The European bakery market will continue to consolidate over the next five years in the wake of the recession, with frozen bakery companies leading the way in mergers and acquisitions, according to a new report.
The Rabobank report, The Bakery Sector Beyond the Down-turn, predicts that the bake-off market will go from strength to strength in coming years, as retai-lers look to offer ’freshly baked’ products, while reducing wastage. Higher margins in frozen bakery mean firms in the sector are also well-placed to make acquisitions.
"Higher profitability can be attributed to the value-added nature of their products, which requires specialisation," said the report. "Bake-off products are prepared for use by bakers in batches, as required for sale, thus optimising stock and reducing wastage. They also attract a higher consumer price because of their ’freshness’ in stores. Due to frozen bakery products’ longer shelf-life and transportability, a business model can extend across a region, improving scaleability."
As consolidation continues and companies focus on their core business, controlling input costs will become more important, said the report. "Bakery players are expected to use hedging products or introduce joint buying arrangements with other players. They will also aim for back-to-back contracts with buyers and clients to minimise volatility," it said. Other factors shaping firms’ resilience include controlling distribution costs and increasing exports.