Developments in the Dutch Bakery Market
While reflecting many of the macro trends seen in other European markets, the Dutch bakery market is a multi-faceted beast. Baking & Biscuit magazine takes a look at the latest developments in this bakery-loving market, with a particular focus on the role of industrial and craft bakeries, the challenges they face and the latest trends.
The production and consumption of bread is relatively stable in the Netherlands, where bread is a dietary staple. In 2012, the Dutch bread market had a total consumer turnover value of EUR 1.2bn, a total bread production of 522.009 t (a decrease of –1% compared with the previous year) and a total per capita consumption of 63.4 kg of bread (down –1% from 2011).
The total value of the Dutch cookie and biscuit market was EUR 780.7min 2013, down by 1.3% from 2012. In the Dutch bread replacement market (including various types of Dutch crackers, breakfast cakes and rusks, but also cereals) the total value was EUR 410.1m in 2013, down by 0.1% from 2012. With a total value of EUR 46.2m in 2013, the Dutchtoast market (including mini crackers, Melba toast and luxury toast) was down by 4.2% from 2012.
Role of industrial bakeries vs. craft bakeries
After Bulgaria and UK, the Netherlands has the highest market share percentage of industrial bakeries in Europe, with 67 industrial bakeries and 2,000 craft bakeries. In 2013, industrial bakeries employed some 6,500 people, who worked 32 hours a week, on average, with an average wage of EUR 15.37 per hour. The number, production capacity and turnover of craft bakeries are decreasing in the Netherlands. Industrial bakeries now have a market share of between 80–85% in the Netherlands’ total bread market, with the remaining 15–20% of the bread market controlled by craft bakeries. Industrial bakeries control roughly 80% of the turnover in the Dutch bread market, while the remaining 20% of the turnover is in the hands of craft bakeries.
“This shift in market share has happened gradually, as more and more companies have moved from having multiple craft suppliers towards dedicated suppliership, and as a result more and more craft bakers have disappeared from the market,” explains Wil Kannegieter, Director Industrial Bakeries, Nederlandse Vereniging voor de Bakkerij (The Netherlands Bakers Association, or NVB, which represents the interests of both industrial and craft bakeries). Supermarket bakeries have also had a huge impact on the decrease in craft bakeries, according to Kannegieter. Longer supermarket opening hours have tempted busy consumers away from traditional bakeries that are only open during office hours. Nowadays, many supermarkets have their own bread baking machines, which allows them to use bake-off products to bake in-store. In fact, pre-baked bread showed higher growth than fresh bread in 2013 in the Netherlands.
Baking market under pressure
The recession and lack of consumer expenditure due to the uncertain situation in Europe has put the Dutch baking market under pressure. One of the main ways consumers are trying to save money is by cutting down on their “out of home” food consumption. Higher commodity prices, such as the rising costs of wheat and other ingredients, have also provided an obstacle to the performance of baked goods in the Netherlands. Adding fuel to the fire is the fact that industry and craft bakers agreed on new working conditions in 2012, which resulted in wage increases of just over 1.5 %. Furthermore, the Dutch supermarket price wars have resulted in lower retail prices of baked goods. The supermarkets demand lower prices from bakers, who give in because of “turnover hunger”, leading to lower margins and a resulting lower turnover.
Looking forward, sales of baked goods are expected to decline marginally, compared with a static performance in previous years. Private label and economy brands are expected to see growth, as opposed to premium and more expensive products, which will undermine overall value sales performance in baked goods. However, the retail value sales of baked goods is expected to do well, as ongoing health and convenience trends push up prices.
Challenges and opportunities in biscuits market
Although the EUR 12bn Western European biscuits market has maintained steady growth in recent years, the sector presents great challenges for biscuit companies, according to Rabobank’s latest report, Fewer Crumbs More Dough. While average growth has been close to 3% in the Western European biscuits sector, the market remains fragmented and manufacturers are being forced into a tight spot by two pressing issues: volatility in value creation, and the high level of competition in the sector. “Value creation volatility is mainly due to major swings in prices for commodities such as wheat and sugar, combined with inflexible price agreements with retailers,” explains Rabobank analyst Marc Kennis. “This creates substantial uncertainty in the variable cost base for manufacturers, who have limited room to pass on any price increase to customers due to intense competition and the sheer size of food retailers. Biscuit companies are caught between a rock and a hard place.”
Despite the Dutch biscuits market’s track record as fairly stable, biscuit manufacturers in the Netherlands are naturally also affected by this highly volatile and increasingly competitive market. The popularity of biscuits in the Netherlands means that these products are mainstream and retailers consider the biscuits sector to be a lucrative one in which to push their own private label products. Private label holds the biggest retail value share, offering a variety of product ranges comparable to branded ones. The retail value share of private labels continues to grow thanks to competitive prices which appeal to consumers in tough economic times.
The Dutch biscuits sector is expected to continue to show growth in constant value terms although retail volume sales are expected to remain static or marginally decline. The value sales of biscuits are expected to continue to increase. While demand has been stabilising in retail volume terms, consumers continue to look for affordable products with added value, such as indulgence or healthier ingredients, which enables manufacturers to increase prices. Manufacturers will continue to introduce new products with healthy or premium angles to continue to prop up value sales, but the volume growth of biscuits could be dampened by the increasing popularity of economy brands and private label. Meanwhile, further increases in commodity prices are expected, which may also positively influence value sales, although volume sales may also suffer further as a result.
Trends and developments
According to Kannegieter, the biggest challenge for both industrial and craft bakers is identifying consumer trends and playing into them in a timely manner. “More than ever before, Dutch consumers know what they want.” he says. “The decision to buy from a specific bakery or supermarket is now a conscious choice. New labelling laws and the new transparency of the baking industry have enabled this trend, because consumers can now see what’s in their bread, which enables them to demand products without additives and preservatives, etc. These labelling laws did not exist in the past,” explains Kannegieter. In other words, today consumers’ purchasing decision isn’t only determined by which bread they find the tastiest but also what ingredients are used to produce the bread. This development has been a real game-changer in the Dutch bakery market.
“The key issues at the moment are sustainability, quality and efficient production. And, there’s an increasing move towards meeting the consumer demand for perceived healthy products such as spelt and sourdough bread,” says Kannegieter. “These are the clear growth areas in the bakery market at present.” So, for example, Albert Heijn, the biggest supermarket chain in the Netherlands, recently added a range of spelt products, including loaf breads, bread rolls, crackers and rusks to meet consumer demand for these products. While some Dutch consumers are willing to pay more for spelt and sourdough products, others are looking for cheaper options, and some families buy cheaper bread during the week and more indulgent breads during the weekend. Consumers are also increasingly being confronted with health aspects in food such as salt and fat. Bread is the only sector in the Netherlands that initiated a law on the maximum salt content for craft and industrial bakeries. “The Dutch bread market is anything but one-dimensional,” Kannegieter concludes.
Sources: Interview with Nederlandse Vereniging van de Bakkerij (July 2014); Nielsen Market Data (June 2014); Euromonitor (Executive Summary, March 2014); Fewer Crumbs, More Dough (Rabobank report, January 2014), GfK (2013); Nederlands Bakkerij Centrum (2013) AIBI Bread Market Report (July 2013).
author: Karin Engelbrecht
This Country Report was researched by our baking+biscuit international editorial department. A collection of recent market profiles was published in the European Bakery Market Review.