With the market place becoming more and more competitive, bakers in the EU are increasingly in need of consumer favour in order to boost their market share, according to market analysts Frost & Sullivan.
According to a new report, a triumvirate of high commodity costs, increasing retailer power and consolidation amongst top players is now bearing down on companies across the bloc.
Retailers have forced manufacturers to reduce prices, shrinking margins at a time when companies are already spending more money on ingredients, the report's author Arthi V told BakeryandSnacks.com.
Adding even more pressure to the mix, global giants are acquiring other companies at record rates, "making the market place viable for top performers but the survival of smaller companies much more difficult".
Examples cited by Arthi V include Kraft's acquisition of the Danone biscuit division, and Premier Foods' takeover of RHM Foods.
Therefore it is now more important than ever before that manufacturers get ahead by promoting products that target the current trends for health, functional, premium and convenient products, with "prudent strategies in place", she added .
Indeed, the onus is now on speed and versatility when addressing consumer demands, Arthi V stated.
The biggest trend affecting the market is functional products promoted as 'good for health'.
"The demand for functional foods in general has increased with the ageing baby boomer population, rising healthcare costs, and the rising incidence of lifestyle disorders such as obesity," Arthi V said.
Health products currently selling well include whole grain and fibre breads, as well as "lite" foods targeted at various low fat and low carbohydrate diets.
These are often sold in smaller portion sizes, increasing the "healthy" image.
The health trend is also encouraging bakery manufacturers to enlist the skills of firms such as Daniso in order to add functional ingredients to products, Arthi V said.
"For example, consumer concerns in the usage of trans-fats has increased has increased the demands for trans-fat free emulsifiers such as Nutrisoft 55," she said.
For extra marketing punch, companies should also sell these products in easy to use packages, the study suggests, as convenience is another huge trend sweeping the industry.
Convenience foods are necessary in the market because of the contributing factors of changing eating habits and busy lifestyles, where the pressures on time availability has resulted in increased on-the-go consumption, the report said.
However, bakers should not forget that products such as cakes and biscuits are traditionally a treat and consumers still want a variety of expensive or premium products available for indulging in from time to time, Arthi V said.
Top selling premium bakery products are rich and indulgent, she added, with foreign treats such as naan breads, pain au chocolate and Danish pastries growing in popularity.
The European bakery market is one of the largest sectors in the European food and beverage industry, estimated to be worth between €100bn and €120bn in 2006.
According to Euromonitor, the top three bakery companies in Western Europe are Barilla, Danone and Kellogg, which share 7.8 per cent of the market between them.
All three of these companies have held on to their top positions by adhering to the current trends, particularly focusing on health and well being, Euromonitor said.