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When shoppers are looking to bake at home, private label is one of the first places they appear to turn.
Eye on the National Brands
The biggest players in home baking, according to Mintel’s latest report, are McCormick, J.M. Smucker, General Mills, Nestle, Pinnacle Foods, ConAgra and ABF. They account for about 36 percent of sales in home baking products. … As national brands are under pressure to provide better-for-you alternatives for shoppers, General Mills rolled out Gold Medal White Whole Wheat Flour in 2011, having the protein and fiber of whole wheat flour but with a lighter flavor and texture. King Arthur, meanwhile, based an entire ad campaign for its flour on getting to know the farmers who grow their products. … National brand manufacturers have found success using recipes on their products to encourage home baking. Nearly 60 percent of home bakers in Mintel’s report said they got recipes from product packaging such as Nestle’s Toll House chocolate chip cookies.
Whether they head to the shelf to pick up sugar and flour, grabbing nuts and chips to fill in their cakes and pies, or buying mixes to make their work a little easier, consumers continue to find value propositions and quality in private label products.
In a report from Mintel on Home Baking in January 2012, the analyst group said private label led a fragmented group of leaders among the 20 segments present in a full-service grocery baking aisle. Eight top CPG companies combined for a 36.2 percent share of the market, the report said, with private label claiming a 24.3 percent share of the market.
The top CPG companies in the category showed a 2.6 percent decline in sales from 2006-10, Mintel said, while private label gained 3.1 percent. “The recession of course disproportionately helped private label products, and they appear likely to continue to gain share” through 2016, the report said.
At its most basic level, the baking products category starts with sugar and flour. Private label dominates the sugar category, with about 58 percent of the dollar share in the category. In a report on sugar and sweeteners from September, Mintel said the category registered just shy of $5 billion in sales in 2012, and is expected to see growth of 2.4 percent annually through 2017 to about $5.6 billion.
Sugar represents the biggest portion of the category in the Mintel report, and showed sales growth of 6.4 percent since 2010. It said economic conditions were not expected to affect sales because sugar and sweeteners were considered pantry staples.
In fact, Mintel’s Home Baking report said that private label provided the only significant growth in sugar in 2010, gaining 3.3 percent as national brands slumped.
“Retailers said this activity can be attributed to the lingering effects of the recession, as consumers cut back on spending and sought out private label items for basic necessities,” the report said.
“The market for sugar and sweeteners is positioned to grow during the next five years,” the sugar and sweeteners report added. “Finally, the continued success of less expensive private label will work to grow the market among value seekers, as brands work to better compete for market share.”
Private label sales in white sugar fell 2.8 percent in 2012 from a year earlier, according to IRI data. Other sugar sales for private label rose 2.5 percent, with the overall category growing 0.8 percent in 2012.
Another category that has gained in the value proposition the past few years is baking mixes. In a Mintel report on baking and dessert mixes from 2011, it said the categories benefitted from value propositions in an era of price sensitivity because of the recession.
The category grew 5 percent from 2005 to $1.8 billion in sales, but Mintel said at the time it expected growth to slow as the recession eased.
Yet IRI data showed overall sales in baking mixes grew 3.6 percent in 2012, and in private label, growth was more than 5 percent from 2011. Private label now accounts for 17 percent of the dollar share in the category and about a 19 percent unit share.
So while Mintel discussed the trade down consumers made to private labels early in the recession because of price, premium mixes have found growth opportunities in private label such as those from NorthWest Specialty Baking Mixes.
Emily Ward-Dickerman of NorthWest said business has continued to rise over the past five years.
“Demand for specialty baking mixes has steadily been on the rise over the past five years,” she said. “We’ve seen an increase of 42 percent from 2008-12. As retailers continue to expand their premium private label brands, they are finding premium baking mixes an ideal fit with their offering. Premium baking mixes provide interesting, convenient and decadent additions to meals as consumers look for ways to treat their families.”
And that means that simply meeting the national brands is not enough to provide differentiation for many retailers. NorthWest finds new and interesting ways to set products apart.
“We specialize in premium baking mixes, so our customers request specialty flavors and products from us rather than NBE,” Ward-Dickerman said. “Over the last
year, we have seen a growing interest in cookie-like bar baking mixes and specialty pancake mix flavors.”
That said, finding the right mixes to meet customers’ needs can be as simple as timing the product to the season.
“Seasonal products and flavors such as pumpkin bread mix are still our top sellers,” Ward-Dickerman said. “Adding creative twists to seasonal baking mix flavors give consumers more reasons to connect to retailers premium private label brands.”
The company has been in business since 1980, and Ward-Dickerman said its ability to focus and specialize on baking mixes allows it to stand out from competitors in the field.
“Our goal is to help our retail customers capture more sales and profit by applying our experience and expertise in the baking mix industry. Baking mixes is all we do,” she said.
Cake, cupcake and pie mixes provides the largest segment in baking mixes, and Mintel’s report showed cake mixes were among the most widely purchased products in the market. Although Mintel predicted declining sales through 2015, private label sales climbed 12 percent, even though unit sales were nearly flat (up 0.56 percent), showing the strength of premium products and price increases that retailers were able to pass along.
Brownie mixes are the next largest segment, although at about half the penetration level for private label as cake, cupcake and pie mixes. Mintel forecast modest growth in the segment through 2015.
Bread and muffin mixes both slowed in private label sales in 2012, according to IRI, but Mintel is bullish on both, expecting continued growth through 2015.
In all cases, Mintel said the growing influence of mass merchandisers and club stores in sales – taking the traditional role of supermarkets – was a positive sign for private label.
“Mass merchandisers, such as Target, are carrying much of this growth fueled by low-pricing strategies, one-stop shopping convenience and strong private label brands,” the report said. “Recession-induced price-sensitivity gave reason for many shoppers to shift to mass merchandisers and club stores seeking the best prices on grocery items.
“The recession has provided the impetus for consumers to shop private label brands, as consumers look for value while unwilling to sacrifice quality. To that end, retailers including Target (with its variety of store brands) have been on a track of consistent innovation in recent years to meet this demand.”
For shoppers who looked for other baking products, flour sales grew 3 percent overall, with private label sales slightly lower. IRI data shows private label with an 18 percent dollar share of flour and a 21 percent unit share.
Mintel’s Home Baking report said that flour sales declined through 2010 as fewer shoppers baked at home, but that as home baking increased, flour sales would rise as well.
“This represents a position of power and responsibility for the segment,” the report said. “The flour industry should take the lead in the creation of campaigns to encourage home baking in addition to positioning their products as the ones that will be best for doing it.”
Sales of accessories to baking goods showed growth in 2012, with baking nuts sales up 2.6 percent, frosting up 1 percent and dessert toppings up 1.2 percent.
Private label’s share of sales in those categories, though, outpaced overall growth. Baking nuts sales grew 8 percent in 2012, dessert toppings grew 5 percent and frosting sales grew 13.4 percent.
Private label baking nuts account for 22.6 percent of the dollar share in the category and 26.6 percent of unit share. Dessert toppings make up 10.4 percent of the dollar share and 14.3 percent of unit share, with frosting at 4.3 percent of the dollar share and 4.2 percent of unit share.
So stronger sales for private label in those categories are not coming on the smallest of shares, showing the strength of quality and variety in the categories. Mintel’s Home Baking report showed baking nut sales growing 7.1 percent from 2007-10.