KN15154

KEY NOTE Breakfast Cereals : March 2004

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This report covers: Plant Bakeries, In-Store Bakeries, Craft Bakeries, Wheat Supplies, Flour Millers,

Companies covered include: ABF Grain Products,British Bakeries, Fine Lady Bakeries, Fletchers Bakeries, Frank Roberts, Harvestime, Rathbones Bakeries, Warburtons, William Jackson, Lyndale Foods, Three Cooks,

EXECUTIVE SUMMARY

Executive Summary The market for bread and bakery products took on a new lease of life during 2003 as the premium plant-baked sectors benefited from renewed emphasis on marketing and new product development (NPD). The overall market was worth an estimated £3.03bn at retail selling prices (rsp) in 2003, having increased in value by 2.5% on 2002. Bread can be broadly segmented into three subsectors: white bread, brown/wholemeal bread, and ethnic and speciality breads.

The bakery products sector includes a broad range of items such as rolls and baps, muffins and crumpets, scones, buns, croissants, brioches and bagels. White bread has been at the forefront of NPD in the premium sector, which has been growing at the expense of the standard and economy sectors. Developments in baking techniques have enabled improvements in the texture and appearance of premium plant-baked loaves that have encouraged consumers to trade up. Consumer resistance to brown bread — the wholemeal variety, in particular — has continued to contribute to the decline of the sector.

The development of `combination loaves' made from both brown and white flour has also meant some sales have shifted from brown to white. Although the market for ethnic and speciality breads has been growing more slowly than was the case during the late 1990s, year-on-year growth remains healthy. As with the traditional bread sector, the bakery products sector has benefited from NPD by major brands, which has helped to reverse the trend towards commodity status. Developments in baking techniques, continuing NPD and strong marketing activity all helped to add value to the market during 2002/2003.

Improvements in packaging have also helped to foster a more upmarket image. However, the growing popularity of high-protein, low-carbohydrate diets, such as the Atkins diet, which is currently causing problems for the bakery market in the US, represents a cloud on the horizon. The current move upmarket within the bread sector will undoubtedly have a positive effect on sales in the immediate future. However, the likelihood of discounting remains high, and growth is predicted to remain at a relatively low level over the 2004 to 2008 forecast period.

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Text © 2004 Key Note

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Last updated by Amanda Porteous June 2004