A bakery without bread? How companies can benefit from structural change

The bakery industry is creaking under the continuous structural change that is taking place. New economic conditions, competition from food retailers and changing consumer habits are some of the reasons for this. How can bakeries take advantage of this structural change? Which consumer trends determine the market, and what opportunities are there today that could benefit the future of the bakery industry?

The Status Quo in the Baking IndustryAccording to the German Society for Consumer Research (GfK), 1,681,000 metric tons of bread were bought in Germany in 2018; and the trend is rising. However, despite consumption growing, the number of artisan bakeries is falling: the country had 55,000 bakeries in the 1950s, compared to just under 11,000 businesses with a total of around 35,000 branches today.

The fact is that in the baking trade, cutthroat competition has been taking place for quite some time. While existing large businesses are becoming larger and larger, the number of small businesses continues to decline. There are a lot of bankruptcies occurring. In addition, the number of bakery shops, bakery kiosks and gas stations with prebaked goods (more precisely, dough blanks, which are frozen goods that are baked on-site) are rising. In addition, the establishment of baking stations in food retailing as a much-used new form of distribution is exacerbating prices through cost decreases and quality competition between large bakeries, branch bakeries and small artisan bakeries.

Modernized companies benefit from the takeover of sales and production facilities. This expansion of baking capacities has already taken place in recent years and has resulted in a high concentration among large bakeries. The market is dominated by a small number of industrial bakery producers who primarily supply the food retail trade and discounters with fresh, packaged bakery products.

Counteract or keep up? In the areas of purchasing, materials, production, and logistics, there are many tried-and-true levers.

Changing Consumer Habits as an OpportunityIf you buy bread regularly (on average, there are 44.5 bread purchases per person and year in Germany), you too can actively shape the future of the bakery trade. Where you prefer to buy bread and which types of bread you buy play a big role.

When it comes to taste, aroma, and consistency, consumers report same-tasting breads with an identical consistency and aroma – completely independent of geography. Prof. Hans Hauner, an expert in nutrition, also explains this in a  Welt newspaper interview : “[Just a] few companies in Germany supply up to 90 percent of bakeries with baking mixes.” Even discounters also purchase some of their products from the same producers.

How can bakeries adapt their business model to changing consumer behavior? Those who adapt to, anticipate, and respond to changes in consumer behavior better than their competitors have always had more success in economic history.

RECOMMENDATIONS FOR BAKERIES FOR TAKING ACTION