The grain-based food sector looks for strategies to limit the rate of category losses.
It is not new that other food categories are gaining market share from the grain-based food business. The rate at which the sector is losing money and the haste with which it is looking for ways to increase sales are unquestionably serious concerns. Over the past year, a number of industry reforms have been pushed by the negative trends.
Although the volume of several significant grain-based food categories has been falling recently, information Resources, Inc. data for the 52 weeks that concluded on August 11 show an acceleration. Fresh bread, the industry’s main product, saw a 4.8% unit volume fall to 3,523,484,271 units over the previous year. Additionally, dollar sales for the year decreased by 0.8% to $8,923,613,663.
The past 12 months have seen a decline in unit sales of other grain-based categories, such as hot dog and hamburger buns (down 2.4%), other rolls (down 1.8%), pita bread (down 7%), crackers (down 1.7%), fillings-filled crackers (down 0.6%), saltine crackers (down 1.9%), graham crackers (down 3.1%), breadsticks (down 8.3%), ready-to-eat cereal (down 3.1%), popcorn (down 0.8%), hot cereal (down 4%), pretzels (down 3.9%), granola bars (down 5%), and pasta (down 0.7%).
Sales increases were seen in a few grain-based categories, many of which are more decadent: bakery snacks were up 0.8%, frozen pizza was up 1.5%, cookies were up 0.5%, and salty snacks were up 3%.
When looking more closely at the fresh bread statistics, it can be seen that while most large corporations had decreases in branded bread unit sales, private label suffered the most losses. Sales of private label bread decreased 9.8% year over year to 1,083,012,714 units. Private label accounted for 31% of bread sales volume but fell to little under 20% of dollar sales, even with another year of share loss. Although it continued to lose market share over the last year, Grupo Bimbo S.A.B. de C.V.’s U.S. company, based in Horsham, Pennsylvania, was still the biggest bread baker in the country, with a 6.1% decrease in unit sales. Thomasville, Georgia-based Flowers Foods, Inc. saw almost unchanged unit sales (up 0.8%), but significant market share was acquired. Campbell Soup Company Throughout the year, Norwalk, Connecticut, saw a 2.5% increase in sales.
A surplus of manufacturing capacity in the baking business has been made worse by the decreasing sales volume, and many plants have closed in the last year. For instance, Flowers Foods stated in October 2019 that it intended to stop manufacturing at a plant in Opelika, Alabama, and in November 2018 that it intended to close a baking facility in Brattleboro, Vermont. Bimbo made intentions to close a plant in West Hazelton, Pennsylvania, public in September 2019. Production has also been concentrated by smaller businesses. Aunt Millie’s closed her Coldwater, Michigan, bakery early in 2019, while Schwebel Baking Co. announced in March that it was closing its Solon, Ohio, facility.
In recent years, difficulties have faced even those companies that have refrained from concentrating on conventionally sliced bread. Aryzta L.L.C. has faced significant obstacles after enjoying years of fast expansion in the 2000s. Sales of units over the previous 52 weeks decreased by 4.6%. The October sharp decline in the parent company’s share price, Aryzta, which has its headquarters in Zurich, was attributed to challenges facing the company’s North American division. Kevin E. Toland, the chief executive officer of Aryzta, commented on the dismal revenue patterns, stating that it would be difficult to stabilize revenues in North America and that the recovery would be gradual and uneven.
Weakness in sales of grain-based foods has been attributed, in part, to the increasing popularity of gluten-free dieting. Reflecting a desire to participate in this trend, Flowers Foods in late 2018 acquired Canyon Bakehouse, a leading producer of gluten-free bread.
Also a major change at Flowers during the past year was a “changing of the guard” at the company’s helm. At mid-year, A. Ryals McMullian Jr. was elected president and c.e.o. of Flowers, succeeding Allen L. Shiver, who retired following a career dating back 41 years.
Prior to the decline in sales of flour-based products in the last year, bakers and millers had started to consider what more could be done as a sector to increase consumer demand for foods made with flour. The industry has been considering investing in a checkoff program that would be supervised by the U.S. Department of Agriculture, with the Grain Foods Foundation leading the charge. The majority of other food staples, like dairy and meat as well as vegetables, have similar consumer education programs in place with the aim of boosting demand for specific items and product categories.
The industry that deals with grain-based foods is specifically considering a checkoff scheme that advertises “bread basket” goods like bread, rolls, bagels, English muffins, and so on. A program like this would be significantly bigger than what the G.F.F. and the Wheat Foods Council now run. Leading bakeries and milling corporations have thrown their support behind it, but several bakers whose operations are primarily focused on the food service industry have expressed skepticism or even resistance. Due to their success in producing a good return on investment, checkoff systems from other industries have persisted for years or even decades. However, because these programs are mandated and the government participates in activities with companies that frequently object, checkoff programs, although established ones, rarely manage to avoid controversy.
The G.F.F. has scaled back the proposed program to $15 million annually from the $23 million that was provisionally indicated early in 2019 in order to reflect the range of viewpoints regarding the initiative. Bakers would pay 85% of the program’s costs, with flour millers covering the remaining 15%. The price per cwt of wheat flour used to make breadbasket items would be 16 cents.
The G.F.F.’s executive director, Christine Cochran, stated that millers and bakers can anticipate a five-to fifteen-fold return on their investment.Additionally, flour milling industries have taken new steps to adapt to changing customer dietary preferences.
To better supply organic wheat and other grains, Ardent Mills, L.L.C. purchased a grain storage facility in Klamath Falls, Ore., in July. Ardent Mills launched The Annex as a stand-alone company in 2018 to cater to broader shifting consumer preferences. The Annex offers a selection of ancient grains, heritage wheats, rye, and barley. At its Denver plant, the company increased its capacity to handle and clean speciality grains earlier this year. Numerous additional milling companies—both big and small—have made announcements about their speciality grain ambitions. Significant actions have also been made by a recently established business, Panhandle Milling L.L.C., to reduce its exposure to more commoditized wheat flour milling while making significant investments in potential related to specialty grains.
Following a 2017 collaboration with Arista Cereal Technologies, which produced a wheat variety with ten times more fiber in the endosperm than is found in the majority of wheat harvested today, Bay State Milling Co. has started selling a new product. Compared to conventional wheat’s 20% or 30% amylose level, the new variety’s amylose percentage is approximately 85%. A higher resistant starch content is a direct result of a higher amylose concentration. Soluble fiber and resistant starch have similar roles. To cultivate the wheat on several thousand acres, Bay State has agreements with farmers in numerous states. HealthSense high-fiber wheat flour is the name given to the resultant flour on the market. In August 2019, Arista Cereal Technologies, Bay State Milling, and Arcadia Biosciences came to a deal whereby Bay State will became the exclusive commercial partner for Arcadia’s HealthSense brand of high-fiber wheat. Arista was granted exclusive rights in Australia, New Zealand, Europe, Japan, and South Korea with respect to Arcadia’s intellectual property.
Cereal category R.-T.-E. sees expansion
Executives in the ready-to-eat cereal industry are confident that innovation will drive growth in their sector despite volume losses.
At the Barclays Global Consumer Staples Conference in Boston in September, Jonathan J. Nudi, group president of North America Retail at General Mills, Inc., stated, “We don’t think it’s going to be in mid-single digit, but just grow a little bit.” Rather than lower consumer demand, he blamed some of the deterioration over the last year on merchants’ inventory drawdowns.
“We have faith in our abilities to execute well, and it can also lead the category,” he remarked. We have undoubtedly been quite transparent about inventory over the past year. We’ve observed that our retailers have brought down their inventories as they concentrate on cutting working capital. Additionally, for us in fiscal ’19, there was a discrepancy of almost one point between Nielsen and our reported net sales figures. That is what we anticipate happening in the upcoming year. We hope the difference isn’t quite as great. Nonetheless, it’s evident that our retailers continue to prioritize working capital.
Steven A. Cahillane, chairman, president, and chief executive officer of Kellogg Co., located in Battle Creek, Mich.,admitted that the corporation finds the R.-T.-E. cereal business to be difficult.
“The category is extremely well-established,” Mr. Cahillane remarked. For us, this is a profitable category. We also don’t believe that the finest times for this category are over. However, it is currently going through a difficult period. Overall, the category is only decreasing by roughly 1%. Therefore, it’s not plummeting down a cliff as you may believe after reading some reports.
He attributed the pressure on the breakfast cereal business on changing dietary preferences.”People should be reminded that cereal is a valuable and nutritious supplement to a balanced diet,” he stated.
According to a recent analysis from, even while North America currently holds the largest share of the morning cereal market, Asia, Europe, and Africa are gradually challenging its dominance.
According to Packaged Facts’ “Global Breakfast Cereals” report, sales growth outside of North America is expected to drive the market’s projected 3% annual growth to $40 billion by 2023.
According to Packaged Facts, North America made up $12 billion of the $35 billion worldwide market for breakfast cereals in 2018. With a higher per capita consumption of hot and R.-T.-E. cereals than other regions, the region has the highest penetration of breakfast cereals worldwide. However, the survey pointed out that a decrease in per capita consumption in recent years has been caused by people’s increasingly hectic lifestyles and the abundance of other breakfast options.
According to David Sprinkle, research director at Packaged Facts, “consumption rates are rising as cereal companies target these areas, even though breakfast cereal penetration is much lower in the rest of the world.” “In these countries, cereals are being offered as an alternative to conventional fare, rather than as an established product that competes with new breakfast options. Breakfast cereals are an innovative and alluring dietary choice because of the Westernization of the diet in many of these regions.
Packaged Facts has identified six trends cereal makers are focusing on to stop breakfast cereal sales from declining further: leveraging the health halo, developing innovative flavors, marketing cereal outside of breakfast, maximizing convenience, enhancing value with add-in ingredients, and paying attention to packaging. The existence of improvedSmart labels are among the packaging elements that are facilitating more consumer involvement and improving the breakfast experience.
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Sales of cookies surpass $8 billion.
Cookies make for delightful snacking experiences because to their excellent ingredients and rich flavors. According to I.R.I., these major factors impacted the snack category, which led to sales of over $8.05 billion and consistent increase in the U.S. snack market for the 52 weeks that concluded on August 11.
According to Mr. Sprinkle, “taste is the biggest driver of choice; consumers seek out products that offer new, exciting tastes and experiences.” “Some consumers want even more decadent, unique, and indulgent options, especially younger consumers.”
The Most Stuf Oreos, produced by Mondelez International’s Nabisco brands in Deerfield, Illinois, highlighted the appeal of indulgence by having more than three times the vanilla crème content of a typical Oreo. This summer, the company introduced three limited-edition flavors: Marshmallow Moon, Mint Chocolate Chip Oreos from Baskin-Robbins, and S’mores.
According to Sally Lyons Wyatt, vice-president and practice leader, client insights, I.R.I., “good old-fashioned indulgence has influenced consumer cookie purchases, even though categories with claims have done well.” “It has been successful to mass market traditional flavors in creative combinations.”
There are difficulties in the cookie market. Growth may be hampered by fresh products, private label and lower-cost brands, and competition from other decadent and/or healthier snacks.
Healthy additions to cookies help them feel fuller between meals or give them more energy after working out. With the introduction of Quest Protein Cookies, Quest Nutrition, located in El Segundo, California, has seen success.
And other varieties, such as thin cookies, are still popular. The Pepperidge Farm Farmhouse Thin & Crispy cookie brand was developed by Campbell Snacks, a company based in Camden, New Jersey. The line of thin, crispy cookies is made using basic ingredients.Not only does protein seem to be a selling point for the cookie category, but consumers will always have a soft place for the comforting treat of a cookie.
Breaking through the cracker code
The goal of cracker producers is to increase category sales by adding value. In one instance, the innovation focuses on supplying nutrition by including veggies into the crackers. Another example is the feel of crackers being made to resemble chips in order to appeal to consumers’ snacking instincts.
In any event, businesses are searching for strategies to reverse the decline in cracker category unit sales and ignite dollar sales growth.
According to I.R.I., dollar sales in the cracker category for the 52 weeks that ended on August 11 were $7,000,423,248, which was 0.7% less than the same time last year. Unit sales during that same period decreased by 1.7%.
Maintaining the pace of Campbell Soup’s Pepperidge Farm division is one of their objectives.
Carlos Abrams-Rivera, senior vice-president and president of Campbell Snacks, addressed investors during the company’s June 13 Investor Day in Camden. He stated that Pepperidge wants to update its core, introduce new packaging formats to retailers, find innovative ways to encourage kids to play with Goldfish, and expand into markets outside of its core demographic.
In order to do this, Pepperidge intends to launch Goldfish Veggie crackers, which will come in two flavors: Sweet Carrot and Cheesy Tomato. It wouldn’t be the first time Pepperidge tried to add veggies to Goldfish. The brand debuted Goldfish Garden Cheddar snack crackers ten years ago, which further included one-third of a serving of veggies.
Kellogg Co. continues to benefit from the Cheez-It brand. According to I.R.I., Kellogg’s cracker dollar sales for the 52 weeks ended August 11 amounted to $1,375,559,479, an increase of 0.6% over the same period the previous year. The core Cheez-It brand saw 3.4% year-over-year dollar sales growth, which contributed significantly to the category gains overall.
Additionally, Kellogg saw growth in Cheez-It’s variety options, such as Cheez-It Grooves. After launching Snap’d, a line of thin and crunchy cheese crackers, Kellogg hopes to build on its Cheez-It popularity. There are four types of the crackers: white cheddar and bacon, cheddar sour cream and onion, and jalapeño jack. There is also a double cheese kind.
According to I.R.I., Mondelez is the biggest participant in the category with dollar sales of $1,609,025,672. However, when dollar sales decreased by 0.5% in the most recent 52 weeks, the company’s hold on the top rank loosened a little. A notable reduction in the company’s most popular brand, Nabisco Ritz, was a major contributing factor to the downturn. I.R.I. reports that Ritz cracker unit sales decreased by 10.5% and dollar sales decreased by 6.1% in52 weeks concluded on August 11.
In recent conference calls, Mondelez has largely avoided discussing its cracker business. However, earlier this year, one of the company’s products made it onto I.R.I.’s Top 10 New Product Pacesetters list. According to I.R.I., Ritz Crisp & Thins, which made its debut towards the end of 2017, brought in $49.1 million in its first year of sales, ranking it ninth on the yearly list. There are four types of Crisp & Thins: bacon, cream cheese and onion, sea salt, and salt and vinegar. Mondelez claims that the crackers have 50% less fat than many typical fried potato chips because they blend potatoes and wheat, roll them thin, then bake them in the oven for added airiness and crunch.