Baked Goods in Malaysia

Baked Goods in Malaysia

HEADLINES

• Sales of baked goods up 2% in current value terms to RM1.6 billion in 2010

• Baked goods, particularly bread, face competition from breakfast cereals

• Packaged/industrial cakes the best performer with 3% current value growth in 2010

• Unit prices of baked goods up by 1% in 2010

• Artisanal players continued to dominate baked goods with a 59% value share in 2009

• Baked goods is projected to register a CAGR of 1% in constant value terms over the forecast period

TRENDS

• Baked goods in Malaysia is growing due to a variety of factors. Firstly, consumers are attracted by the large variety of designs and flavours offered by artisanal outlets. Secondly, the pace of life is picking up in Malaysia. People have less time to prepare breakfast. Coupled with growing Western influence, many consumers have switched to bread or other types of baked goods, such as packaged cakes.

• Baked goods registered slightly faster current value growth in 2010 than in 2009. Although consumers may have purchased more cakes and pastries in 2010 due to an increase in disposable income, bread is not as price sensitive as cakes and pastries. Bread is considered a staple for many Malaysians. They will continue to purchase bread regardless of the economic conditions. Hence, the economic recovery in 2010 has not boosted the sales of baked goods significantly.

• Packaged/industrial cake recorded the fastest current value growth in 2010, largely because packaged cakes served as a convenient and affordable alternative to biscuits as snacks. Small pack packaging also made cakes more convenient than bread. Moreover, the affordable prices of packaged/industrial cakes as compared to artisanal bread made them a more attractive choice for daily consumption.

• The unit price of baked goods increased marginally in 2010. Higher raw material costs such as the prices of sugar and wheat flour have caused the costs of baked goods to increase. However, this was largely offset by the retailers’ promotional activities such as value pack bread or buy-two-get-one-free promotions for packaged cakes.

• The value share of artisanal baked goods has fallen slightly since 2005, indicating that artisanal offerings are not stealing sales from packaged/industrial baked goods. Although chained bakeries such as Breadtalk and Bread Story constantly introduce new and innovative varieties, these products are usually more expensive than packaged/industrial baked goods because of the smaller scale of production and higher costs. Hence, the artisanal outlets tend to attract the more affluent customers and those who purchase bread and cakes as snacks. On the other hand, packaged/industrial baked goods manufacturers also constantly launch new products and flavours to cater to the mass market, especially those who are more budget conscious and families that consume bread as a staple.

• Within packaged/industrial bread, white bread continued to dominate in Malaysia in 2010. Its value share remained unchanged from that in 2009. Although consumers are increasingly aware of the health benefits offered by wholemeal bread, some Malaysian consumers still prefer white bread. The emergence of healthier variants within white bread such as enriched white bread or high-fibre bread also helped to retain consumers. For example, Gardenia Bakery KL Sdn Bhd offers a few fortified variants of white bread, including Gardenia Enriched White Bread, Gardenia High Calcium Milk Bread, which helps prevent osteoporosis, and Gardenia High Fibre White Bread, which is fortified with the soluble fibre, inulin, as well as Omega 3 and Omega 6. The share of wholemeal bread has been on the rise slowly since 2005. This trend will likely continue, as some consumers may switch to wholemeal bread for its health benefits.

• Sales of single-portion packaged/industrial cakes increased by 5% in current value terms in 2010, due to its convenience and the launches carried out by London Biscuits Bhd. Sales of multi-portion cakes grew marginally by 1%. However, multi-portion cakes continued to dominate packaged/industrial cakes, as their unit prices are cheaper than those of single-portion cakes.

• Unpackaged/artisanal pastries grew faster than packaged/industrial pastries in 2009 in current value terms. This is because artisanal pastries are usually fresher than packaged/industrial pastries. Customers have the option to mix different flavours, which would be more appealing than packaged pastries.

• In-store bakeries, which exist in the main supermarket/hypermarket channels, such as Giant, Carrefour, Tesco, Jusco, performed well in 2010, due to the convenience and quality products they offer. Consumers can purchase baked goods from in-store bakeries during grocery shopping. They often trust baked goods sold in in-store bakeries to be quite fresh and of good quality. Hence, instead of buying industrial packaged bread/cakes from the shelves, some consumers may have switched to baked goods sold in in-store bakeries. In-store bakeries will continue to compete with packaged/industrial baked goods for sales share.

COMPETITIVE LANDSCAPE

• Baked goods continue to be dominated by artisanal players, which accounted for around 59% of total value sales in 2009. This was mainly due to the widespread presence of chained as well as independent bakeries in Malaysia. Gardenia Bakery KL Sdn Bhd was the leading player for packaged/industrial bread in Malaysia in 2009.

• Stanson Bakeries Sdn Bhd saw the largest increase in value share in 2009. Stanson Bakeries Sdn Bhd’s parent company, Silver Bird Group Bhd, launched several affordable bread products in 2009 in response to the economic crisis. In January, Silver Bird Group Bhd launched SureValue 300 in January 2009, which retailed at a low value of RM1.30 per loaf. In August 2009, it launched SureValue 500, another affordable bread targeting budget-conscious consumers. As consumers tightened their belts in 2009, these new launches proved to be successful and helped to boost the value share of Stanson Bakeries Sdn Bhd.

• 2009, QAF Ltd’s Gardenia Bakery KL Sdn Bhd was the only notable international manufacturer of baked goods in Malaysia. Domestic companies dominated baked goods, due to the importance of freshness throughout the distribution system.

• Gardenia Bakery KL Sdn Bhd introduced the Gardenia Delicia Soft Rolls in 2009. The soft rolls came in three delicious flavours – Butter Toffee, Milky Chocolate, and Coffee Cinnamon, giving consumers a wider variety of bakery products to choose from. In addition, Silver Bird Group Bhd launched SureValue 500 bread under its High 5 brand in August 2009 to help the firm achieve a significant share in the sandwich bread niche. High 5 bread contains all of the five essential nutrients from each of the five important nutritional groups – carbohydrates, protein, calcium, vitamins and irons. SureValue 500 bread was intended to target budget-conscious consumers. At the time of its launch, the new 22-slice Sure Value 500 bread loaf was retailed at RM2.25, compared with Silver Bird Group Bhd’s 19-slice Nutri-White bread loaf, which sells for RM2.10.

• As part of Gardenia’s brand enhancement programme, Gardenia Bakery KL Sdn Bhd erected a large eye-catching lighted signboard in 2009, which has since become a landmark in Selangor. The signboard was clearly visible from the highway, creating a memorable and valuable brand imprint on motorists and commuters.

• Sales of private label fell slightly in 2009. This may be because industrial/packaged baked goods usually came with more varieties than private label lines and their prices were not significantly more expensive than private label products. Lots of industrial/packaged baked goods were sold with offers such as extra 200g in each packet of bread to entice consumers. The manufacturers of industrial/packaged baked goods have also invested more in product development to come out with interesting products, such as high-fibre bread or low-GI multigrain bread.

PROSPECTS

• The outlook for baked goods in Malaysia is positive. Bread and cakes are likely to become even more popular as staple food due to their convenience and availability. Although many Malaysian families still choose bread by its price and their palates, the awareness of healthy food is increasing. Many families have begun to differentiate wholegrain bread, mixed grains and white bread. The rising living standard and awareness of the consumers are expected bring a higher level of appreciation of bakery products over the forecast period.

• Baked goods, especially bread, will remain popular as breakfast or snacks among Malaysians. Cakes and pastries are expected to become more popular, as consumers appreciate the products for their convenience.

• Cakes are predicted to post the fastest constant value growth over the forecast period, because consumers are likely to purchase more of these products as an indulgence with their rising disposable income. In particular, unpackaged/artisanal cakes are expected to grow strongly as consumers will be prepared to spend more on these products instead of packaged/industrial cakes.

• Unit prices of baked goods are expected to just increase marginally in constant value terms over the forecast period. Sudden changes in commodity prices may cause fluctuations in the prices of baked goods. For example, in January 2010, Gardenia Bakery KL Sdn Bhd raised the price of white bread in response to a spike in the price of wheat flour. Over the forecast period, as global warming becomes more serious, there will likely be more droughts or floods around the world, which may impact crop output and result in occasional price hikes of breakfast cereals. On the whole, unit prices are likely to remain stable, because baked goods manufacturers and artisanal outlets usually do not spend a lot on TV advertising, which can be quite expensive. Lower marketing costs would be able to offset the increase in the costs of raw materials.

• The value share of distribution through supermarkets/hypermarkets has been on the rise since 2005 and it is expected to continue to increase over the forecast period. This is because supermarkets/hypermarkets devote plenty of shelf space to baked goods products. They also offer more varieties than small grocery retailers. A rise in the number of in-store bakeries will also boost distribution through supermarkets/hypermarkets.

• As the economy has recovered, there may be less demand for budget bread. Some consumers may switch to more fanciful flavours such as fruit and nut or multigrain bread, premium brands or artisanal baked goods. Hence, sales of Stanson Bakeries’ SureValue 300 and SureValue 500 may fall gradually. Over the forecast period, the manufacturers may launch new products that cater to the growing demand for healthier food, for example, multigrain bread, bread enriched with wheat germ or flax seeds. Artisanal players may also produce new varieties or flavours.