Is Value Shifting in the Bakery Chain?

Due to changing consumer trends, food service and food retail companies might be—as they are closest to the consumer—reconsidering their stance concerning product development. For example: Is value shifting in the bakery chain?

Image of dough

The change in consumer preferences is continuing

At the end of March, we attended the annual American Bakers Association (ABA) Convention in Phoenix, where some 300 companies—big and small, from milling to food retail and food service—were in attendance.

Many topics were discussed, and it was more than obvious that the consumer was on everybody’s mind. US consumers are very dynamic… or—as some said—confused. What is, however, evident is that the consumer is showing a very strong interest in food and its ingredients. So, while some trends in the bakery sector are perhaps at their peak (think of gluten-free), many other trends are now having an impact on the sector. Three are worth singling out:

  • GMO. As we have discussed before, GMO labelling is going to happen in the US, even if it is mostly voluntary for now. This is driven by mandatory GMO labelling in the state of Vermont. Many packaged food companies now will label their products, because the costs of creating separate packaging for various states are too high. Bakery companies will have to follow suit… or change their ingredients.
  • Clean label. Taking a step back from GMO, the consumer is looking for food that doesn’t contain artificial ingredients: food that is all natural. This is a hot topic in the bakery sector, as quite a few preservatives are used to extend the shelf life. We picked up on a bread product with a shelf life of 64 days… Again: A change in ingredients may be required.
  • Organic. Related to this is the phenomenal growth of organic products, also in bakery. A move to organic does require a rethink of the supply chain, along with… a rethink of ingredients.

Where is the value in the chain?

This is why we believe the story in bakery is mainly about what is inside the product. And the question on everyone’s lips is: Who will drive the change that the consumer is looking for? Are the retailers and food service companies—those closest to the consumer—driving this change? Are the industrial bakeries coming up with new on-trend products? And are the ingredients companies going to push their solutions?

While there might not be one single answer to the question, we found it very interesting that one of the largest food service companies in the world (and a large user of bread products) came up on stage and asked bakery representatives in the audience to bring along their ingredients suppliers the next time new products were discussed. To put it differently: This food service company may be feeling the pinch as a result of the changes in consumer preferences, and it may be looking for ways to turn the tide. Bakery companies may not always be aware of changes at the consumer level, so perhaps new product development will take place at the food service companies, with the help of bakeries and their ingredient suppliers. The latter are instrumental in providing the right solution to the demands of the consumer, as noted above.

We might be witnessing a shift in the value in the chain, in the direction of food services companies (new product development) and ingredients companies (solutions). Or will the bakeries rise to the challenge?

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