Sector Trend Analysis – Bakery products in Canada

Introduction

Global retail sales overview

In 2021, total global retail sales of baked goods were equal to US$407.2 billion, having grown at a compound annual growth rate (CAGR) of 4.6% from 2017 to 2021. Canada was the world's twelfth largest retail market for baked goods, with US$6.6 billion in sales in 2021, equal to 1.6% of total global sales. Retail sales of baked goods in Canada grew at a CAGR of 3.3% from 2017 to 2021, and are expected to grow at a CAGR of 3.5% from 2022 to 2026, reaching US$7.8 billion by 2026. In 2026, Canada's share of global baked goods sales is expected to have fallen slightly to 1.5%.

In 2021, global retail sales of health and wellness (HW) baked goods were valued at US$42.3 billion in 2021, having grown at a CAGR of 6.8% from 2017-2021. Canada was the third largest market, behind the United States and Brazil. The United States saw retail sales of US$9.5 billion in 2021 and had a 22.4% market share, Brazil saw retail sales of US$3.4 billion and had an 8.1% market share, while Canada saw retail sales of US$2.6 billion and had a market share of 6.2%, having fallen from 6.7% in 2017. Retail sales in Canada from 2017 to 2021 grew at a CAGR of 4.6% from 2017 to 2021 and are expected to grow at a CAGR of 4.4% from 2022 to 2026, reaching US$3.3 billion in 2026 and accounting for 5.8% of the global market.

Global trade overview

In 2021, Canada was the world's fifth largest importer of baked goods, behind the United States, Germany, the United Kingdom (UK), and France. Canada saw total imports of US$1.8 billion of baked goods, which grew at a CAGR of 4.4% from 2017 to 2021. In 2021, Canada had a 4.3% market share of imported bakery products, down slightly from the 4.5% share Canada had in 2017.

Canada was the second largest exporter of bakery goods behind Germany. Germany exported US$4.6 billion worth of bakery goods in 2021 and had a 10.7% share of global baked goods exports for the year, while Canada exported US$3.8 billion and had an 8.7% share for the year, up from 7.3% in 2017. Canada saw baked goods exports grow at a CAGR of 11.5% from 2017 to 2021, well above the global average rate of 6.4%. In 2021, Canada had a trade surplus of baked goods amounting to US$2.0 billion.

Foreign supplies of agricultural goods to Canada were dominated by the United States, which in 2021 enjoyed a 72.3% share of baked goods exports to Canada. Italy was the second largest supplier with US$60.7 million in sales (3.4% share), followed by Mexico with US$56.1 million (3.2% share) and France with US$39.4 million (2.4% share).

97.2% of Canadian baked goods exports for 2021 went to the United States, totalling US$3.7 billion worth. American imports of Canadian baked goods accounted for 46.3% of all foreign supplies. Canada's next largest importer of baked goods was the UK, which imported US$51.9 million worth of Canadian baked goods, equal to 1.4% of Canadian exports and 1.7% of UK imports. Australia was the third largest destination, worth US$9.5 million, equal to 0.3% of Canadian exports of baked goods.

Bread, pastry, cakes and biscuit was the largest category of Canadian baked goods exports and imports. The United States was both Canada's largest supplier and customer for these products and was by far the largest customer for every category. The United States was the largest supplier of every category of baked goods with the exception of gingerbread, supplies of which mostly came from Italy.

Retail trends

In 2021, Canada saw recorded retail sales of US$6.6 billion worth of baked goods, expected to reach US$7.8 billion in 2026 after growing at a CAGR of 3.5%. Bread was the largest category of baked good, with US$4.1 billion in sales in 2021, or 62.8% of the baked good market. Pastries saw US$1.3 billion in sales, or 19.3% of the market, cakes saw sales of US$825.3 million or 12.6% of the market, and frozen baked goods saw sales of US$274.1 million in 2021, or 4.2% of the market. Health and wellness baked goods recorded sales of US$2.6 billion.

The Canadian market for baked goods was profoundly affected by the advent of the coronavirus pandemic. In 2020, Canadians generally spent more time indoors and ate out less. Households spent more time eating at home, some using the preparation of food as a fun activity to do together. Sales of baked good saw year over year growth of 8.9% in 2020, and frozen baked goods saw growth of 14.3%. Sales of frozen baked goods have also been benefitting from the added convenience of oven proof packaging, which has been on the rise. However, some of the growth of frozen baked goods and other categories that could be consumed at home came at the expense of the foodservice sector, which has yet to fully recover.

Frozen baked goods saw a slight decline of sales in 2021, falling 0.8%, as many Canadians felt more comfortable visiting foods establishments. Overall baked goods saw positive year over year growth of 0.7%, with all categories seeing little growth or contraction from the last year. From 2022 to 2026, most categories are expected to have similar growth rates of around 3.5%. Dessert mixes, however, is expected to see slower growth at a CAGR of 2.2%, while health and wellness baked goods are expected to see relatively fast growth at a CAGR of 4.4%. Foods marketed as organic or gluten free are expected to see strong growth.

As Canadians continue spending more time outside, foodservice outlets are expected to continue to recover. However, there remains uncertainty in the Canadian market, as the possibility of a resurgence of coronavirus looms large. A return to the situation of 2020 would likely benefit retail sales of frozen baked goods, while inflicting further damage on the foodservice sector.

Retail environment

Distribution channel shares

In 2021, total retail sales of baked goods in Canada amounted to US$6.6 billion. The baked goods market was dominated by grocery retailers, and modern grocery retailers were the largest category of store-based retailers. Modern grocery retailers saw sales of US$4.8 billion in 2021, amounting to 73.3% of the market for baked goods. Supermarkets were the largest subcategory, with total sales amounting to US$3.1 billion, or 47.8% of all retail sales of baked goods. This was followed by Hypermarkets, which had US$1.2 billion in sales in 2021, and held a 17.8% market share. Discounters saw US$401.6 million in sales and a 6.1% market share, forecourt retailers had US$82.2 million in sales and a 1.3% market share, and convenience stores had US$20.8 million in sales and a 0.3% market share.

Traditional grocery retailers saw US$1.6 billion in sales (23.9% share), and their largest subcategory, food/drink/tobacco specialists, had US$811.8 million in sales and a 12.4% market share. Independent small grocers had US$326.7 million in sales and a 5.0% market share, and other grocery retailers made up the remaining US$429.2 million in sales, enjoying a 6.5% market share. Mixed retailers saw US$84.1 million in sales and a 1.3% market share, e-commerce saw 79.7 million in sales and a 1.2% market share, and health and beauty specialist retailers saw US$25.0 million in sales and a 0.4% market share.

Overall, the sector saw retail sales growth occurring at a CAGR of 3.3% from 2017 to 2021. E-commerce saw by far the fastest growth, with sales growing at a CAGR of 101.9% over the historic period. The sector saw year-over-year growth of 860.0% in 2020 and grew 68.5% in 2021. Health and beauty specialists saw the second fastest growth, growing at a CAGR of 6.3% over the historic period, while mixed retailers grew at 5.0%. Forecourt retailers and convenience stores were notable for seeing negative growth in sales of baked goods.

Company shares

In 2021, total baked goods sales were US$ 6.6 billion. The baked goods market was compromised mostly of brand labels, with private labels making up 19.2% of the baked goods market and 18.9% of the HW baked goods market. The largest company in the baked goods market was Grupo Bimbo SAB de CV, with US$1.0 billion in sales in 2021, and a 15.5% market share. The next largest was George Weston Ltd, which saw US$787.0 million in sales and a 12.0% market share, followed by Kellog Co which saw US$136.4 million in sales and had a 2.1% market share. Grupo Bimbo SAB de CV and Kellogg Co had sales spread across multiple categories, while George Weston Ltd had all its sales in the baked bread category.

Baked bread and George Weston

Baked bread was the largest category of baked goods in 2021 with US$4.1 billion in sales, and George Weston Ltd was the largest player in the bread market. George Weston enjoyed a 19.1% market share of the baked bread market in 2021, as well as a 19.8% share of the packaged flat bread market and a 27.2% share of the packaged leavened bread market. George Weston recorded total sales of US$787.0 million in 2021, down slightly from US$792.2 million in 2020. George Weston also recorded US$349.2 million in HW baked goods sales, accounting for 13.4% of the market and being the second largest seller, behind Grupo Bimbo SAB de CV.

From 2017 to 2021, George Weston saw its baked bread sales rise at a CAGR of 3.0%, slightly behind the growth of baked bread overall, which occurred at a CAGR of 3.3%. George Weston's growth also lagged behind the growth of Grupo Bimbo SAB de CV, which from 2017 to 2021 increased its baked bread sales at a CAGR of 3.9%. George Weston saw growth of HW baked goods at a CAGR of 4.3% from 2017 to 2021, slightly behind the overall growth of the sector of 4.6%, but ahead of Grupo Bimbo SAB de CV's growth rate of 3.6% in the HW baked goods category.

Grupo Bimbo SAB de CV had by 2021 increased its sales of baked bread in Canada to US$783.0 million, representing a 19.0% market share, although this company also saw its baked bread sales drop in 2021. The third largest player in the Canadian baked bread market, Boulangerie St-Methode, La, recorded strong growth at a CAGR of 6.3% from 2017 to 2021, but held only a 1.4% market share in the baked bread market. Ozery Bakery/Pita Break had a 1.3% share, Flowers Foods Inc had a 0.4% share, and Dare Foods Ltd had a 0.2% share. Private label baked bread saw US$1.3 billion in sales, accounting for 30.6% of the market, while the remainder was made up by other brands.

Other Categories

The cake market was valued at US$825.3 million in 2021, and Grupo Bimbo SAB de CV was the largest player with US$203.1 million in sales and a 24.6% market share. The next largest player was Hostess Brands LLC with a 2.1% market share, followed by Kinnikinnick Foods Inc with a 0.2% market share. Private labels had a 0.8% market share, and the remaining US597.2 million in sales and 72.4% of the market was made up by smaller companies.

The Desert mix market was valued at US$81.8 million in 2021, and was relatively consolidated, with the largest company, General Mills Inc, recording US$33.1 million in sales and holding a 40.5% market share. Kraft Heinz Co recorded US$16.6 million in sales and a 20.3% market share, JM Smucker Co, The recorded US$12.6 million in sales and a 15.4% market share, private labels accounted for US$10.5 million in sales and a 12.6% market share, while the remaining US$9.2 million were accounted for by other brand labels.

Frozen baked goods saw US$274.1 million in sales in 2021, with Kellogg Co selling US$101.9 million worth of product for the year and holding a 37.2% market share. Grupo Bimbo SAB de CV had US$36.0 million in sales and a market share of 13.1%, General Mills Inc had US$25.4 million in sales and a market share of 9.3%. Private labels accounted for US$21.9 million in sales, or 8.0% of the market, while the remaining US$88.9 million in sales can be attributed to other brand labels.

The pastries market saw a total of US$1.3 billion in sales in 2021. The pastries market was significantly more fragmented than the other categories, with the largest player, Kellogg Co, recording US$34.5 million in sales in 2021, and holding a 2.7% market share. Sara Lee Frozen Bakery saw US$2.0 million in sales, or 0.2% of the market, and private labels saw US$195.4 million in sales, accounting for 15.4% of the market. The remaining US$1.0 billion in sales were attributable to other brand labels.

HW baked goods saw US$2.6 billion in sales in 2021, and the largest player was Grupo Bimbo SAB de CV, with US$522.3 million in sales and a 20.0% market share. George Weston Ltd had US$349.2 million in sales and a 13.4% market share, while Boulangerie St-Methode, La had US$56.9 million in sales and a 2.2% market share. Artisanal HW baked goods saw US$998.4 million in sales, accounting for 38.3% of the market, private labels saw US493.0 million in sales or 18.9% of the market, and other brand labels accounted for the remaining US$189.5 million in sales.

Retail subsector analysis

Bread

In the bread category, leavened bread dominated the market in 2021, with US$3.5 billion in sales, or 84.6% of the market. Flat bread saw US$634.8 million in sales and accounted for 15.4% of the market. Flat bread saw significantly faster growth from 2017 to 2021, growing at a CAGR of 8.6%, while leavened bread grew at a CAGR of 2.5%. Flat bread is expected to grow at a CAGR of 9.1% from 2022 to 2026, while leavened bread grows at a CAGR of 2.2%.

High fibre bread was the largest category of health and wellness bread, with US$2.2 billion in sales and an 83.4% share of the market. Organic bread was the second largest category, with US$201.2 million in sales in 2021, and is expected to grow at a CAGR of 6.5% from 2022 to 2026. Gluten free bread saw US$163.6 million in sales in 2021, and is expected to see the fastest growth, growing at a CAGR of 9.9% from 2022 to 2026.

Cakes

In 2021, unpackaged cakes saw US$518.7 million in sales, making up 62.8% of the cake market. Packaged cakes saw US$306.3 million in sales accounting for US$ 37.2% of the market. Packaged cakes saw faster growth from 2017-2021, however unpackaged cakes are expected to see stronger growth from 2022 to 2026, growing at a CAGR of 4.4% as opposed to packaged cakes' CAGR of 2.4%. By 2026, unpackaged cakes are expected to make up 65.7% of the market. Of HW cakes, all recorded sales were in the reduced fat category.

Pastries

In the pastries category, unpackaged pastries saw US$669.3 million in sales in 2021, making up 52.8% of the market, while packaged pastries saw US$597.7 million in sales and made up 47.2% of the market. Packaged pastries recorded stronger growth from 2017 to 2021, however this growth is expected to taper off from 2022 to 2026. Packaged pastries are expected to grow at a CAGR of 2.3% from 2022 to 2026, while unpackaged pastries are expected to see their growth rate rise to a CAGR of 4.7%. By 2026, it is expected that unpackaged pastries will make up 55.9% of the pastries market.

Frozen baked goods and dessert mixes

Frozen baked goods saw a strong CAGR of 5.3% from 2017-2021, however is expected to see more subdued growth from 2022-2026, growing at a CAGR of 3.3%. Desert mixes is expected to grow at a CAGR of 2.2% from 2022-2026. In 2026, it is expected that Frozen baked goods will reached a size of US$320.0 million, while dessert mixes will have reached a size of US$90.6 million.

New product launch analysis

According to Mintel's Global New Products Database (GNPD), 3,590 bakery products were launched in Canada from 2017 to 2021. Top sub-categories of new bakery products included sweet biscuits and cookies with 982 launches, baking ingredients and mixes with 901 launches, and bread and bread products with 848 launches. Top claims included kosher with 1,689 launches, no additives or preservatives with 1,136 launches, and environmentally friendly packaging with 925 launches. 1,140 products, or 31.8%, were listed as imported, while 750 products, or 20.9%, were listed as not-imported.

Flexible was the most common package type, with 2,626 launches, while flexible stand-up pouch followed with 311. New variety/range extension was the largest new launch type, with 1,318 launches, while new packaging was second with 1,165 launches and new products was third with 821 launches. Top flavours included plain with 1,184 launches, chocolate with 312 launches, and vanilla with 84 launches. Top ingredients included salt with 2,428 launches, wheat flour with 2,154 launches, and white sugar with 2,072 launches. The company that saw the most product launches was the George Weston Ltd subsidiary Loblaws with 214 launches. Sobeys was second with 154 launches, and Christie Brown with 117 launches. Weston Bakeries was ninth, with 64 launches including 4 in 2021.

Examples of new product launches

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Resources

• Euromonitor International, Baked Goods in Canada, Country Report. December 2021
• Global Trade Tracker, 2022
• Mintel Global New Products Database, 2022

Sector Trend Analysis – Bakery products in Canada
Global Analysis Report

Prepared by: Brendan Dwyer, Student

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