Bread and Breakfast Market in the UK - Essay Example

Bread and Breakfast Market in the UK Introduction: Kotler defines marketing as “the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.” (Kotler 2004 p. 9). There are three key components in this definition: the target markets in which there are other competing firms, the customers whom the competitors also woo and winning, retaining and increasing the numbers of customers by delivering superior value vis-à-vis competition. The ‘superior value’ is the ‘differential competitive advantage’ that marketers vie for in the minds of the consumers. In order to achieve this marketers have to understand consumer preferences, what competitors are offering and how existing competitors compare with each other. Bread and breakfast market: The UK food and drink market has been growing steadily between 1997 and 2005 peaking in 2000-2001, but generally maintaining a growth rate of between 3.3% and 5.5%. The market size in 2005 according to the January 2006 Mintel report was ₤ 110,000 million with a growth rate of 3.3%. The market consists of a vast array of items such as bread, cereals, meats, poultry, eggs, milk, beverages, vegetable etc., which makes it unwieldy to be considered in a single marketing report. Therefore this report focuses on a segment of the food and drink market, the bread and breakfast market. The background information for this report is drawn from the Bread & Bakery Products. Market Report. 2001, offered as a free sample report by Key Note Ltd., although the character of the market in 2005 as gleaned from the latest available reports is summarised below. The year 2005 was good for the market with retail sales reaching ₤ 3.5 billion and grew at 2.5% over the previous year. Key Note reported that the market size was ₤ 2.8 billion in 2000. Thus the industry maintained an average growth rate of 5%. The industry as a whole was able to capitalise on consumer preferences such as fitness fads that made them avoid more starchy and fatty foods. In the UK, twelve million loaves of bread are consumed every day and 99% of households eat bread for breakfast and lunch in the form of sandwiches. France imports sliced wrapped bread from the UK. A subset of this market, the speciality breads - consisting of such as baguettes, focaccia, ciabatta, naan, pitta, rye breads, corn breads, organic breads and flavoured breads - is fast growing. Ethnic products such as pitta and naan account for 40% of the speciality bread market while established garlic bread accounts for a third of the market and both continue to grow at a fast pace. White bread accounts for 76% of the total bread consumed in UK although the brown (9%) and wholemeal (13%) varieties have seen a surge in growth in recent years. (There appears to be an incongruence in these ‘percentages’ unless the pattern of consumption has dramatically changed between 2000 and 2005 - See tables below.) Again the premium segment bread accounts for 21% of the bread market and continues to grow rapidly. The market for other bakery products also known as ‘morning goods’, which accounts for 26% by volume and about 33% by value of the total bread market, has also been steadily growing. This market includes such products as rolls and baps, scones, teacakes, buns and other fruited products, muffins, crumpets and pikelets, pancakes and griddle scones, waffles, potato cakes, croissants, brioches, and bagels. While the overall bread market has remained static, the ‘outside the home consumption segment’, the sandwich market has grown by over 50% during the last three years and is estimated to be around ₤ 3.5 billion. The market for burger buns continues to grow. Industry analysts consider that the market is saturated and is likely to see sluggish growth over the next five years. They also believe that continued product innovation combined with aggressive promotion of individual products and the category as a whole my give the sector a new fillip. (Facts about bread in the UK; Mintel Report March 2006) The market: The market may be broadly divided into two parts: the bread and bakery products. The bread market is subdivided based on the flour content: white, brown or wholemeal or the shape of the loaf: sandwich loaf, split-tin, farmhouse, batch loaf, cob or Vienna. There is another classification based on the type of flour used: wheat germ bread, granary bread, soft grain bread and soda bread. The ethnic and speciality breads are made with a variety of different flours. They include naan, pitta, focaccia, ciabatta, baguette and cholla. The bakery products are also known as ‘morning goods’ sold in the morning and consumed on the day on which they are sold. But modern technology and packaging, which extend their life, make the term ‘morning goods’ a misnomer. Further, changing consumer preferences make people buy and eat them at any time of the day. This segment is led by rolls and baps, traditional English toasting products like muffins, crumpets, teacakes, sones, buns, seasonal products like hot cross buns and international products like croissants, American sweet muffins bagels, pancakes, waffles and potato cakes. The following tables summarise the market trends up to the year 2000. Table-1 UK Bread & Bakery Market ₤m 1996-2000 and 2005. (Trade estimates cited in Barker). The figures for bakery products and premium segment were derived from the percentages mentioned. Table-2 UK Bread Market ₤m 1996-2000 and 2005. (Trade estimates cited in Barker). Consumer trends: There has been a change in the ‘traditional meal times’ habit and are now prone more casual eating patterns; buy and eat at any time of the day. Bread and toast meals like breakfast and ‘high tea’ have virtually disappeared due to changing lifestyles and more women taking to employment. However, some of this market shifted to the bakery sector and other breads sector with ‘snacking’ and ‘grazing’ becoming the ‘in’ thing. Although there have been no dramatic price cuts in the bread sector, the sheer volume of sales brings in it into the ambit of ‘across the board’ price differentials. The industry’s constant search for innovation has led to the introduction of organic bread. Trade associations like the Federation of Bakers, National Association of Master Bakers and the Flour Advisory Bureau Ltd. have been striving to promote the consumption of bread. The environment: The market for bread in general can be termed as saturated with 99% household penetration in the UK. However marketers can seek growth through increased purchasing, moving consumer up the scale to premium variety, introducing innovative methods to increase the range, quality of breads and in marketing. Increased disposable incomes, women in employment and changing lifestyles induce customers to move up the value scale seeking premium loaves, ethnic breads including Asian and Middle Eastern varieties and sandwiches. The great opportunity for marketers lies in the smaller, high value, high growth niche segments. There is also great potential for new product development both in the bread and bakery segments. Distribution systems: The production and distribution system in the bread and bakery is industry is divided among three types of players, the large bakeries, in-store bakeries within supermarkets and the high street retail producers. Table-3 Market share of UK bread production by value and volume. (Trade estimates cited in Key Note report). The large plant bakeries distribute to direct catering and retail outlets using their own delivery fleets. However as companies produce different lines of products distribution there is inter-company distribution too for complimentary lines. Multiple grocers dominate retail distribution in the trade. The multiple grocers have been putting up in-store bakeries (ISBs) squeezing the high street bakers or one off stores out of the market in the bargain. The table below shows the number of retailers owned by the top three bakers in UK: Competitive players: The intense competition among the top bakers and the adoption of ISBs has led to price cuts in standard and premium slice segments of the market. Allied Bakeries has closed down some of its plants and Tomkins PLC sold off Ranks Hovil McDougall the parent company of British Bakeries. A few large plant bakers control almost 80% of the market and dominate the industry. The following table lists the 10 top UK bakers by turnover: These large players were able to derive competitive advantage by vertical integration of flour milling and bread making and related activities like grain trading, packaging flour and cereals etc. Segments niches and strategies: An important trend that has been noticed in 2006 is consumers have been moving up either from economy bread to everyday lines to farmhouse and then to premium brands. Warburtons is the number one selling branded bread in UK although the company does not have the network for 100% distribution. This is because the company has not only focused on its premium brands segment but also concentrated on a regional niche - Lancashire, where six out of every ten loaves sold are its ‘Toastie’ 800 gm loaves. Warburtons distribution covers only 80% of UK; the company plans to extend its reach to the remaining 20% by 2010. The company launched the brand ‘Healthy Inside’ that contains the added natural prebiotic ingredient inulin, which stimulates the growth of friendly bacteria in the gut and can lead to improved digestion. The company invested in consumer research to find out what exactly the customer wants and was able to offer a number of bakery product innovations. Taking a long-term view the company worked closely with retailers in areas such as ranging, merchandising and investing in store consumer research. Another strategy the company adopted for brand promotion was to dress up its buses to look like a loaf of Warburton’s bread and “are part of an integrated campaign including sampling, in-store radio, six-sheets and shopping trolley advertising”. The company’s innovations include the introduction of half-loaves for smaller households and the “The Good Health” range of high-fibre, low-salt bread. Similarly Allied Bakeries is driving up sales of its premium brand ‘Allinson’ by a strong advertising campaign and celebrity endorsement of television chef James Martin. The company claims that ‘awareness’ of the brand is at an all time high because of this. Another premium brand of the company ‘Kingsmill Gold’ has been bringing incremental sales with 41% over the previous month because of new buyers or old ones adding to their stock. The company, which has a strong variant in the garlic bread category in ‘Kingsmill’, was planning to launch a variant of ‘Kingsmill Gold’ in the premium chilled breads category. The company has allocated a marketing budget of ₤m 1 million for the promotion of the ‘Kingsmill’, range, which consists of three traditional products. This is because the snacks sector is driving growth across the morning goods’ sector. The company has introduced all-new pack designs for these brands to attract customers. ‘Burgen’ and ‘Sunblest’ make up the rest of the range for the company. Both Allinson and Burgen are aimed at more health-conscious consumers. The Soya and linseed variants of ‘Burgen’ are designed for menopausal women. The leading brand of British Bakeries, which supplies a third of UK’s plant bread, is ‘Hovis.’ It was originally positioned as ‘wholemeal’ but became an umbrella brand and is the best selling brand in its category. Similarly the ‘Hovis Granary’ is the brand leader in the malted brown bread category. While focusing its mainstream brands in the ‘nutritional thinking’ niche, the company has reduced the salt content of its breads across the board by 10%. A less known premium brand ‘Mantinga’ (a Lithuanian import) has been adopting an altogether different strategy to get a toehold in the UK market: steering clear of the large chains with multiple outlets but supplying to independent retailers, delicatessens, health food shops, farm shops as well as foodservice outlets. For ‘Mantinga’, innovation seems to be the name of the game. The brand is made available in ‘multi-seeded heart-shaped roll’ to make it attractive to consumers. The speciality bread sectors like ‘ciabatta’ and ‘focaccia’ have been growing at a phenomenal rate with ‘ciabatta’ having reached a market size of ₤m 7.3 and growing at a phenomenal rate of 22% year on year. The phenomenal success of this speciality bread is because of the distribution strategies adopted by its marketers: the variety is available everywhere from supermarkets to local sandwich shops. The latest success story is from Delifrance: its new launch ‘Butter Brioche’ loaf has been hugely successful. Its sales have gone up by 20% between 2000 and 2004 and the company is hopeful that the new variants it is planning to launch will drive sales further upwards. It has been observed that while households buy bread once in a week but there were three visits in a week to bakeries. Enticing the customer to spend more time in the bakery aisle has been found to be another innovative method to increase bread sales. The following are bakery opportunities along which bread sales can piggy ride: Bakery Occasions opportunities: Potato cakes, waffles and crumpets; Pancakes, English muffins & croissants; Pitta bread, baguettes, bagels and wraps; Doughnuts, muffins, iced buns, Chelsea buns; Flapjacks, pain au chocolat; Fruit loaf, malt loaf, hot cross buns; Scones & teacakes; Garlic bread, ciabiatta, naan, foccacia. (“Baking new products which inspire shoppers to experiment…” “Consumer insight leads to premium opportunities…”, “Not just your average loaf. Premium breads.” and “Sector Insight: Bread - Upper crust.”) Product opportunities: Neither saturation of the market nor the strength of established players is deterring new entrants. They are innovating products and product designs, finding niches in product slots, distribution outlets and geographical areas and above all aggressively driving their promotional campaigns. 1. Notwithstanding the sluggish growth rate the size of the market - ₤ 3.5 billion is the attraction for marketers. 2. There are niches within the bread and bakery market, for e.g. speciality breads, ethnic breads, nutritional breads, sandwiches and other snack foods, which offer attractive openings. 3. For a saturation product line like bread and bakery marketing should be innovative in many ways, such as in product design, packaging design, identifying product offering niches, and distribution niches to seek high growth even in seemingly saturated markets. 4. Different segments of the ‘bread and bakery’ market are in different life cycles: while the basic bread may be said to be in the ‘mature’ stage, there are quite a few subsets, which are in other stages. Thus for e.g. the organic bread segment may be said to be in the nascent or emerging stage the speciality breads and sandwiches are in the growth stage. 5. As we have seen companies have adopted various differing strategies to gain high market share especially in the growth sectors of the market. Some of them have adopted the single niche strategy (for e.g. supplying ‘Mantinga’, to individual retailers or concentrating on a geographical area); some the mass market strategy and others multiple niche-strategy. The objective of these strategies is to derive differential advantage in one of the dimensions of the product: form, features, performance quality, conformance quality, reliability, services, image etc. 6. As each round of new product attribute succeeds, it attracts competition or alternatively others are forced to adopt it to meet heightened customer expectations. The multidimensional bread and bakery market offers interesting challenges to marketers and tests their ingenuity but offers an array of opportunities. The route to utilising opportunities is closely watching customer preferences and competitor movements and adopting strategies accordingly. Bibliographic References: "Baking new products which inspire shoppers to experiment--and allowing the creation of a successful bakery aisle. (Factfile: the bakery category)." Grocer 226.7614 (July 26, 2003): S2(1). British Council Journals Database. Thomson Gale.  5 Dec. 2006  . Barker, Lynsey. (2001). Bread & Bakery Products. Market Report. 2001. (Sixteenth Edition 2001). Hampton. Key Note Ltd. http://www.keynote.co.uk/BreadnBakery2001.pdf "Brands use their loaf: morning goods players have spied the huge potential that snacking offers for stretching their brands.(Bread)." Grocer 227.7655 (May 22, 2004): 58(1). British Council Journals Database. Thomson Gale. 5 Dec. 2006 . "Consumer insight leads to premium opportunities: following considerable investment in retailer and customer research, as well as extensive new product development, Warburtons, in particular, is able to provide the bakery sector with a hugely valuable category insight. (Factfile: the bakery categories)." Grocer 226.7614 (July 26, 2003): S4(1). British Council Journals Database. Thomson Gale. 5 Dec. 2006 . Facts About Bread In The UK. The Flour Advisory Bureau. Tuesday December 5, 2006. http://www.fabflour.co.uk/Freestyle.asp?PageID=233 Kotler, Philip. (2004). Marketing Management (Eleventh Edition). Delhi. Pearson Education (Singapore) Pte. Ltd. "Not just your average loaf. (Premium breads)." Grocer 229.7755 (May 20, 2006): 75(2). British Council Journals Database. Thomson Gale. 5 Dec. 2006  . Sector Analysis - Food and Drink Retailing (January 2006) - Mintel International Group Ltd. http://reports.mintel.com/ "Sector Insight: Bread - Upper crust." Marketing (April 27, 2005): 36. British Council Journals Database. Thomson Gale.  5 Dec. 2006 . "Warburtons gets friendly.(Marketing: PROMOTIONS--PRODUCTS--PACKS)(Warburtons Bakery Cafe Inc.)(Brief Article)." Grocer 228.7710 (June 25, 2005): 67(1). British Council Journals Database. Thomson Gale. 5 Dec. 2006  . Read More