Sector Trend Analysis – Bakery products in the United States

Retail environment and trends

Baked goods retail sales in the U.S. increased at a CAGR of 5.9% over 2018 to 2022, reaching US$82.9 billion in 2022. It is expected to grow at a CAGR of 3.1% over 2023 to 2027, reaching US$97.7 billion in 2026. Bread was the best performing category over 2018 to 2022, with retail value sales increasing by CAGR of 6.3%. reaching US$30.0 billion.

2022 witnessed a strong comeback for baked goods as occasions, seasonal and religious celebrations returned to pre-pandemic patterns. This was evident as travel peaked with many families reuniting for celebrations such as birthdays, weddings and graduations, thus driving up demand for baked goods. Fresh baked goods such as cakes, pastries and pies benefited more from this trend compared with frozen baked goods. Although health concerns remain in some categories, such as bread, people still want to indulge occasionally, thus leading to a stronger demand in categories such as cakes and pastries.

According to Euromonitor, Inflation in the U.S. reached historic levels in 2022, peaking at 9% during the middle of the year, prompted many manufacturers to revisit their pricing strategy, cut costs, yet deliver high-quality products with significant price increases witnessed across baked goods categories in 2022.

Artisanal baked good companies make up the largest manufacturer of baked goods, or almost half the market, followed by private labels and 'others'. Top three baked goods companies were Grupo Bimbo (US$6.7 billion in 2022), followed by Flowers Food (US$3.1 billion in 2022) and Hostess Brands (US$1.9 billion in 2022). Over 2018 to 2022, Gruma SAB sales grew the fastest by a CAGR of 10.4%, followed by Flower Foods (8.1%) and Hostess Brands (8.0%).

In terms of brands, Grupo Bimbo brands dominate with Sara Lee, Entenmann's, Thomas, and Orowheat in the top 15. Hostess (Hostess Brands), Little Debbie (McKee Foods) and Sara Lee (Grupo Bimbo) are the three largest baked goods brands in the U.S.

Retail subsector analysis

Bread

While all bread categories have shown post pandemic growth, growth rates vary by category. Flat bread saw the most growth with unpackaged flat bread growing the fastest, at a CAGR of 11.1% over 2018 to 2022, reaching US$1.9 billion in 2022. Sales of packaged and unpackaged leavened bread increased slightly by a CAGR of 6.8% and 5.3%. Bread will continue to grow over 2023 to 2027, although growth rates are set to slow in all categories.

According to Euromonitor, rising prices, high competitiveness and strong consumer demant in this category has led manufacturers to focus on product and packaging innovation. Despite high inflation, consumers' move towards premiumization has led several manufacturers to come up with unique products, such as Bimbo Integral cereal-based packaged leavened bread by Bimbo Bakeries USA Inc, and Mission Wholewheat Sprouted flat bread, by Gruma SAB, both launched in 2022. Bimbo Bakeries USA Inc also focuses on clean labels for its products. The rising cost of raw materials had some impact on the profitability of manufacturers, which saw margins shrink to some extent.

Today's consumers are also becoming increasingly conscious of climate change, and are choosing products that they think care for the environment. Thus manufacturers are adopting climate actions, for example, Bimbo Bakeries USA Inc claims that 90% of its packaging is recyclable and provides recommendations for consumers on know how to dispose of the packaging in the most environmentally-friendly way.

Sara Lee and Natures Own were the largest bread companies in the U.S. with sales growing by a CAGR of 9.8% and 7.4% over 2018 to 2022 respectively, with sales increasing to US$1.5 billion respectively in 2022.

Cakes

Sales of both packaged cakes and unpacked cakes grew at a CAGR of 5.1% and 6.9% respectively over 2018 to 2022. Sales growth of Cake is expected to continue at a lower rate over 2022-27 and are expected to take time to recover to 2019's level of foodservice sales. Both chained and unchained bakeries across the U.S. took a serious financial hit during the pandemic, resulting in a reduced number of outlets specialising in sales of cakes and pastries. After the 2020 decline, strong growth in foodservice sales of cakes in 2021 and 2022 has contributed to a speedy recovery for cakes to pre-pandemic level sales in 2022 and are also set to see further growth over 2023 to 2027.

Private label, followed by Hostess and Little Debbie are the largest cake brands in the U.S. Little Debbie experienced the largest growth at a CAGR of 8.7% over 2018 to 2022, followed by Hostess, which grew at a CAGR of 8.6% over 2018 to 2022.

Desert mixes

Sales of dessert mixes were stagnant from 2018 to 2022, at US$1.9 billion in 2022. This trend is expected to continue over 2023 to 2027 with 1.7% sales growth.

Jello, Betty Crocker, and Duncan Hines are the largest dessert mix brands in the U.S. with retail sales representing almost half the total market sales in 2022.

Frozen baked goods

Sales of frozen baked goods increased slightly over 2018 to 2022 at a CAGR of 2.2%, reaching US$2.4 billion in 2022. This slow growth rate is expected to continue over 2023 to 2027.

New York brand frozen baked goods experienced the largest increase in CAGR at 3.9%, reaching US$295.0 million in 2022.

Pastries

Sales of ppackaged and unpackaged pastries increase at similar rates with sales of unpackaged pastries almost double the size of packaged pastries.

Artisanal brands made up over half the retail sales in the market, increasing by a CAGR of 6.5% over 2018 to 2022. Following artisanal brands, private label brands have the highest retail sales and experienced the largest sales increase at a CAGR of 9.7% over 2017-22.

Distribution channels

The vast majority of bakery products in the U.S. are distributed through store-based retailing. Grocery retailers represent 93.9% of distribution, out of which 45.4% represent supermarkets, while the remainder are distributed through non-grocery specialists, mixed retailers, and non-store retailing.

According to Euromonitor, with foodservice coming back to life in 2021, consumers are increasingly enjoying unpackaged baked goods. Foodservices' rapid growth is expected to pressure sales of packaged baked goods, especially in categories such as cakes and pastries, as well as dessert pies and tarts, as consumers seek out freshly produced products instead of packaged ones. Frozen baked goods faces more threat than other categories, as the preference for fresh products will continue to grow. For manufacturers of baked goods, this will mean continuous investment in product innovation, as well as in price promotions, to capture consumers' attention.

As consumers have grown used to purchasing groceries online, several retailers are investing heavily in order to make online shopping even more convenient for their customers. Albertson's, a prominent US grocer, has been collaborating with Google in order to leverage the latter's Artificial Intelligence (AI) to enhance customers' online shopping experience. Such advances in e-commerce technology, ease of ordering, as well as high fuel costs, will continue to bolster online sales.

New product launch analysis

According to Mintel, 10,876 bakery products were launched in the U.S. from 2018 to 2022. Top sub-categories of new bakery products included sweet biscuits/cookies, baking ingredients and mixes, bread and bread products, and cakes, pastries & sweet goods. Flexible was the most common package type, followed by flexible stand-up pouch. New variety/range extension was the largest new launch type, followed by new packaging, and new products.

Examples of new product launches

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Resources

• Euromonitor International:
  • Baked Goods in the U.S. (November 2022)
  • Staple Foods in the U.S. (November 2022)
• Mintel Global New Products Database, 2023

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

Prepared by: Kris Clipsham, Market Analyst

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