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Free-from transforms dairy and bakery [Interview]

Free-from and organic dairy and bakery goods show positive growth as consumer awareness of food intolerances opens up new lines of business. Daniel Lojo, Research Analyst at Euromonitor International, identifies the opportunities and challenges that the health and wellness categories pose for these traditional categories.

How has growth in the bakery and dairy developed in recent years? Is growth set to continue?

‘Both dairy and baked goods have suffered negative performances across Western Europe in recent years. The industries needed to overcome challenges such as higher awareness about digestion issues, which affected dairy consumption, or trends on carbs control, which negatively impacted baked goods. However - and although coming from a low base - health and wellness categories such as free-from or organic products posted positive growth in the region and are expected to continue gaining value sales and shelf space in the next five years.’

‘Despite the fact that health and wellness products have high unit prices, consumers showed an increasing interest in these options. Health and wellness has become a way to add value to their portfolios through innovative alternatives, which is expected to be reflected in higher retail prices. The expected positive economic scenario over the next five years and the higher disposable income coming along with it, is set to produce company strategies focusing on health and wellness alter natives as a way to increase margins and value sales.’

Which sectors/ products within these categories are driving growth?

‘Free-from gluten baked goods or free-from dairy products are good examples of the existing trends in the market. Higher awareness of food intolerances has opened new lines of business for the industry, which have become larger due to the fact that many non-intolerant consumers have started to also purchase these products. Milk alternatives such as soy milk are already well established in the market and nowadays, newer options such as almond milk or rice milk are showing the biggest growth in this category.’

What are the biggest challenges for these categories?

‘The biggest challenge might be the unavoidable need to restructure most of the selling points of the products within these categories. Higher consumers’ awareness and running campaigns questioning the health benefits or threats on consumption of popular products such as cow’s milk or leavened bread will bring new challenges to the industries. However, the industries can convert potential risks into new strengths within these categories. Supplying new products demanded by buyers might become a way to not just maintain an important consumer base, but also to increase margins due to the higher value present in the companies’ portfolios.’

What are your predictions for the Food industry in the next 3-5 years?

‘Western Europe is set to see macroeconomic growth over the next five years, which is likely to bring higher disposable income along. Western European consumers have proven that quality and added value are starting to be key factors against price. Expected company strategies based on innovation, health and wellness trends, ethical labels or premiumisation are likely to be reflected in higher value-added products, higher retail prices and to produce an increase in total value sales. Competition between main players and private label is also expected to increase, creating a less fragmented scenario and less room for small companies, which will need to mainly focus on niche markets.’

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