It’s great to see a new report highlighting an opportunity for more sales of snazzy cakes in the foodservice sector. Well, it would be if anyone could agree on what on earth foodservice actually means.
All the major market analysts operate ever-so-slightly different definitions of foodservice, which makes the sector a tricky beast to pin down - not least because the distinction between retail and foodservice is becoming ever-more blurred. So we’ve done our best (see boxes on these pages).
The foodservice market - for now we’ll go with ’out-of-home eating occasions’ - appears to be gradually eating into bakery’s retail market share. The Bakery & Confectionery report (details and definition below right), which covers sweet bakery products, shows that while retail dominates consumption of sweet bakery products, foodservice usage accounted for more than 15% of volume (193,000 tonnes) in 2007, up from 14.4% (180,000 tonnes) in 2002. Foodservice sales of sweet bakery, as defined in our table, are now approaching £1bn at consumer prices.
There’s a marked difference when it comes to value sales share in the bakery market; while multiple retailers dominate with 64% value share, the foodservice sector accounts for 28% of bakery value, as defined.
(The category "other retailers", which tend to sell only a few long-life products, although some do bake-off, includes newsagents and forecourts and accounts for only 3.2% share.)
Driving bakery in foodservice is the growing importance of leisure and cost sectors, as well as de-skilling in the kitchen, leading to a demand for more prepared cakes and pastries, says the report: "Both bakery and confectionery products have relatively weak sales in the foodservice sector and are heavily dependent on retail sales. However, there are more opportunities for bakery, especially in cakes and pastries, which are distributed extensively into foodservice sectors such as coffee shops, hotels, leisure and roadside operations."
And the big players have cottoned on. In December 2007, cakes giant Greencore acquired The Ministry of Cake, which makes frozen cakes, cheesecakes and pastries, to give it greater presence in the foodservice and convenience sectors.
The latest firm to tap into this trend is Kara Foodservice - a £35m turnover bakery that’s part of Vision Capital’s Fletchers Group of Bakeries - which has announced a second new range of bakery lines for the UK foodservice sector in less than six months, on the back of independent research into the market.
This involved quantitative research and qualitative interviews with 500 catering outlets, including branded café chains and independent coffee shops, as well as hotel groups, universities, NHS trusts, restaurants, leisure chains and travel stop locations. Op-portunities highlighted included growth potential for supplying independent cafés.
"For instance, Danish pastries are currently sold only in around 23% of independent coffee shop outlets, whereas the major coffee shop brands all offer a range of Viennoiserie products," says Kara’s MD Paul Doughty.
Kara’s Café Collection of croissants, pastries and muffins was launched in May through bakery wholesalers, with Doughty saying the thaw-and-serve bakery market remains under-served. This follows the launch of a Restaurant Collection - continental speciality breads - line in January.
"Until now, sector choice has, in the main, been limited to imported frozen or part-baked products that need to be baked on-site before serving," explains Doughty. "With the Café Collection, we are one of the few UK suppliers offering high-quality, fully-baked, thaw and serve pastries. Our survey demonstrated the concerns others had with on-site preparation potentially leading to under or over-baking, which can ruin presentation."
But even the café sector is no longer so straightforward, as coffee concepts change amid the emergence of new retail competition in the form of branded delis, health and bakery concepts.
Jeffrey Young, MD of management consultant Allegra Strategies, predicts "a blurring of boundaries between foodservice and retail", with foodservice increasingly integrated into retail and leisure outlets. Allegra’s latest research shows that 76% eat out of home at least once a week, with the highest frequency among those aged 44 or under - half eat out four or more times a week.
Simon Richardson, sales and marketing director for Rich Products, which supplies Starbucks with bespoke products, says: "The growth in out-of-home will, in the short term, outstrip retail - there’s just a bit of catching up to do. And as we spend more out-of-home, ’treat yourself’ products will do well. Often, they’re for family occasions - travel, leisure, hotel and holidays - where consumers are in an indulgent mood. That’s particularly true in the coffee sector, which has captured that ’occasion need’ even more than a ’product need’."
Rich’s supply chain is geared for this growth, with established channels for ambient, chilled or frozen bakery products into foodservice. "Talking to colleagues in Mexico or South Africa, we realise just how developed our supply chain is," notes Richardson. "In most outlets there are at least two routes in, so that’s a luxury we have in the UK. The industry is moving quickly. The innovative companies - with some seasonality and range refreshment - are winners in this area because the market is pretty well served."
Some of these gains come from changing dynamics in the market, often at the expense of high-fat traditional snacks such as crisps. One example is BakeMark’s reduced fat muffins and Better For You cookie range, which are being taken into travel and retail areas. "We are working with airport and train station catering providers and developing products that offer the consumer premium, healthy ranges to capitalise on market demands for indulgent treats with healthier benefits," says foodser-vice lead account manager Dawn Cole.
To get this balance just so, foodservice customers are becoming more demanding of suppliers. "You now see an indulgent cake beside an apple, an orange, a banana and a yoghurt with granola topping. So the foodservice offer has become more sophisticated and balanced," says Richardson. "Everyone wants something bespoke. So it’s this ’mass customised’ model that we’re finding more prevalent in the marketplace."