|
Functional
bread in Europe - a niche market with potential
- 27
Aug 2004
Author: Christiana Benkouider Given
the tight margins across the whole industry, food manufacturers have increasingly
been focusing on added-value products as a way to improve profit margins and as
a means of differentiation. This trend can be seen in the emphasis by manufacturers
on superior quality and taste, premium flavours, portability and convenience.
In addition, manufacturers have embraced the consumer trend towards health and
wellness and the opportunities this trend brings to the market place. This has
led to a growth in organic, functional and ‘better for you’ products.
According to
the latest study by global market analyst, Euromonitor International, entitled
The world market for functional food and beverages, functional products are a
dynamic market. On a global basis, they have seen value retail sales grow by a
compound annual growth rate (CAGR) of just under 10% between 1998 and 2003. This
compares with a significantly less impressive CAGR of 2.4% for total packaged
food over the same period. The
rise of functional products
While
manufacturers and their search for added-value, higher margin products provided
key impetus for the growth of functional products, Euromonitor International believes
that the rise of functional foods was also positively impacted by other factors.
These include: Awareness
of deterioration in personal health, led by busy lifestyles with poor choices
of convenience foods and insufficient exercise.
Increased incidence of self-medication,
led by government reduction on healthcare expenditures, leading to increased sense
of personal responsibility for healthcare.
Increased level of information
from health authorities and the media on nutrition and the link between diet and
health, which has created a more educated consumer.
Scientific developments
in nutrition research, leading to a number of discoveries of ingredients with
health properties which could be incorporated into foods.
However, while functional
products generally outperformed standard packaged food and beverages, within the
functional market, certain products lent themselves more easily to the functional
concept and were furthermore more widely accepted by consumers. Some
functional products more successful than others
Euromonitor’s
research suggests that by far the largest sector throughout the 1998-2003 period
was that of beverages, which accounted for 56% of total functional product sales
in 1998, and rising to 59% in 2003. The popularity of beverages as a carrier for
functional attributes is due to several different factors. Beverages are a convenient
format which can be consumed on the move, and therefore tap into key consumer
demand patterns of health, convenience and portability. The sector is furthermore
led by major drinks multinationals PepsiCo and The Coca-Cola Company, which are
able to invest considerably in the development, marketing and distribution of
these products. Dairy
products also saw significant sales, accounting for just over 23% of total sales
in 2003. However, products in this sector are much more niche positioned than
beverages. Key products include fortified milks, which are strong in Latin America
and parts of Southern Europe, probiotic dairy products, which are strong in Asia
and Western Europe, and plant sterol spreads, which are also strong in Western
Europe. Bakery
products and snacks represents the smallest of the three sectors by some distance,
taking a share of 18% – and falling – in 2003. This sector is principally
made up of medicated confectionery and functional chewing gum, with all other
products – such as fortified bread and biscuits – showing a niche positioning.
Functional confectionery
is by far the largest product category within bakery and snacks in Western Europe,
accounting for nearly 90% of total sector sales in 2003. Excluding confectionery
from the sector, bakery products account for an even lower amount of total functional
product sales, that is under 3%. This
is not expected to change much in coming years: Euromonitor International forecasts
that by 2008, functional bakery products and snacks will have grown by 35% but
will account for only 23% of total market value of functional products. Functional
confectionery will continue to account for the bulk of total sector sales, but
is expected to hold a slightly lower share of the total, ie 85%, while snack bars
will become of increasing importance (8% of total sector sales compared to 5%
in 2003). Functional
bread currently is the smallest product category within the bakery and snacks
sector in terms of value sales, and this is expected to remain unchanged in coming
years. Euromonitor predicts that as in 2003, in 2008 functional bread will account
for no more than 2% of total functional bakery products and snacks sales. Compared
to the other sectors, there has been less innovation within bakery products and
snacks, and less consumer acceptance, as consumers struggle to associate products
such as confectionery and biscuits with healthy eating. Sceptical
UK consumer
In
the UK, a major European market for functional foods, bakery products and snacks
remain under-developed. Total sales in 2003 were £315 million, with over
£300 million of these sales derived from confectionery. Bread remained small
and seems poised for decline rather than growth following the de-listing of V-Force
from British Bakeries and less than fantastic sales for other brands such as Good
Health Loaf and Burgen. Allied Bakeries has recently made a big push for its Burgen
brand with two new variants, Cholessterol and Hi-Bran, however whether the increased
marketing support will translate into improved sales remains to be seen. It
appears that UK consumers are not yet ready to go that far down the healthy route.
Consumers do seem prepared however to go for ‘half way’ solutions such
as Hovis ‘Best of Both’, that is white bread with added wholemeal, which
appeals to both parents (because it contains more fibre) and to children (because
it looks and tastes like white bread). Less
scepticism among Germans
In
Germany, another key market for functional products, functional fresh bread has
seen good growth rates since 1998 when German firm Kampffmeyer baked its first
omega 3 bread. As wholemeal bread is very common in Germany, Germans are well
aware of the fact that bread with a high fibre content is good for digestion and
intestinal health. This awareness is a good base for positioning functional products
in the bakery sector. Kampffmeyer
had tried to launch functional products at the beginning of the 1990s but was
unsuccessful. During the BSE crisis, the company launched its Kornsteak-Brot (wheat-steak-bread),
which was especially developed for consumers who no longer wanted to eat meat.
With the increasing
health and fitness boom, Kampffmeyer also launched Calcius D3 bread, which is
aimed at consumers lacking in calcium and D3. Cult-1 bread promotes intestinal
health and digestion as well as enforcing the immune system. Finally, the company’s
best-selling Omega-3 bread claims to provide consumers with 25% of the daily dose
of omega 3 fatty acids. While
functional bread is expected to remain stagnant at best in the UK, growth prospects
are significantly better in Germany, where consumers appear to be less cynical
towards products which make strong claims as to their health properties. Between
2003 and 2008, Euromonitor International expects functional bread in Germany to
grow by a compound annual growth rate (CAGR) of 15%, compared to a CAGR of -1%
over the same period for total bread. Nevertheless, even in Germany where functional
bread has so far performed best, it only accounts for a tiny proportion of total
per capita bread consumption: with 100g of functional bread being consumed per
capita compared to just under 58kg for total bread in 2003. By 2008, Euromonitor
forecasts per capita consumption of functional bread to reach just over 200g,
compared to 57.5kg per capita for total bread. While
functional products do indeed offer sales growth and margin improvements for food
manufacturers, the addition of functional ingredients is not as easily accepted
for products that are more strongly associated with indulgence rather than health,
as it is for products that already have a healthy image. Functional
bread in theory shows good potential, as it is generally regarded as a healthy
product (Atkins notwithstanding) which is more geared towards the addition of
nutrients. Nevertheless, product failures have proved to be rife, especially where
marketing efforts to communicate the health benefits have been only minimal. Innovation
has been high however, as given low profits on basic breads, many bakeries are
working to differentiate and add value to their products. The development of functional
breads is a tiny offshoot of this trend that is principally illustrated by exoticism,
use of different cereals and experimentation with herbs and other flavourings.
So far, premium
‘exotic’ breads have fared significantly better than functional bread,
however with continuing innovation, coupled with stronger and more effective marketing
support, functional bread could possibly step out of its current niche. | 
