Frozen bread has proven successful in neighboring South American countries and Brazil is very likely to follow suit. The highly mature Brazilian bread category is expected to contract further, in volume terms, after shrinking by 0.6% in 2015. Although many consumers still collect their bread fresh from the local bakery, this is a habit that will suffer as societal needs evolve.
By Chris Brockman, research manager, Mintel Food & Drink-EMEA Region
It’s hard to think of a more mature food category in Brazil than bread. It boasts almost complete consumer penetration of 97%, according to Mintel’s report Bread and Baked Goods – Brazil – August 2016. However, maturity comes with its own problems and the category is struggling to grow in volume terms. Mintel estimates that retail sales of packaged bread and bread products contracted 0.6% in 2015, and projects that the category will shrink by 1.8% this year. Indeed, as Brazilians get older (it is estimated that there will be three times as many consumers aged 65+ in 20 years’ time) per capita consumption of bread is expected to decline still further as habits change.
A mature category in need of a reshape
Manufacturers and retailers face a significant challenge in combating this market shrinkage, and one opportunity they may consider to develop and reshape the category is to expand the market for frozen bread baked off in-store. Currently, Brazilians continue to buy a significant proportion of their bread fresh from the local bakery – 49% shop at a bakery daily, according to Mintel’s Supermarkets and Hypermarkets – Brazil – December 2015. But while this approach guarantees freshness, it is a habit that will be increasingly at odds with the needs of an evolving society, where families are getting smaller, more women are working full-time, increased traffic is making every commute an odyssey, and where convenience is ever growing in importance. Mintel’s report The Time-Pressed Consumer – Brazil – October 2015 shows that one in four Brazilians feel they have less free time than a year previously, and as this squeeze on free time gets tighter the fresh local bakery is likely to suffer. Frozen industrially made bread that is baked off in store is available through the in-store bakeries of the largest supermarket chains, but has yet to develop in smaller/regional chains. Penetration into convenience stores or even through food trucks could provide a further growth opportunity set against the stagnating packaged bread market, providing just-baked, convenient and affordable bread for everyone.
Brazilian market likely to follow neighbors in adoption of frozen
Local bakeries are highly popular and will remain relevant for a large number of Brazilians, as in other Latin American countries. French rolls are by far the most popular bread in Brazil, eaten by 62% of consumers in the last three months when surveyed in May 2016. This is more than double the number who claim to have eaten packed whole-grain sliced bread (28%) or packed white sliced bread (27%). But there is certainly openness among consumers to more convenient formats with the flavor and taste of freshly made bakery bread. Eighty-five percent of bread eaters are likely to buy bread/baked goods that are freshly baked in store from their favorite brand. What’s more, 46% claim they would be willing to pay more for it. This is in line with the way the markets are moving in neighboring South American countries. In Uruguay, Pagnifique and Friopan have been redefining the bread industry by bringing minute-baked frozen bread to convenience stores and corner shops across the country. Similarly in Chile, Bredenmaster has grown from its foundation in 1996 to become a company with sales of more than USD100m a year by selling frozen bread to supermarkets, convenience stores and foodservice. The company was acquired last year (for an undisclosed amount) by Colombian Team Foods, who were looking to expand their regional presence. It is not difficult to see why manufacturers and retailers are moving this way. Frozen bread provides significant cost efficiencies and consumer benefits. It only needs a freezer to keep and an oven to heat, reducing waste, labor and sanitary certification needs. Virtually any store with electricity can become a provider, and need only heat the exact amount required by the hour (again providing efficiency savings). Furthermore, it provides warm, ‘just-baked’ bread to consumers at a competitive price and which can be conveniently sold pretty much anywhere -not just the local bakery.
Opportunities for incumbents and new entrants alike
Frozen bread for bake off presents opportunities for growth on three main fronts: for established players to consolidate their position; for new entrants to steal share; and for agile entrepreneurs to get a foothold in the market. To the first point, there is a big opportunity for the market leaders to command this category – 85% of consumers are interested in freshly baked bread from their favorite brand. Therefore, there could be an opportunity for leaders such as Bimbo, Wickbold or Panco to leverage their brands, distribution networks and marketing power to translate their strong positions in sliced bread into a new and -potentially- larger business area. To the second point, new companies could get a jump on the incumbent packaged bread brands as they have done in Uruguay and Chile. Pecpao and Pancristal are a couple of examples of Brazilian companies that have sought to steal share from the market leaders and reshape the industry through frozen bread. Finally, doors may open to entrepreneurship and innovation. The mobile bakery Sagrado, for instance, delivers freshly baked bread and bakery products on wheels in the cities of Barueri and Santana de Parnaíba. Similarly, in the US Zume Pizza – a Silicon Valley startup – is using robotics and geo-location to guarantee speedy, freshly cooked pizza made from natural ingredients. Both are focused on bringing freshness, convenience and price closer to the consumers’ demands and, in Brazil at least, frozen bread for quick bake-off could help square that circle.
