Description
Report Coverage
This report focuses on the manufacture of bakery products and includes information on wheat production, flour milling, bakery product production and sales, prices, and products including health and vegan products. There is information on notable players and corporate actions, and influencing factors such as economic conditions, input costs, consumer spending, innovation and the competitive environment. There are profiles of 24 companies including major manufacturers such as Tiger Brands, Pioneer Foods, RCL Foods, Premier FMCG, National Brands and Libstar, and companies such as Baketech and VKB Milling which supply the baking industry.
Introduction
• Growth in the bakery products industry has been affected by rapidly rising input costs and electricity supply insecurity.
• Margins have been squeezed by changing consumer tastes and weakening consumer spending power, leading to discount shopping.
• Major national manufacturers have gained market share against supermarkets and independent bakeries in the last four years, reversing a trend towards less concentration.
• Standard bread is the main bakery product. White bread production has increased in the past four years while brown and wholewheat sales have declined in relative terms.
• The cost of wheat has driven up costs.
• Major companies have focused on cost-cutting, consolidation, and capital expenditure.
Trends
• Bread has become more competitive against similar consumer products such as maize, cereals, and grains.
• Globally-driven pressures on wheat and other inputs prices accelerated cost inflation for manufacturers in 2022 and 2023 but have since eased.
• Manufacturers of bakery products are focused on cost containment, price investment, balance sheet improvements and productivity.
• National bakery company share of standard bread production has increased, taking share from corporate and independent supermarkets, and independent bakeries.
• Supermarkets sell cheap 600g loaves of bread.
• White bread has become more popular.
Challenges
• Vulnerability to price and supply shocks through dependence on wheat imports.
• Weakening demand and restrained consumer spending.
Outlook
• Industry revenue is dominated by standard bread loaf sales which have declined over the past three wheat marketing seasons.
• Bakery products manufacturers have been resilient in the face of elevated input costs.
• Lower long-term debt levels have positioned the industry well for future growth.
• There have been signs since late 2024 of an upward cycle in consumer spending.
• Price inflation has slowed, energy supply has stabilised, and consumer confidence is more positive on the back of declining interest rates.
• The industry’s focus on keeping products affordable to stimulate demand is expected to bear fruit.
• It is expected that 2025 may be a better year for consumer spending.
• However, higher economic growth, job creation and improved household incomes will significantly improve the industry’s prospects.
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