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US AND INDIAN BAKERY MARKETS - A COMPARISON
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Wednesday, 02 November, 2011, 08 : 00 AM [IST]
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Roy Silva
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The bakery market in the United States is substantial and mature. The US baking industry has an annual turnover of about $30 billion mainly serviced by large- and mid-sized bakeries and another $3 billion in sales serviced by smaller retail bakeries.
Though the current Indian bakery market is smaller, there is a substantial potential for growth in the immediate future. India has a much larger population than USA, which is partially serviced by a very few large- or medium-sized baking companies. It would appear that small bakeries currently serve the majority of the market. The growth of the Indian economy has resulted in increased consumer buying power. The future direction of the Indian baking industry will be determined by consumer demand.
The Indian baking industry is currently dominated by the bread and biscuit sectors which make up about 80% of total turnover. The biscuit/cookie sector currently constitutes a major part of the Indian baking industry. India is the third-largest biscuit manufacturer after USA and China and reported to be growing at a rate of over 10% on an annual basis.
Growth potential
The cake-sweet goods category in the United States is large and lucrative because of the higher margins. Currently, in India, this sector is quite small with medium-sized to small bakers largely servicing this segment. Based on the experience of other developed economies it would appear that this is a sector with potential for growth if cake is presented as a convenience food.
The Indian bread sector too is serviced partially by a couple of major players but the vast majority of the Indian market is supplied by the small baker.
Though the continued growth of the Indian baking market will certainly be unique to Indian conditions it may be useful to look at how the US baking industry has grown in response to the consumer needs. In the US, the growth of the baking industry was fuelled by the consumers demand for a variety of high quality convenience foods at an affordable cost.
There has been a dedicated new product development effort to satisfy the consumer. The commercial baking companies have maximised profitability through optimisation of productivity and development of functional ingredients, and cost control.
The US baking industry has concentrated on two trends - convenience foods and the growing demand to develop nutritious and healthy but tasty bakery products.
Cookie/biscuit baking
The cookie is the American version of the Indian biscuit. US cookies tend to be higher in sugar and fat and are softer in eating as compared to the Indian biscuit, which uses a much leaner formulation leading to a harder bite. The cookie and cracker market in the US, which has a sales value of about $10 billion annually, is starting to focus on the health aspect to add to the product line and increase sales. New products have focussed on reduction both in trans-fat as well as total fat levels. Current new product introductions include high fibre, whole grain, low sodium and Omega-3 fortified cookies.
It is interesting to note that the leading Indian baking companies are already starting to develop products with health aspects in mind. Low fat and low sugar biscuits have reportedly been introduced in the Indian market recently and one company has marketed a no-sugar butter cookie for diabetics. A major sector of the Indian biscuit industry is the "glucose" biscuit category dominated for years by two major manufacturers. A new manufacturer in north India has now introduced whole grain - 'atta' - glucose biscuits and consumer response to this will be interesting.
Cake baking
This could be an important sector in the development of the Indian baking industry. A large proportion of the US mass cake market makes "small" cakes like cup cakes etc. This development had transformed the US cake into a high volume convenience snack food. Processing and formulations have been developed with this high volume in mind. Most of the cake manufacturers use high speed mixing where the air is "injected" though the mixing process, leading to a very uniform texture and excellent eating qualities. The scaling and depositing are done through extrusion process. Formulations normally contain a high level of fat and sugar. In response to the consumer concerns about the health aspects, new product development work is concentrating on reducing fat and sugar levels in cakes. This sector has amongst the highest profit margins for the baker. Another offshoot of the cup cake market is the development of a substantial market for cake muffins.
The Indian cake market is still defined by the larger layer cakes. But there are reports that some European small cake manufacturers are forming joint ventures with Indian manufacturers to introduce to the Indian consumer smaller cakes, swiss rolls etc. as convenience foods.
White bread or brown bread
Till very recently, in the United States, white bread was the sales leader in the bread sector. Whole wheat bread as well as other whole grain and fibre breads have been gaining increasing preference as compared to purely white flour bread.
Gradually the "brown" bread sector has increased and now it is reported that the bread sector is equally divided between whole grain type bread and white bread. Considerable formulation effort has been utilised in improving the eating quality and shelf life of whole grain breads. A majority of American consumers realise that there is a need to increase fibre in their diet, but as high fibre bread, cookies etc. have started to show up on the grocery shelf there has also been a demand for better tasting hi-fibre baked products. Market reports indicate that in India the "brown" bread sector is only about 10% of the total bread market. This is an area where the Indian baker can not only increase sales but also increase margins.
Bread baking developments
There has been a gradual change from the original straight dough methods to the sponge and dough methods to a liquid sponge / brew methods - there is also a gradual change to high water - low flour brews. Some form of high speed mixing with automatic depositing and scaling is common. A number of improvers are used in the bread formulation. Potassium bromate - an oxidising agent is important to strengthen the wheat gluten, but there is controversy about its negative health effects and there is a shift to alternative oxidisers.
Bun baking developments
The general principles are similar to bread baking, this sector has grown substantially with the growing popularity of fast food hamburger outlets which require high quality but low cost buns. Whilst the processing is similar to bread there has been substantial automation in this sector to facilitate standard quality. Formulas generally have higher levels of shortening and sugar.
Bakery economics
The business success of the Indian baking industry will depend not only on consumer demand but also on baking economics. The general trends in the US and India are similar. The margins in the bread sector are usually quite low. Profits depend on volume, and the "brown" bread sector will give higher margins. The best margins are usually in the sweet goods and cake sector. The Indian baker may find it worth the time and effort to develop the cup cake/pastry market. This will help push the convenience food aspect of the product to increase the sales of a product with higher margins. There is considerable concern in the Indian industry over rising ing
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