The last 12 months have seen big changes in milling and baking. Five flour mills (all on the eastern side of the country) have closed, and one has changed hands. The number of UK mills has now fallen below 60, a record low, as millers look for increased efficiency in production and delivery to meet customer demands. The break-up of the Finedon/Rathbones business has been completed, which has changed the map of baking. Most recently, Northern Foods has announced that much of its bakery and milling business is for sale. So it looks as if structural change is likely to continue apace in 2006/7.
Meanwhile, overall production of flour is remarkably stable. There have been small fluctuations in recent years, but it seems that while there are changes in consumer tastes, these involve switching between baked products rather than moving out of the category altogether. This is evidence of the baking industry’s ability to innovate in order to meet new demands for healthy, tasty and convenient food.
If there have been developments in the structure of the milling and baking industries, it is clear that there are also big changes afoot among our farming suppliers as they seek to adjust to new agricultural policies in Europe and elsewhere. Although more than 80% of our wheat is sourced in the UK, global trends have an increasing influence on our markets.
In recent times, changes in European agricultural policy, the shock hike in energy prices, and increasingly erratic weather have all contributed to increased volatility in grain markets, and it looks as if we can expect more of the same for some years. While no-one knows with any certainty what the impact of global warming will be, it appears that the increased energy available in the atmosphere is bringing about more extremes of weather: more droughts, heavier rain in bursts, even longer heatwaves.
More immediately, prospects for the 2006 wheat harvest are still uncertain, but in the last two months, the UK wheat price has moved up by 12%, and HGCA November quotations are now £12 above the prevailing price for 2005. Around the world, markets are nervous in response to worries about the weather in North America and concerns that growing demand for grain as a raw material for ethanol will lead to a sustained rise in prices. According to the International Grains Council, world wheat stocks will fall to their lowest level in 25 years accounting for no more than 20% of annual usage.
So the milling and baking sectors are currently in the midst of a period of enormous change on many different levels: fast evolution of consumer markets; structural change within the industries; new challenges to farmers and grain markets; and an evolving political environment. And with change comes opportunity, perhaps to reposition the entire sector. When you are busy making bread, it is easy to overlook how important flour and baked goods are to the nation’s diet, and what a strong position that leaves the baking industry in.
According to the government’s data, bread accounts for about 16% of food energy (i.e. excluding alcohol) for the average adult; for flour, the figure is nearer 20%.
Bread also provides about 15% of our protein requirements, but only about 3-4% of fat intake (see table). Both bread and flour are also a great source of B vitamins, iron and calcium.
Part of the reason for this success is that bread and flour remain suited to today’s consumers. Added fibre? No problem. Whole grains for health? The original source. Great taste and versatility? Over 200 different varieties. Convenience? Available everywhere in all sorts of shapes and sizes. Great value? Penny for penny, the best balanced package of nutrients and energy available anywhere. Bread offers so much that it does not need to be sold on price.
It is very interesting that the government’s recently published survey on food expenditure for 2005 (British Baker, 2 June, pg 5) records a big shift in the direction of brown and
wholegrain bread, coupled with an increase in the overall level of spending.
So the current environment for flour and bread products is very exciting. There is a lot of growth in some sectors of the market, and there is much ingenuity going into new product development. Meanwhile, big changes are afoot in relation to climate, energy supply and farming support. While the role of bread remains constant, with changes of this magnitude at both ends of the chain, there is an opportunity to reposition the entire sector for the better.