Biscuits Market Trends

By: Moira Hilliam The world market for biscuits is nearly 11 million tonnes a year, with a value of over US$40bn, according to Leatherhead Food International. Western Europe has the largest market in volume terms, with over a quarter of that, although the North American market is larger by value, reflecting a preference for premium products and generally higher average prices. Consumption Internationally, per capita consumption of biscuits is about 3kg, but this rises to over 8kg in Western Europe and falls to about 2kg in Australasia and just over 1kg in China. Within Europe itself, Belgium has the highest per capita consumption, at about 13kg, ahead of Ireland on 12kg, France on 10kg and the UK on 9kg. The market is relatively mature in many parts of the world, with static sales in both volume and value terms. Although there is increasing interest in premium and luxury products, there is also a sizeable economy or value sector in most countries, causing the market to polarise and tending to put pressure on standard and everyday lines. As a result of this, there has been ongoing product development aimed at boosting interest in the market, particularly in the higher-value-added areas, such as chocolate biscuit countlines, healthy or better-for-you lines, and more convenient and snack-style presentations of established brands. This is nowhere better illustrated than in the UK, where chocolate biscuits dominate value sales, reflecting their premium pricing, and healthy biscuits remain one of the strongest growth sectors in the market. Overall, the UK market rose by less than 1% in 2004 to reach a value of just under 1.7bn. Within that, chocolate biscuits accounted for a dominant, ahead of healthy biscuits with about 16%. Chocolate Biscuits The market for chocolate biscuit countlines has not fared particularly well in recent years, despite the rising interest in premium products, as consumers increasingly look for healthier alternatives. The market contains still contains some very strong multinational brands, however, and these have maintained their positions with high levels of promotional and product activity. Nestl, for example, extended its Milkybar white chocolate brand with Milkybar Strawberry Biscuits in the UK; in France and Germany, it uses the Galak white chocolate brand, and this was also extended during 2004 with products such as Galak Pocket on the French market. Meanwhile Masterfoods extended its Bisc& brand in Europe with a number of new products, including Bisc& Millkyway and Bisc& Snickers.

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Back in the UK, Cadbury extended its Fingers brand into the chocolate biscuit bars market with the launch of Giant fingers in standard Milk and Caramel varieties, and Foxs extended its Rocky chocolate biscuit countline brand with Rocky Rubble, comprising rice crispies and biscuit pieces covered in milk chocolate. Cadbury Fingers and Rocky were in the top 10 UK biscuit brands in terms of value sales in 2004, with sales of about 27m each, although this put them well behind the leaders; KitKat (two-finger variant) with 82m and McVities Chocolate Digestives with 64m. Healthy Biscuits Meanwhile, the healthy biscuits category has continued to show good growth, with sales rising by nearly 10% to over 250m in 2004. Cereal bars are one of the fastest growing sectors of the market, with sales reaching over 200m by the end of 2004, although innovation in the sector now seems to be slowing. The leading cereal bar brand remains Kelloggs NutriGrain, placed at number 5 in the overall ranking of biscuit brands, although it saw sales fall over 8% to 36m in 2004. The low-fat biscuits market has also seen some interesting activity, including the move of Cadburys Highlights instant hot drinks brand into the sector, with the launch of Cadbury Highlights biscuits in late 2004. The range included three types of wafers and two types of mallows. Each biscuit contains less than 100 calories and 3 g of fat, although it still has a sugar content of 51.3 g per 100 g. Use of Brands The use of existing strong brands was clearly in evidence in other sectors of the market, where Unilever Bestfoods introduced its wholemeal Marmite Biscuits, as well as launching new flavours in its Mini Cheddars brand with Mini Cheddars Cheesy Beans. A very traditional brand also returned to the UK biscuit market after 10 years when the Huntley & Palmers brand was reintroduced after a ten-year gap following the Companys purchase by a group of investors. The first new products under the brand were called Not Just for Cheese, a range of biscuits and wafer thins for cheese, dips or pt, and When Taste Matters, a selection of bite-sized biscuits. Increasing demand for mini snacking lines in savoury biscuits has also been reflected in product activity in recent years, with the launch of products such as Baby TUC and Ryvita Minis. Continental Trends Product trends in the biscuits market in Continental Europe are broadly similar to those in the UK, particularly in France and Germany, which also have relatively mature markets. Germany has the largest market in volume terms, at about 630,000 tonnes, but France leads in per capita terms with about 10kg. In spite of its maturity, the French market tends to be categorised more simply than in the UK, with the sweet biscuits market divided into family,

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adult and childrens products. Childrens products are clear leaders in terms of volume, accounting for over 45% of the sweet biscuits sector, ahead of family biscuits with about one-third and adult biscuits with 20%. In value terms, however, the premium nature of the adult market means that it has a much more significant share of about 31%, putting it at a similar level to family biscuits and much closer to childrens biscuits on 38%. As in the UK, the healthier biscuits market is seeing some growth, although it is much less developed. Cereal bars first appeared on the French market in the early 1980s and saw dynamic growth through that decade. During the 1990s growth slowed, but the sector was revitalised during the late 1990s and early 2000s by new product activity, initially in the breakfast replacement category, then in the childrens market and more recently in health lines. In 2003, adult products accounted for 60% of the EUR88m cereal bar market, giving them a value of EUR61.2m. Within this are a number of health lines, including breakfast replacement brands, such as Kelloggs Special K and Nestl Fitness. They tend to be marketed on a general health and vitality platform. France also has a well-established dietetic biscuits market, where companies such as Gerbl and Creal sell ranges of specialised products. These include biscuits fortified with ingredients such as vitamins and minerals (including calcium and magnesium), oligosaccharides (prebiotics), dietary fibre, soya and a whole range of more unusual ingredients with perceived health benefits. As interest in health and awareness of functional foods grows, these kinds of product are increasingly likely to cross over the mainstream biscuits market. The total dietetic biscuits and snacks market is worth about EUR100m, dominating the French everyday dietetic foods market, with a share of about 60%. German Innovations The German biscuits market has been seeing volume growth of just over 1% per annum in recent years, while value sales have been growing at a faster rate, reflecting ongoing innovations, particularly featuring more convenient packaging, with key brands being launched in new-style smaller packs designed for snacking. Market leader Bahlsen has been particular strong in this area, with products like Messino Minis and Pick Up brands, although Masterfoods has also had some success with its Bisc&. Sweet biscuits account for over 80% of the German market, led by chocolate biscuits, which account for 38% of the sweet sector, ahead of assortments with 19% and butter biscuits with 8%. Small Growth Overall, sales in the biscuits market in western Europe are set to rise by less than 1% a year in volume terms over the next five years,

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which would take sales from about 2.72 million tonnes in 2003 to 2.82 million tonnes in 2007. This growth rate is similar to that expected in Eastern Europe and ahead of the minimal 0.2% increase expected in North America over the same period, but well behind that in many Asian markets, where annual increases could be over 8% a year in countries such as China and India.

Per capita consumption of biscuits in selected countries and regions, 2003 Kg Belgium Ireland France UK Western Europe average Germany Eastern Europe average US Russia India Japan China Source: Leatherhead Food International 13.0 12.3 10.0 9.0 8.2 7.7 5.6 5.6 4.9 1.5 1.2 1.1

UK: Biscuits market by type, 2003-04

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Seasonal biscuits 7.6%

Children's biscuits 6.0%

Savoury Special biscuits & treats 5.2% breadsticks 3.9%

Chocolate biscuit bars 23.1%

Everyday treats 11.7% Crackers & crispbread 12.3% Everyday biscuits 14.4%

Healthier biscuits 15.8%

Source: Leatherhead Food International

UK: Top 10 Biscuit Brands, 2004 (52 weeks to 2 October) m 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. KitKat (two-finger variant) McVities Chocolate Digestives Quaker Snack-a-Jacks McVities Jaffa Cakes Kelloggs Nutri-Grain Twix Penguin McVities Digestives Rocky Cadbury Fingers 82.1 64.4 43.4 43.2 36.3 31.9 30.5 28.5 27.4 27.2 % Change 2003-04 + 6.1 - 3.5 - 4.7 + 9.3 - 8.2 - 7.4 -18.0 + 0.8 + 2.0 - 3.2

Source: Grocer Top Products Survey/ACNielsen

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