Sector Trend Analysis – Bakery products in the United Kingdom

Introduction – Global retail sales and trade of bakery products

Global retail sales overview

The global retail value market of baked goods was worth US$384.7 billion in 2020 representing an increase in compound annual growth rate (CAGR) of 4.7% from US$320.3 billion in 2016. The global retail market of baked goods is expected to achieve a growth rate of 5.5% as sales increase to US$498.1 billion by 2025. The top three global markets for retail sales of baked goods were the United States (U.S) US$66.9 billion representing a 17.4% market share, China (US$34.1 billion) representing a 8.9% market share and Brazil (US$22.9 billion) representing a 5.9% market share in 2020. The United Kingdom (U.K) in comparison, ranked eleventh in global retail sales of baked goods valued at US$9.7 billion in 2020 (+6.1% from US$9.2 billion in 2019). Of note, as a previous member of the European Union (EU), the U.K was fifth (after Germany and Turkey) with retail value sales of baked goods worth US$9.2 billion in 2019.

Global retail sales of health and wellness (HW) baked goods were valued at US$38.7 billion in 2020, representing an increase in growth rate of 6.6% from retail sales of US$30.0 billion in 2016. Retail sales of health and wellness baked goods are expected to increase in growth rate by 5.8% as sales reach US$50.2 billion by 2025. The top three global markets for retail sales of health and wellness baked goods were the U.S (US$8.9 billion) representing a 23.3% market share, Brazil (US$2.9 billion) representing a 7.5% market share and Canada (US$2.3 billion) representing a 6.0% market share in 2020. The U.K in comparison, ranked seventh in global retail sales of health and wellness baked goods valued at US$1.5 billion in 2020 (+7.3% from US$1,372.4 million in 2019).

Global trade overview

In 2020, the U.K was the second largest global market (7.9% market share) for baked goods with imports valued at US$2.9 billion (1,024.2 million kilograms). The U.K experienced a CAGR of 5.2% as imports of baked goods increased from US$2.4 billion (917.1 million kilograms) in 2016 (+0.5% from US$2,890.0 million in 2019).

Canada was the fifth largest global market for imported baked goods, accounting for 4.5% of total global market share (representing US$1.7 billion, 504.6 million kilograms) in 2020.

United Kingdom trade

The U.K has a diverse supply network of baked goods products. In 2020, the top three suppliers of baked goods to the U.K were France, representing a 15.7% market value share (US$456.6 million, 167.9 million kilograms), Ireland, representing a 14.5% market value share (US$420.9 million, 179.1 million kilograms) and Germany, representing a 14.4% market value share (US$416.9 million and 146.2 million kilograms). Canada was the U.K's ninth largest supplier of baked goods, representing a 1.6% market value share, providing US$45.6 million and 13.0 million kilograms in 2020.

In 2020, the U.K imported US$2.9 billion of baked goods globally from which France was the largest supplier (15.7% market share), while Canada supplied a 1.6% market share. Of these imported baked goods, the bread, pastry, cakes and biscuits (HS code 190590) commodities represented the largest, overall imports by the U.K with values of US$2.2 billion representing a 74.1% market share, followed by imports of sweet biscuits (HS code 190531) valued at US$449.4 million (15.5% market share) and imports of waffles and wafers (HS code 190532) valued at US$228.5 (7.9% market share). Of note, Canada supplied a 5.4% market share of ginger bread valued at US$825.4 thousand.

Canada's performance

Canada was the U.K's ninth largest supplier (after Poland and Spain) of baked goods in 2020. The U.K imported US$45.6 million of baked goods from Canada in 2020, representing a moderate 17.2% increase in growth rate for baked goods imports from US$24.2 million in 2016. Volume of baked goods from Canada also increased by 16.3% from 7.1 million kilograms in 2016 to 13.0 million kilograms in 2020.

Top baked goods imports from Canada were bread, pastry, cakes and biscuits (HS code 190590) commodities representing the largest, overall imports by the U.K with values of US$44.2 million (12.5 million kilograms), followed by gingerbread (HS code 190520) with values of US$0.8 million (0.2 million kilograms) and rusks, toasted bread (HS code 190540) valued at US$0.4 million (0.1 million kilograms) in 2020. Canada's baked goods supply gap to the U.K has increased in CAGR of 5.0% from US$2,349.2 million in 2016 to US$2,858.1 million in 2020.

Consumption trends

According to a recent Puratos study conducted in mid-June 2020 regarding the impact of the coronavirus in the U.K, when purchasing bakery items, taste, freshness and price remain the most important selection criteria for British consumers. Further, the importance of healthiness is growing, especially for breads, with consumers increasingly looking for food that bolsters their health and immunity. While hygiene is also considered, although it is a lesser selection criterion, possibly because of pre-existing high standards.^{Footnote 1}

Product preferences of British consumers are also evolving. The corona crisis is expected to boost sales of products that are: healthy; breads with more grains and high in fiber, and cakes with less sugar and fat are topping consumers' wish lists to improve their diet, packed; British consumers prefer packed breads and cakes with 4 to 7 days shelf life, indulgent, local; considered more authentic and affordable; with one out of two families paying more attention to the amount spent on food.^{Footnote 1}

Mintel also notes that covid 19 has led many consumers to find comfort in indulgent foods, in particular seasonal cakes such as Christmas, Halloween and Easter, remain well-suited as their decadent flavours and distinct, seasonal connotations remind consumers of happy past holidays. Nostalgia has been a powerful influence on food innovation throughout the pandemic.^{Footnote 2}

Ethical issues surrounding animal and human welfare are also important to the British consumer. 48% of U.K adults surveyed believe high animal welfare standards, while 37% of respondents believe supporting worker and farmer welfare should be the biggest priorities of food and drink companies. Animal welfare concerns are mainly due to the egg content in the cake, pastry and sweet goods sector as cakes made with free-range eggs or barn eggs are more likely to appeal to welfare-minded consumers, as many look for these ethical assurances when shopping for regular eggs. Ethical human claims are typically represented by UTZ or Rainforest Alliance logos on the packaging, relating to fair business relations with farmers and producers.^{Footnote 2}

Retail sales

The emergence of covid-19 and the accompanying lockdowns (home seclusions) and restrictions (foodservice and non-essential retail closures), enabled the baked goods category to increase in both retail volume and value growth during the historic period, especially during covid-19 in 2020. As reported in Euromonitor International, the lockdown in the first half of the year led to panic-buying of some products such as packaged products and frozen baked goods, which saw higher sales as consumers tended to return to the familiarity of staple products. Certain products such as morning goods, croissants and pain au chocolat were popular choices as consumers looked for indulgence foods in uncertain times.^{Footnote 3}

Retail sales of baked goods in the U.K increased in value growth from US$8.4 billion (2,805.5 tonnes) in 2016 by a CAGR of 3.8% to US$9.7 billion (2,956.2 tonnes) in 2020 (+6.1% from US$9.2 billion in 2019) and are expected to increase by an additional 3.8% to attain values of US$11.6 billion (2,949.0 tonnes) by 2025. Bread was the largest baked goods category with retail sales values of US$5.0 billion (2,226.7 tonnes) and a 51.5% market share, followed by cakes with retail sales values of US$3.5 billion (573.6 tonnes) and a 35.7% market share in 2020. Pastries was the third largest category and experienced the largest growth rate of 6.2% in the baked goods category as retail sales values increased from US$682.4 million (72.8 tonnes) in 2016 to US$867.5 million (80.9 tonnes) and a 8.9% market share in 2020.

Retail sales values of (HW) baked goods also experienced a (larger) increase (in comparison to baked goods) in growth rate of 5.0% from US$1.2 billion (452.0 tonnes) in 2016 to US$1.5 billion (499.7 tonnes) in 2020 and are forecast to increase by a further growth rate of 5.1% as retail sales values reach US$1.9 billion (516.7 tonnes) by 2025. Bread was also the largest category within health and wellness baked goods with retail sales values of US$1.3 billion (487.5 tonnes) and a 89.8% market share. Health and wellness cakes, despite lower retail sales values of US$150.9 million (12.1 tonnes) in 2020, experienced a larger value growth rate of 8.4% as retail sales values increased from US$109.2 million (10.6 tonnes) in 2016, a trend that is expected to continue as growth rates in retail sale values of (HW) cakes are forecast to increase, albeit at lower rates of 6.6% by 2025.

Retail environment

Distribution channel shares

In 2020, retail sales values of baked goods across various distribution channels in the U.K were valued at US$9.7 billion, representing an increase in growth rate of 3.8% from US$8.4 billion in 2016. Store-based retailing via grocery retailers was the primary retail channel valued at US$8.7 billion (+2.5% from US$8.0 billion in 2016) through which baked goods were distributed (98.3% market share) via modern grocery retailers, specifically hypermarkets and supermarkets as the largest channels, with retail sales of US$2.4 billion and US$2.5 billion respectively, accumulating a combined market share representation of 66.8% of modern grocery retailers in 2020. Within traditional grocery retailers, food/drink/tobacco specialists were the largest distribution channel for retail values sales of baked goods worth US$777.5 million and a 55.8% market share of traditional grocery retailers value sales of US$1.4 billion in 2020.

Non-store retailing experienced a significant increase in growth rate of 27.3%, with e-commerce as the only distribution channel selling baked goods via the non-store retailing channel with retail sales values of US$819.3 million in 2020 from US$312.1 million in 2016 (+73.7% from US$471.7 million in 2019), as the emergence of covid-19 and more at-home living and working influencing its presence as a distribution channel (8.4% non-store retailing market share in comparison to the 91.6% store-based retailing market share in 2020). Further, according to Euromonitor International, most manufacturers of packaged bread, pastries and cakes were already present on e-commerce through retailers, but the recent pandemic has led to some changes for smaller artisan bakers. For example, some artisan bakers have shifted to their own direct-to-consumer online distribution to maintain and develop sales, as ingredients and labour costs are typically high.^{Footnote 3}

Company shares

The baked goods and health and wellness (HW) baked goods retail market in the U.K is comprised of both brand and private labels, with private labels representing a 32.9% and 39.6% market share respectively in 2020. According to Euromonitor International, baked good brands have struggled as of late to compete with the prices and premiumisation offered by private labels as consumers look for more innovative baked products.^{Footnote 3} In addition, Euromonitor International notes that private label lines have furthered their offerings by implementing various health trends and extending their portfolios with seeded, high-fibre, high-protein baked goods products, including wider ranges of artisan breads, such as sourdough.

The bread category was the largest in both the baked goods and health and wellness baked goods products with retail sales of US$5.0 billion and US$1.3 billion respectively, in comparison to the second largest category, cakes, with values of US$3.5 billion and US$150.9 million respectively in 2020. Of note, artisanal health and wellness (HW) bread represented a 1.1% market share (US$14.5 million) in retail sales of total health and wellness bread valued at US$1.3 billion in 2020.

Warburtons Ltd and Premier Foods Plc were two dominant companies with the largest retail sales in most categories of products found both in the baked goods and health and wellness (HW) baked goods categories. The Warburtons brand, in particular, has been inspired by artisan bakeries and premium craft baking, and have developed a sourdough gluten-free range to challenge the dynamism offered by private labels.

Retail subsector analysis

Bread

In the bread category, leavened bread was the largest bread sub-category with retail sales of US$4.6 billion and a 90.9% market share in 2020, and is expected to increase in growth rate by an additional 2.6% to US$5.2 billion by 2025 as more consumers avoid processed foods and carbohydrates. Flat bread is also becoming more common as British consumers are becoming more adventurous in the kitchen and preparing more international recipes using products such as tortillas, naans and pittas.

Within the health and wellness (HW) bread category, naturally healthy high fiber bread was the largest sub-category with US$860.0 million in retail sales in 2020, while free from gluten bread experienced the largest growth rates (12.4% and 8.8% respectively) in both historic and forecast periods.

Cakes

In the cakes category, packaged cakes were the largest cake sub-category with retail sales of US$2.1 billion and a 60.6% market share in 2020, and is expected to increase in growth rate by an additional 3.7% to US$2.5 billion by 2025. Within the health and wellness (HW) cake category, free from gluten cakes was the largest sub-category with US$109.2 million in retail sales in 2020, experiencing the largest growth rates (14.0% and 8.7% respectively) in both historic and forecast periods, while reduced fat cakes declined in growth rate by 1.6% in the historic period and expected to remain stable (unchanged) in growth in the forecasted period.

Pastries

In the pastries category, packaged pastries were the largest pastry sub-category with retail sales of US$570.9 million and a 65.8% market share in 2020, and is expected to increase in growth rate by an additional 6.1% to US$756.3 million by 2025. Unpackaged pastries however, experienced the largest growth rates (6.5% and 7.3% respectively) in both historic and forecast periods.

The premiumisation trend is influencing pastries, with consumers treating themselves to doughnuts, croissants, Danish pastries, muffins and pain au chocolat. The demand for more extravagant pastries has also led artisanal bakeries to develop exotic flavours or new combinations of products, such as "cronuts", "crookies", "duffins", "macaringues" and "cretzels",^{Footnote 3} as noted by Euromonitor International.

Frozen baked goods and dessert mixes

Both the frozen baked goods and dessert mixes category (the smallest categories of baked goods), experienced positive growth rates obtaining retail sales of US$214.1 million and US$155.6 million in 2020, and are expected to increase in growth rates by an additional 5.6% and 5.8% respectively by 2025.

New product launch analysis

According to Mintel's Global New Products Database (GNPD), there were 8,751 new bakery products launched in the U.K from January 2016 to August 31, 2021. In terms of new bakery product launches per year, 2017 and 2018 had the highest launches with 1,743 and 1,671 products respectively. The top sub-categories of new bakery products offered were cakes, pastries, and sweet goods with 2,823 launches, sweet biscuits/cookies with 2,029 launches, bread and bread products with 1,728 launches, baking ingredients and mixes with 1,456 launches and savoury/biscuits/crackers with 715 new products launched from January 2016 to August 31, 2021.

Top claims (may contain more than one claim per package) were vegetarian, ethical-environmentally friendly packages and ethical-recycling. Top package types were flexible, carton and clam-pack formats and launched primarily as new variety/range extensions, new packaging and new products. Top flavours (including blends) identified were unflavoured/plain, chocolate and chocolate (milk) while top ingredients identified were wheat flour, salt and white sugar. Top companies releasing new bakery product launches were Asda, Tesco and Sainsbury's from January 2016 to August 31, 2021.

Examples of new product launches

Opportunities for Canada

In 2020, the U.K ranked eleventh in global retail sales of baked goods valued at US$9.7 billion in 2020 (+6.1% from US$9.2 billion in 2019). Of note, as a previous member of the European Union (EU), the U.K was fifth (after Germany and Turkey) with retail value sales of baked goods worth US$9.2 billion in 2019. In terms of health and wellness baked goods, the U.K ranked seventh in global retail sales with values of US$1.5 billion in 2020 (+7.3% from US$1,372.4 million in 2019).

In 2020, the U.K was the second largest global market (7.9% market share) after the United States, for baked goods with imports valued at US$2.9 billion (1,024.2 million kilograms). The U.K experienced a CAGR of 5.2% as imports of baked goods increased from US$2.4 billion (917.1 million kilograms) in 2016 (+0.5% from US$2,890.0 million in 2019). Canada was the fifth largest global market for imported baked goods, accounting for 4.5% of total global market share (representing US$1.7 billion, 504.6 million kilograms) in 2020.

Canada was the U.K's ninth largest supplier (after Poland and Spain) of baked goods in 2020. The U.K imported US$45.6 million of baked goods from Canada in 2020, representing a moderate 17.2% increase in growth rate for baked goods imports from US$24.2 million in 1016. Volume of baked goods from Canada also increased by 16.3% from 7.1 million kilograms in 216 to 13.0 million kilograms in 2020.

Top baked goods imports from Canada were bread, pastry, cakes and biscuits (HS code 190590) commodities representing the largest, overall imports by the U.K with values of US$44.2 million (12.5 million kilograms), gingerbread (HS code 190520) with values of US$0.8 million (0.2 million kilograms) and rusks, toasted bread valued at US$0.4 million (0.1 million kilograms) in 2020. Canada's baked goods supply gap to the U.K has increased in growth by a rate of 5.0% from US$2,349.2 million in 2016 to US$2,858.1 million in 2020. As such, there remains substantial opportunity for Canada to increase its presence in the U.K market as suppliers of safe and high-quality baked goods products, in addition to value-added products and ingredients.

Canada's broad (and growing) trade network provides Canadian companies preferred access to diverse markets all over the world. Information on Canada's free trade agreements (FTA) may be found at Global Affairs Canada, Trade and investment agreements. 

The Canada-UK Trade Continuity Agreement (Canada-UK TCA) Economic Impact Assessment:

• The Canada-United Kingdom Trade Continuity Agreement (Canada-UK TCA) replicates the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) on a bilateral basis. The TCA, therefore, is meant to maintain the status quo in the Canada-U.K. trade relationship
• The United Kingdom officially left the European Union (EU) on January 31, 2020, and CETA will cease to apply to Canada-U.K. trade on January 1, 2021.
• To avoid a gap in preferential trade access into each other's markets, Canada and the United Kingdom negotiated a trade continuity agreement - the TCA - that provides Canadian exporters, services providers, and farmers with continued preferential access to the U.K. market carried over from CETA. CETA removed 98% of tariffs on Canadian goods and over time will remove approximately 99% of tariffs, in addition to the other CETA benefits including improved access for services, greater certainty and transparency, protection for investments and intellectual property.
• In May 2020, the United Kingdom announced the applied MFN tariffs, which it refers to as the UK Global Tariff (UKGT), that would take effect on January 1, 2021. Under these tariffs, 94.4% of Canada's exports to the United Kingdom would be MFN duty-free. Under the United Kingdom's proposed bound duties -- the highest tariffs that the United Kingdom could apply, which closely resemble the EU's Common External Tariffs (CET), 87.5% of Canada's exports would be MFN duty-free.

For more information

The Canadian Trade Commissioner Service:

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

• Find a Trade Commissioner

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Resources

• Euromonitor International, Baked Goods in the United Kingdom, Country Report. November 2020
• Global Trade Tracker, 2021
• Mintel Global New Products Database, 2021
• Mintel; A year of innovation in cakes, pastries & sweet goods, 2021, Patrick Dahn. September 17, 2021
• TASTE/TOMORROW; From consumer insights to innovation. UK: consumer expectations for Bakery in the 'new normal', August 19, 2020.

Sector Trend Analysis – Bakery products in the United Kingdom
Global Analysis Report

Prepared by: Laurie Bernardi, International Market Research Analyst

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