Look Into the Future: The State of Food & Beverage Industry

The state of the nine categories of the food & beverage industry and what 2010 holds for them.

By Diane Toops, News & Trends Editor, and Dave Fusaro, Editor in Chief

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The food & beverage industry really is a collection of reasonably disparate yet surprisingly interconnected food categories. As distinct as milk may appear, dairy as an ingredient permeates many other categories. While fruits and vegetables may seem synonymous with fresh produce, they’re components in many other categories.

While the turn of the calendar page is an arbitrary milepost in the continuum that is time, it does cause people to pause, to reflect on the previous 12 months and to peer into the year ahead. That’s what we’re doing here.

So, to get a handle on the year ahead for the whole food & beverage industry, we’re going to break it down into nine discrete units and look backward and ahead at each. What emerges is a quilt of opportunities but also challenges for everyone in this business of food.

Bakery & Bread: Rise to the occasion
Top Bread VendorsFrom breakfast bagels to lunchtime sandwiches to dinner rolls, the bread market is weathering the recession quite well. Originally predicted to grow 2.1 percent in 2008, Mintel International’s latest figures show the bread market instead grew 7 percent. Even higher growth is expected for 2009 and through 2013.

In 2008, the U.S. bread market reached $20.5 billion, according to Research and Markets. Fresh bread sales that year were $6.6 billion, compared to $545 million for frozen bread/roll/biscuits/pastry dough and $207 million for bread/rolls/bun dough, reports Baking Management. Bread sales in all categories had gains in 2008.

Key new product trends in the bread aisle include whole grains, fiber, added calcium and products designated organic, all-natural or HFCS-free.

Whole grain breads are expected to remain strong, and consumers also are demanding more natural breads with nutritional ingredients, premium breads that feature quality ingredients and artisan breads. Traditional or “ancient” grains, such as amaranth, quinoa, sorghum or spelt, will become more popular, especially for wheat-intolerant consumers, according to Mintel.

“An increasing number of consumers are adopting a ‘natural lifestyle’ with a focus on health and well being that includes green living, sustainability and natural products,” says Stephany Verstraete, vice president of bread marketing at Hostess Brands, Irving, Texas. To that end, Hostess – the new name for Interstate Bakeries Corp. – in the past year introduced what it claims is the only national brand of natural bread, Nature's Pride.

“Increasing the general nutritional content -- from calcium enhancement to fiber and other nutrients -- will continue to show strength as a trend,” she continues. “We introduced a reformulation of our Wonder Classic and Wonder Classic Sandwich breads to provide the same amount of calcium as 8 oz. of milk in two slices and a good source of vitamin D.”

Last year, some of the nation’s largest bread manufacturers introduced products for cholesterol-conscious consumers, hoping they will look to the loaf as a defense against elevated low-density lipoprotein (LDL), or bad cholesterol. Mexico-based bakery giant Grupo Bimbo’s Arnold (the brand name in the northeastern and southeastern U.S.), Brownberry (the name in the Midwest) and Oroweat each launched plant sterol-enriched loaves. Thomas’ also added the cholesterol-fighting fortifiers to new English muffin and bagel products. And supermarket chain Kroger recently launched six varieties of proprietary Active Lifestyle breads featuring plant sterols.

The irony is, most consumers say that they won't pay extra for healthful bakery items. But for those who will, whole-grain products top the list – along with other grains such as oats, barley, and sorghum -- or specialty products deemed "worth the extra cost." Bakery consumers also say they want products that are locally produced, healthful, all natural and organic — but only if they don't have to pay a premium.

Gluten-free continues to grow in the in-store bakery. An April 2009 Packaged Facts report estimated the size of gluten-free market at $1.56 billion with a compound annual growth rate of 28 percent from 2004 to 2008. These products are sought not only by those with medical conditions requiring a lifelong adherence to a gluten-free diet but also by consumers who believe that a gluten-free diet is more healthful.

When volatile commodity prices affected bakery prices, 61 percent of consumers switched to store brand breads and bakery items, according to What's in Store 2010, the annual trends report from the Madison, Wis.-based International Dairy-Deli-Bakery Association (IDDBA).

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