THE BACKGROUND - The launch of Warburtons All in One bread this month, a white loaf with a low glycemic index for mothers concerned about their children's blood sugar levels, is indicative of the direction in which the bread sector is heading. 'Healthy' lower-carb loaves and specialty breads, such as French sticks and pitta, attract a premium and are driving up value sales in a market that continues to drop in volume and which, because of existing high penetration in the UK, displays little potential for further growth.
As far as UK consumers are concerned, there are plenty of things better than sliced bread these days: consumption of the staple fell 5% between 1999 and 2004 in terms of volume.
While sales of the sliced white loaf are dwindling, however, other sections of the market, such as premium loafs and speciality and ethnic breads, are on the up. Overall, the sector has grown 9% in the five years to 2004 to reach a value of £1.96bn, according to Mintel.
There are numerous factors affecting this sector, not least changing attitudes to diet in this country. With healthy eating on the rise, brown, wholemeal and granary breads have benefited in comparison with white bread.
However, diets such as the Atkins and low-GI eating plans - which limit the consumption of carbohydrates - could hit sales if their appeal proves lasting.
To counter this cultural shift, the Federation of Bakers is trying to raise awareness of bread's nutritional value through events such as British Bread Month, which took place last October.
Between 2000 and 2004, volume sales of white bread dropped almost 10%, with brown bread down 16.9% and wholemeal and granary down 0.3%. But in the past two years, brown bread has made something of a comeback, while premium white bread is building its market value, showing a 46% increase in sales value between 2000 and 2004.
Speciality boost The most impressive growth has been seen in the ethnic market. Indian bread has experienced a rise of 67% over the period, while tortillas, wraps and pitta are all performing well.
Of principal shoppers in the household, 83% have bought continental or speciality bread in the past three months, with French sticks the most popular, purchased by 52%.
In 2004, sales of these breads hit £540m, accounting for 28% of the overall market. This category seems to be benefiting from a general trend toward upmarket products. There is also some evidence that with changes in diet, some consumers see bread as a treat purchase, rather than a shopping staple.
While this is to the detriment of volumes, it is better in terms of value.
Distribution is increasingly dominated by the multiples. Some independent grocers are clinging onto share, but craft and in-store bakeries are on the wane.
'Plant' bakeries account for the bulk of bread production - either as finished items or 'bake-off', where the product is partially prepared for finishing at the retailer and is sold in in-store or craft bakeries.
Where freshly baked bread is sold, craft bakeries supply it.
In the mid-90s, own-label accounted for 60% of the plant bread category, but as the premium loaf has gained ground, brands have fought back to such an extent that own-label's volume share was down to 36% in 2004.
The leading plant companies are Allied Bakeries, British Bakeries and Warburtons. Allied distributes its products nationwide from its 13 bakeries and claims to have a third of the market through its brands and own-label business. Its leading brand is Kingsmill, with Allinson, Burgen and Sunblest making up the remainder of its portfolio.
Kingsmill was the first premium sliced bread (launched in the 80s) and is now valued at more than £180m. It created the super-premium sector in 1996 with the launch of Kingsmill Gold and a range of variants now operate under the brand, including its Better For You functional range, which offers benefits such as 100% wholegrain and added calcium.
Both Allinson and Burgen are aimed at more health-conscious consumers.
Burgen appeals mostly to women through products such as its Soya & Linseed variant, which claims to ease menopausal symptoms.
British Bakeries is part of Rank Hovis. It too supplies about a third of the UK's plant bread (16m loaves a week across 450 different types of bread). Its leading brand, Hovis, which has expanded from its original wholemeal positioning to become the company's umbrella brand, is the bestselling bread in the wholemeal category. Hovis Granary is the top malted brown bread.
Hovis marketing manager Alyson Ebbrell claims Atkins-type diets and products are niche, so Hovis is focusing on 'ensuring its mainstream brands are in line with nutritional thinking'. It has just reduced salt content by an average of 10% across its brands.
Warburtons is the UK's leading independent baker and covers about 65% of the UK, mostly in the North, Midlands and Scotland. It has invested heavily in new product development and marketing in the past two years and has enjoyed above-average growth.
It is best known for its traditional wax wrapper although it also uses polythene bags now. Notable recent introductions include half-loaves for smaller households and The Good Health range of high-fibre, low-salt bread. It also produces bread under the Weight Watchers brand.
Bread already has a 99% penetration of UK households, so room for growth is limited. But while consumers are likely to continue to cut their bread intake, the market will benefit from shoppers spending more on high-quality and speciality products.
Mintel expects the market to grow by 4.9% by 2009 to reach £2.06bn - although when inflation is taken into account, this is a decline of 3%. White bread will retain the biggest share, but show the lowest growth at 2.1%.
PLANT BREAD BRAND SHARE BY VALUE (pounds m)
2004 2002 02-04
1 Own-label 545 560 -2.7
2 Kingsmill 270 240 12.5
3 Hovis 255 230 10.9
4 Warburtons 210 175 20.0
5 Mothers Pride 75 75 0.0
6 Sunblest 65 70 -7.1
7 Other 90 87 3.4
Total 1510 1437 5.1
UK BREAD BRANDS ADSPEND (£000)
2004 2003 2002 2001
1 British Bakeries 4781 3402 4346 3981
Hovis 4776 3381 3219 3497
Mothers Pride n/a n/a 720 1
Nimble n/a 21 407 483
Others 5 n/a n/a 3489
2 Allied Bakeries 4469 3616 5022 3099
Kingsmil- 3577 2715 3412 2621
Allinson 38 7 1193 288
Others 854 894 417 190
3 Warburtons 4005 3273 2455 2940
4 Other 1764 1968 2185 2783
Total 15,019 12,259 14,008 12,803
Source: Nielsen Media Research/Mintel.
UK RETAIL VOLUME SALES OF BREAD BY TYPE (000 tonnes)
2004 2002 2000
1 White 1269 1327 1406
2 Wholemeal and granary 298 308 299
3 Brown 162 142 195
4 Vienna and French 102 99 91
5 Other 156 151 119
Total 1987 2027 2110
ANALYST COMMENT - Ryan Brightwell, analyst consumer markets, Datamonitor
The issue of health is not just driving the British bread industry, it is dividing it. While some brands are rolling out lower-carb loaves to appease Atkins dieters, others are fighting the trend toward fad diets and stressing the role carbohydrates should play in healthy eating.
Consumption of bread in the UK has long been well below the European average, and in decline since 2000. In 2004 UK consumers ate 45.3kg a person - equivalent to a little over 56 loaves, according to Datamonitor. That is down from 46.8kg four years ago - a decline of about two loaves a person.
One reason for this is that consumers have been fed mixed messages about bread. On one side are the advocates of balanced diets and regular exercise, and on the other, the enemies of carbs within the burgeoning diet industry.
The result is confusion about the role foods such as bread should play.
The Federation of Bakers, Flour Advisory Bureau and Grain Information Service are focusing on the promotion of the Vitality Eating System diet. It is based on 'sound science' and, of course, plenty of bread. With the celebrity endorsement of TV presenter Cat Deeley, the diet is being positioned against faddish fixes.
British Bakeries, the company behind Hovis, does not see diets such as Atkins as a fad, however, and predicts the market for lower-carb breads will grow to more than £70m within five years.
The rise of low-carb loaves is only part of the story, but it is symptomatic of consumer mistrust of starchy, high-carb foods. It also underlines the need for ordinary bread to be repositioned. Most people eat it every day - the challenge is to make people feel good about it.