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Bread sector valued at $0.53 billion in 2015; growing at nine per cent
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Friday, 21 July, 2017, 08 : 00 AM [IST]
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Anurag More, Mumbai
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The bread industry in India is valued at Rs 33 billion ($0.53 billion) in financial year 2015, and is growing at a compounded annual growth rate (CAGR) of nine per cent over the last three years.
According to ValueNotes, the industry will be worth approximately Rs 53 billion ($0.86 billion) by financial year 2020, growing at a CAGR of approximately 10 per cent.
The demand for brown and fruit bread is estimated to increase further, due to an increasing urban consumer base and a rise in health awareness about nutritional food.
75% of total sales
White bread is the most popular category, contributing 75 per cent to the total sales of bread products.
Brown bread ranks second with a 15 per cent share in the sales of the industry. Fruit bread contributes to five per cent of the industry, followed by other nutritional bread, with the least number of products, and therefore, the least market share (five per cent). Growing disposable incomes, changing lifestyles and preferences of consumers, supported by an increase in the youth population, female work participation and a widening scope of the Indian retail market will drive the industry growth.
Trends
The latest trends witnessed in the industry reveal that companies manufacturing bread products are likely to increase their manufacturing capacities to expand their foothold in different regions.
According to ValueNotes, “With a change in eating habits and preferences of consumers, the bread industry is coming up with innovative products and flavours, and a variety of breads.”
Abhishek Saareen, executive director, Trident F&B Consultants Pvt Ltd, said, "In urban areas, as more and more people are getting health conscious, we have seen rise in the consumption of multi-grain bread, brown bread, whole wheat bread, etc.”
Rising demand
“Moreover, people are getting more inclined towards the trend of baked, not fried snacks, which is again a boon for the bread industry. There are innumerable cafes, lounges and casual diners, which have different varieties of bread and other bakery items like puddings, pastries, sandwiches, cakes, mousses, etc. in their menus due to the rising demand of the customers,” he added.
“Currently, the urban market holds 65 per cent of the demand, but the rural market is growing at a rapid pace. The bread manufacturers are steadily extending to nutritional breads like soy-fortified bread, whole-wheat (atta) bread, multi-grain bread, semolina (daliya) bread, diet bread (with no added salt or sugar), rusks, garlic bread, etc.,” Saareen stated.
R B Smarta, managing director, Interlink Marketing Consultancy Pvt Ltd, said, “There are many specifications in bread. For instance, the share is 15 per cent share of brown bread. It is like normal sugar and brown sugar, but the demand for brown sugar is still very less.”
Nemat Sheereen S, assistant professor, School of Legal Studies, CUSAT, said, “Due to the increasing demand for bakery products and the vast unexplored market, there is tremendous scope for this sector. A growing trend is witnessed.”
Positive change
Saareen said, “Till the 1990s, the bread industry was given the small-scale industry status by the Government of India. Now the stature of the bread sector is huge within the bakery industry.” “The bread industry is seeing the biggest boom right now. With more and more retail brands coming up, this trend is going to go upwards,” he added.
“Bakery products, and not just breads, were once considered a poor man’s food. A very positive change in the entire bakery sector in our country has been noticed, which is majorly due to the evolving consumer tastes and changing perception of the bakery products. This has really benefited the bread industry,” Saareen said.
“These days, many supermarkets or hypermarkets have set up a dedicated space for a bakery within their premises. Many have done a tie-up with local bakery brands or suppliers, while others have in-house production. Some have set up a base kitchen, where the production of the bread and other bakery products take place and then the items are transported to their retail spaces,” he added.
“With the fast food culture catching on, the demand for the bread products has increased manifold. Breads are consumed in various types, patterns and flavours such as sliced bread, fruit bread, paos, buns etc.,” Saareen said.
“Sliced bread is the most popular segment in the bread industry. Among the sliced breads, white bread clearly dominates the consumption pattern. It grabs 70 per cent of the entire market share. Whole-wheat, multi-grain and other nutritional breads are the fast-growing segments. The urban market holds 65 per cent of the demand, but the rural market is growing at a rapid pace,” he added.
Smarta said, “The industry is worth approximately $33 billion and is growing at 10 per cent per annum. By 2020, it will be $53 billion. As far as the demand is concerned, while 75 per cent is the share of normal bread, 15 per cent is that of brown bread, five per cent is that of fruit bread and five per cent is that of nutritional bread.”
Innovations
Saareen said, “The growing concerns over health and urbanisation has resulted in innovations in bread products. Earlier the breads were manufactured manually, but now the bread industry has shifted to the automated process, at least in the organised sector.”
“Till 1990s, wax-coated paper was used by the manufacturers as the most preferred packaging material, as it had the capacity to absorb the excess oil. But it tended to open-up in humid conditions, making the bread prone to infection,” he added.
“Now polythene is used for packaging, as it makes the product fully sealed and safe. Attractive transparent packing is used now, which adds to the aesthetic appeal to the bread products,” Saareen said.
“India has realised the huge potential of the upward graph of bakery and confectionery products being cherished by the general masses here in India,” he added.
“Not only do the promoters or investors see this as a high demand or need to upgrade their bakery products in terms of their texture, taste, consistency, finish, etc., but they are also looking for innovative ideas/ways to lure customers,” Saareen said.
“Keeping that in mind, there are many things which one can notice everywhere. If we talk about the retail sector, then many bakeries have set up a live icing room, which is visible by the visitors/customers through a see-through glass, where the pastry chef decorates the cakes, makes delicious puddings, etc.,” he added.
“Then there are many such retail places that offer bakery classes, lessons and live demonstrations on how to make tempting cakes, pastries, puddings, pies, pralines, etc. Some are inspired by the concept of fusion cuisine and blend the popular Indian desserts with continental bakery items, succeeding in making innovative items like Gulab Jamun Cheesecake, Rasmalai Tiramisu, etc.,” Saareen said.
Smarta said, “If you look at Wagh Bakri Chai, they have piloted cafes in a few places in Mumbai, and are planning to open such cafes across the city. So we may soon have a bakery cafe, as tea and bread goes well. There are two companies who want to come to India to set up bakery cafes.”
“Earlier, at Irani cafes, they used to give biscuits with tea. If a patron ate them, he or she was charged. Or else, he/she had to pay only for tea,” he added.
“Indian minds are very cost-effective. Innovations can take place in e-tailing, and there could also be different flavours of bread. Currently we have only one or two flavours available in the market,” Smarta said.
“There would be changes in packaging as well for breads. Innovations may taken place in smaller packs for bread. Companies will find out the consumption patterns, and will come out with those kinds of packaging. The consumption of bread is 1.2 per kg for per annum,” he added.
Sheereen said, “New innovative products were adopted by this sector, but no innovation was adopted in technology.”
Strengthening foothold
Saareen said, “There are many steps taken by the manufacturers at various levels to strengthen their foothold.”
He added that they were as follows: working hard to satisfy consumer’s evolving tastes and preferences, giving more variety, improving the product quality, consistency in taste, improvement in packaging, innovation and making the best use of technology, ensuring cost control (as the bread industry runs on low margins), brand development, creating new revenue-generating areas and better distribution network and logistics.
Smarta said, “There are a few major players, such as Britannia, Modern Bread, etc. Bread also has a very regional competition, and there is competition in five -tar hotels as well, as they have their own bakeries, so there could be liaisoning with five-star hotels, as spas have done. Similarly, it will happen with bakeries in India.”
Sheereen said, “Explicitly no measures have been adopted. Even advertisements are not given effectively.”
Growth
Saareen said, “Our earlier generation used to prepare bakery items at home, but now people, due to their busy lifestyles and/or simply unwillingness to cook/bake, have found their solutions in packed foods. This has again turned out to be a boon for the bakery retail industry.”
“There are over two million unorganised bakeries operational in India. Recent statistics show a healthy increase in the retail sector, thanks to the sudden spurt in the organised sector in the recent past,” he added.
“Studies conducted by our company, Trident F&B Consultants Pvt Ltd, have shown that less than half of the entire bread production in India is by the organised sector (i. e., approximately 45 per cent) and the rest is done by the unorganised sector,” Saareen said.
“Therefore, there is a lot of potential for the organised sector to increase their production and improve their supply chain system. As more and more consumers are becoming brand-conscious, and a large number of people from the unorganised sector are planning to become organised players, the gap in the bakery production between the organised and unorganised sectors is going to become thinner or not expected to widen further,” he added.
“Not just in the bakery production scenario, but there is also a boom in the organised retail sector, which is becoming a great opportunity for the entire bakery fraternity,” Saareen said.
“Upward trends in demand also gave the promoters to grab the opportunity. Chefs are also coming up with the nouvelle ideas and concepts,” he added.
“Not only the outlets in swanky malls, but the high-street, stand-alone outlets are making good margins too. Be it bread, cake, pastry, biscuits, etc., there is a huge demand for bakery products everywhere,” Saareen said.
“The overall growth in the organised retail sector is expected to increase due to the entry of international chains in the bakery sector in our country,” he added.
“Recent studies have shown that the retail bakery industry in India is expected to grow between 18 per cent and 20 per cent in next five years,” Saareen stated.
Smarta said, “The growth would be 10 per cent, as the consumption is very less in India. We eat lot of wheat and jwari. But the moment, wheat and pulses’ consumption goes down, the consumption demand for bread would go up. Our consumption for pulses and wheat needs to be monitored.”
Sheereen said, “Compared to the immense demand for bakery products, there is a slow pace of growth.”
Prospects
Saareen said, “Bread is the second largest segment of the entire bakery industry after biscuits and cookies. The bread industry is a four-million-tonne industry growing at the rate of six per cent, and is expected to grow at the same rate in the medium term.”
“However the organised sector is growing at the rate of eight per cent. As per the forecast done by our company, Trident F&B Consultants Pvt Ltd, the bread industry in our country is expected to reach Rs 53 billion by 2020. Currently, the urban market holds 65 per cent of the demand, but the rural market is growing at a rapid pace,” he added.
Smarta said, “In fortified by nutritional breads, as far as variety is concerned, it will grow well.”
Sheereen said, “Due to the changing living conditions, the bread sector has a vast unexplored market.”
SWOT analysis
According to Saareen, the strengths are bread is considered a necessity, especially in urban areas. Moreover, it is very convenient.
“However, the weaknesses are the short shelf life of the product, and the fact that it is a low-margin business,” he added.
Saareen stated that the opportunities are the increasing disposable incomes, changing lifestyles and preferences, the growth in organised retail and the increasing consumption of packaged food.
“The threats are the continuous increase in the prices of the raw material, the poor infrastructure problems and the declining trend in growth,” he added.
Smarta said, “I think there are strong competitors, like Britannia and Modern, so the maximum threat will be through e-tailing or technology change. A few petrol pumps have retail shops as well, so availability is increasing nowadays. I don't think there is any issue.”
Distribution network
Saareen said, “As bread is a highly perishable food item with a very limited shelf life, the distribution network is planned carefully with various middlemen and suppliers to reach every nook and corner of our vast country.”
“Good distribution network and logistics play an important role in the bread industry due to the short shelf life of the bread products,” he added.
Smarta said, “It is good and very well penetrated in metro cities, and in tier-II cities, it has good demand, whereas in tier-III cities and villages, there is less demand.”
Impact of GST
Saareen said, “As expected, bread has been exempted from goods and service tax (GST). So it is good news for the bread industry.”
“However, pizza bread has been placed in the five per cent GST slab. Biscuits (all categories), cake and pastries shall attract 18 per cent GST,” he added.
Smarta said, “There will be 12 per cent GST on bakery. Basically the levy has direct corroboration with consumption. Stocking may not happen, but consumption will happen. It is a perishable commodity.”
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