With many messages on the subject of our economy travelling like wildfire around the baking industry, you won’t be blamed for supposing we’re about to suffer the first recession this century.

But these tales of imminent doom and gloom are in danger of turning out like a nasty game of Chinese whispers - distorting the truth, and bringing about unnecessary fear and panic. With the baking industry regarded by consumers as a key source of affordable treats, it can be a time of opportunity.

The questions on many business owners’ lips are: Will consumers trade down? And which products are vulnerable to tightening purse strings?

As the average price of a consumer’s shopping basket increases, the question "Do I really need this?" will become more common. The key is offering consumers a choice, say industry experts. If they feel they cannot afford a particular product, they will look for a suitable, cheaper alternative.

== Consumer trends ==

At a recent seminar by the Food & Drink Innovation Network (FDIN) on new product development, food market analyst RTS Resource said recession-proofing NPD involved revisiting your ingredients and packaging, as well as looking at the key drivers of consumer trends - affluence and population changes. According to RTS, the proportion of disposable income spent on food has declined from 30% in 1960 to 15% today, and the trend has been for income to go up and food prices to go down.

Total food volumes are likely to increase in line with population, at approximately 0.4% a year, says RTS. So which products are likely to suffer when the pennies are pinched? At the seminar, RTS Resource mentioned Fairtrade, organics and sandwiches as possible losers, and "cheaper meal solutions", such as pizza, pies, pasties and biscuits, as the winners.

People are always going to buy bread, especially if workers are opting to make their own sandwiches rather than buying them ready-made. But bakery products are not easy to recreate in the kitchen, unless you’re an expert, so there will always be demand. After all, what better way to cheer yourself up when thinking about the economy than with a piece of cake?

Over the last few years, from 2002 to 2007, sales of many foods such as cereals, dairy, snacks and soft drinks have increased by a much higher percentage in value than in volume. The confectionery sector even experienced a decrease in volume of around 0.3%, but an increase in value of 3% (see table). Meanwhile, snacks saw an increase in volume of around 0.8% from 2002 to 2007, but a value incease in the same period of around 4%. Soft drinks increased more evenly, with volume rising by approximately 3.2% and value by 5%.

Internal and external pressures facing businesses include low market volume growth (especially in relation to value), cost-cutting drives and the demand for clean-label products. RTS Resource managing director Steve Rice believes businesses need to "look at adding value" to their products - a topic on which he feels the bakery market has remained relatively static in the past.

== Buying habits ==

An unstable economic climate is likely to see the emergence of smart shoppers, who will become more selective with their purchases. Analysis from Verdict Research reveals that some households are switching their supermarket allegiance in favour of discount stores, such as Aldi and Lidl, although upmarket stores are still doing well. It’s the middle-market consumer who is most likely to be swayed into switching brands or trying something new.

Consumers will always judge the value of a product on emotional aspects as well as rational ones such as price. This means that, despite the view that sales of organics and Fairtrade may be under threat during a recession, people who value the products on nutritional or ethical associations, are unlikely to want to compromise.

Consultancy firm Your Future speaks of ’money for value’ or ’value for money’ - these being the two sides of the coin that decide why a consumer buys something. In the current market climate, the company believes it is important to optimise the mix of ’messages’ in order to deliver best-value in a category.

== Food trends ==

Consumers are becoming more and more savvy about their food purchases, and many shop at the higher-end supermarkets as well as the discount stores, depending on what products they’re after. "Consumers think about a lot of other things before they cut down on their food shopping," said Mitzie Wilson, freelance food writer and former editor of BBC Good Food and Delicious magazines, at the seminar. However, in all likelihood, certain products will lose out in a credit crunch - for example, those launched into an already crowded market.

Among Wilson’s list of key issues and trends, she mentions food wastage, a lessening growth in the sales of organics, a growth in free-from foods and an increase in wellness foods. "It used to be about what’s going out - now it’s about what’s going in," said Wilson. She feels the general view of the consumer is: "Why pay more, when you can get it for less?" Or, as she put it, "the Primark effect".

If people are spending less, companies may find it advan-tageous to offer products that were previously shared, in individual portions - for one-off treats. "I don’t think we’ll ever lose customer desire for instant gratification," said Wilson.

== A targeted approach ==

In terms of how bakery food manufacturers should approach new product development, the current key trends need to be considered. According to Wilson, this year seems to be all about lavish desserts - treats such as posh tarts and gateaux, as well as individual designer desserts. The new niche trend appears to be in Chinese and Japanese flavourings - for example lychee and green tea. She also refers to spelt as the new ’superfood’, due to its nutritional benefits, especially for people with food intolerances.

Research from consultancy firm Changes, which has held over 30 group discussions in the last six months, has revealed that, despite some predictions of a slump, the current trends - organic and Fairtrade - are holding strong. Other areas to focus on are consumers’ dislike of over-packaging, demand for local produce, snack/convenience foods and health in all its various manifestations.

A similar pattern is revealed by The Nielsen Company, which outlines the four major trends as: health/well-being, indulgence/pleasure, ethical, and convenience/practicality. These are all needs the bakery and café sector can meet, but the question is how? In order to set your product above the rest, you need to clearly differentiate it from your competitors, look at how to add value to it, and make sure it serves a purpose. It is important to let your customers know if you use local, organic or Fairtrade products, as well as any added health benefits.

Sure-fire strategies are not easy to implement. But businesses need to stay relevant, and the ones that will come out on top in terms of NPD are the ones that demonstrate true innovation and have the ability and willingness to change. According to Jonathan Banks of The Nielsen Company, all manufacturers need to do is develop consumer-relevant innovation and execute it perfectly - easier said than done!


=== Recession-proofing: top tips ===

l Get the basics right by offering a clear, motivated and differentiated proposition l Demonstrate the product’s relevance and deliver on hygiene

l Ensure your innovation is insight-driven and reflects real consumer demand. Make sure it connects with core trends/drivers and embodies consumer values

l Make sure it relects category/brand engagement

l Avoid unecessary packaging

l Consider promotional strategies

l Pick your winners and get behind them. Don’t be afraid to ’kill’ unsuccessful products

l Watch your competition

l Clarify your targets under who, why, when and where headings.


=== RTS Resource’s NPD considerations ===

1. Don’t just reduce quality

2. Assess precisely where your products sit

3. Rate your products’ vulnerability

4. Re-evaluate NPD

5. Focus NPD on taking market share from competitors.