Analysis by Sheila Eggleston Virtually everyone in the UK eats bread in one form or another. The market is saturated with more than 99% household penetration, and yet the pressure to make people eat more continues. Industry estimates show the total market for bread and bakery snacks consumed at home is worth just under £3bn. Instore bakery bread is growing, up 3%, and is dominated by the top four retailers which hold more than 87% of the market [Taylor Nelson Sofres]. Innovation is the key to tempting fickle consumers with more money than ever before to splash out. Hence the influx of new flavours, textures, and foreign varieties using authentic ingredients, specific health targeted lines such as for the menopause and heart conditions, and the rise in organics. Organic is a growing sector but still relatively small ­ about 1% share of plant bread and less by volume. It currently stands at £8.9m [Taylor Nelson Sofres], with 70% sales going through multiples. "The main difficulty to get across is the pricing," says Allied Bakeries' marketing director Frances Brindle. "Organic is more difficult to produce and it is more expensive compared to standard." Warburtons business development manager Roz Cuschieri is confident that although organics is currently small "we see it as a trend to stay". The company has just rolled out nationally its new organic range of 400g white and wholemeal stoneground loaves backed by a £3.6m support package. "It is very likely we will be expanding into organic rolls as well." Smaller operators such as Greenhalgh's Craft Bakery are also moving into organics with a 300g crusty batch loaf planned for the summer. But it's innovation from the premium and super premium brands such as Hovis, Kingsmill and Warburtons, backed by massive marketing spends, which are boosting the market. As they fiercely compete with each other for brand supremacy, these brands have put the squeeze on standard loaves and helped to erode own label's share of the wrapped bread market. Hovis Crusty White with its longer lasting crusty finish and soft inside was launched in June 1999 and British Bakeries marketing manager Cathy Instone says it intends to build on this development. Support near last year's £7m spend on Hovis is planned. And Allied Bakeries has also entered this arena. Research showed consumers wanted crusty bread with a farmhouse appearance and the result is Kingsmill Tasty Crust in white and wholemeal. There is also room, says Allied Bakeries, for a more premium offering in rolls,a £620m sector but "one of the most under-exploited areas of the bakery category". An everyday basic roll has been created to be eaten with a filling, especially for children, while everyday premium is the tastier alternative which can be eaten on its own or as a meal accompaniment for adults. Allied Bakeries has invested more than £30m in plant, logistics and IT for its Strategy 2000 programme. This comprises: £10m in its Glasgow plant, £3m in automated warehousing at Cardiff, and £18m on upgrading its whole plant bakery network. It is working with retailers to analyse individual store trading profiles to develop tailored delivery times. Next year Warburtons will be 125 years old, its longevity attributed to innovation. It has gone some way to infuse foreign flavours into its traditional British range, particularly with its garlic and herb Toasties filling the gap for more garlicky products. And it has increased its premium seeded batch loaves to include a bigger 800g size. Over the next three years, Warburtons is investing £28m in new bakery and plant. Its newest bakery will be at Wednesbury. Currently operating as a depot, it will be up and running by Christmas. All three companies have helped to revive the wholemeal sector according to Taylor Nelson Sofres. For example, Kingsmill Tasty Wholemeal, launched only in September, is now worth £17.5m. With a buoyant economy, the market has been stable on the price front with the last recorded increase in July 1998. It has survived the economy bread price war and seen the back of the 7p loaf. This bread now accounts for 28% of the market, down 2% from a year ago, and down 8% year on year. Prices are now above their level a year ago ­ in some cases more than double ­ because it has a smaller share of the market at a higher price point. Pricing now seems to be irrelevant. "Every Day Low Pricing has helped to flatten out the peaks and troughs," says Brindle. From a consumer point of view its less confusing, and because the Kingsmill brand is strong, we have benefited from EDLP." British Bakeries marketing manager Cathy Instone agrees: "EDLP simplifies the fixture. People are buying bread less on price and are able to make a better selection and find what they are looking for more easily." The ability to adapt to small households is important. Half loaves are still unique to British Bakeries which it says is surprising considering the increase in single households. Opportunities lie in frequency of purchase, trading up and choice. But how do people actually shop the fixture? British Bakeries is currently working with retailers to see how many buy treats at the weekend along with the plant bread intended to last the week, to see if the two fixtures can be linked together. Warburtons has also tapped into this area linking fresh bread and treats, with rolls being particularly popular at weekends. In the latter, new variations are in the pipeline. The company is also looking at zones in store particularly targeted at children. Busier lifestyles, single people households, plus the quest for a weekend treat are fuelling the need for snacking products. Croissants are growing, up 7%, to £29m, with waffles and muffins making gains. But it is hot cross buns which top the table accounting for £42.7m despite a late Easter meaning peak Easter sales were excluded from this data, and showed a decrease of 24% year on year. Wrapped pancakes have evolved into a kids lunchbox item and to encourage this trend, British Bakeries has brought out snack pack sizes of Mothers Pride jam filled Scrummees. American style products have also made inroads. The New York Bagel Company now includes mini bagels and a premium range made up of banana and walnut, chocolate chip, real cheese, and American deli varieties, as well as organic bagels. But even as smaller operators aren't resting on their buns, neither are independent retailers. Allied Bakeries' Sunblest division was set up in 1997 to help independents boost their margins. Within the last 12 months, Sunblest has set up a 12 strong team dedicated to advising independent retailers. As well as promoting Kingsmill and Allinson, it also has a concept of bakery snacks under the Tasty Bakery label of single eat lines such as doughnuts and muffins. Launched just over a year ago, it is now worth £1m. Partnerships with Pride Valley for naans and the New York Bagel Company for bagels has helped to increase its offering. "Merchandising is key," says divisional director Simon Crosland. "Success is for those who compete and set the store up well. If bread and morning goods is a major part of a c-store offering, a strong location is vital ­ muffins by tills or even by confectionery." Although long life bread has gained share in multiples, Crosland doesn't recommend it for all stores. "If your strategy is to encourage frequency of visit, and bread and milk are key draws, long life isn't necessarily a pull." {{FOCUS SPECIALS }}

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