Man may not live by bread alone, but it is one of the most popular foods, with household penetration holding steady at 99 percent. Sales of bread rose to $18.5 billion in 2007, a modest 10 percent increase since 2002 in current prices, but a loss of 5 percent after adjusting for inflation, according to London-based Mintel (www.mintel.com).
Fastest growing segments are rolls/buns/croissants and bagels/English muffins, both up approximately 10 percent in food, drug and mass merchandising stores.
Volume of bread consumed has declined gradually from 2002 through 2007 due to a confluence of factors including price increases from rising wheat and fuel costs; the low-carbohydrate diet trend; shrinking household sizes; and an increase in the number of meals eaten away from home.
Mintel expects the market will keep pace with inflation and total $20.6 billion in 2012, driven by continued price increases, product innovation and a new trend toward more meals eaten at home — a result of the lagging U.S. economy.
But rising prices may lead to bargain hunting. The average price per pound of bread increased 23 percent from 2002 to 2007 (from $1.45 to $1.79) as manufacturers raised retail prices amidst rising costs. While it is unlikely that consumers will forgo a staple like bread due to rising prices, many will switch to less expensive non-premium varieties, private labels and on-sale brands.
In fact, four of the top 10 innovators in the bread market (in terms of number of new products) are store brands (usually produced by private label manufacturers): Target, Wal-Mart, H-E-B and Kroger. Private labels are also upping the ante with upscale products (e.g., whole-grain and organic/natural varieties, breakfast breads) that can compete with brand names, but at a lower price.
Rising food and fuel prices coupled with economic uncertainty in recent months led to a drop in consumer confidence. Consumers, looking for ways to save money, are eating out less. According to Mintel’s “Attitudes Towards Dining Out—U.S., March 2008,” more than half of the respondents were cutting back on how much they spend at restaurants due to the troubled economy, with only 15 percent spending more.
Eating at home presents a significant cost savings versus eating at a restaurant: the cost of food itself is lower, there’s no tipping nor fuel used driving to a restaurant. This trend is likely to benefit the bread category, as most at-home meals include some type of bread either as a side or part of the main dish. Taking meals from home to work, or brown-bagging it, is another positive force in the bread market.
Another opportunity is one that may at first seem to be a negative: The average household size in the U.S. has been on the decline due to a number of reasons, including increased wealth (which allows adult children to move out on their own sooner), women delaying having children and medical improvements that allow people to live longer. Smaller households eat less bread.
However, manufacturers can target smaller households directly. Demand for smaller and single-serve bread products will increase. A 1.5-lb. loaf of bread (today’s standard) is rather daunting for a one- or two-person household. Cost-conscious and environmentally minded consumers who don’t want to waste food are unlikely to continue buying full-size loaves of bread, but they may be willing to pay slightly more for less.
Bread as health food
In order to compete, bread makers need to innovate and focus on healthy and/or premium offerings. The bread aisle has seen an explosion of new products with better-for-you claims, including “whole grains,” “natural,” “organic,” and “no/low trans fats.” These claims are growing sales in segments such as hamburger rolls and English muffins.
In fresh bread, growth is not as strong for these claims, but demand for “super breads” that boast functional ingredients like omega-3 fatty acids, flaxseed, plant sterols and double protein is high.
Baby boomers started entering their 60s in 2006. By 2012, nearly 40 percent of the U.S. population will be age 45 or older. An aging population, in and of itself, will not strongly impact total bread sales, as consumers of all ages eat bread, but the aging of Americans will influence the types of bread eaten.
Looking to lifestyle and diet to manage health issues, boomers will seek whole-grain bread and functional breads with heart-healthy ingredients like plant sterols and more fiber. Sure, these products cost more, but boomers have the money and the inclination to spend more on better-quality breads.
And it’s not just boomers. With rates of obesity and diabetes soaring, many Americans are taking steps to improve their health and eat better. Awareness of the benefits of whole grains has risen in recent years, due in part to USDA’s 2005 Dietary Guidelines, which recommend a 3-oz.-equivalent of whole grains per day to help reduce the risk of coronary heart disease, maintain a healthy weight, and lower risk for other chronic diseases.