In the battle of the bears, Winnie the Pooh has soundly beaten his rival Paddington over the past 12 months. Sales of marmalade - the Peruvian bear’s spread of choice - are in the doldrums, with value sales down 5.8% and volumes down 6.2% [Kantar Worldpanel 52 w/e 28 October]. But sales of Pooh’s beloved honey are looking sweet, with value sales up 4.1% and volumes up 3.5% [Kantar].

The reason for marmalade’s decline is that consumers have been switching to jam and honey as well as more contemporary offerings such as chocolate hazelnut spread and peanut butter, which together have helped the jams and spreads category grow by 3.3% over the past 12 months [Kantar].

But is the problem terminal or can marmalade manufacturers do something to get themselves out of this sticky spot? And could other traditional spreads, notably jam, be about to face a similar challenge?

Marmalade certainly hasn’t been helped by its reputation as the granny’s spread of choice. And its image problem has been exacerbated by years of underinvestment, says one supplier. “Marmalade has an image of being old-fashioned and tired. It’s one of those things people can grow into as they get older, but if consumers aren’t identifying with certain brands then that’s a real problem.”

The situation has not been helped by the turmoil at Premier Foods, which invested precious little in its jams and spreads business after unveiling its power brands strategy in 2011. Neither Robertson’s nor Frank Cooper’s marmalade were among the eight brands targeted for investment and both are now in the hands of Hain Daniels after it paid £200m for Premier’s jams, jellies and spreads business, which also includes Gale’s, Hartley’s and Sun-Pat, last summer.

The jams, preserves and spreads market is now worth £422.7m and growing at 3.3%. This growth has been driven by shoppers paying higher average prices and purchasing more often.

There has been a fall in promotional activity and a switch to more price cuts and fewer volume-based deals.

Brands account for over 60% of the category, but own label has grown at a faster rate to steal share.

Chocolate spread and peanut butter are the star performers, both delivering double-digit growth through an increased buyer base and price inflation.

Honey now accounts for over a quarter of the category and has seen growth ahead of the overall market of 4.1%.

Jam remains the largest sector accounting for 25.6% of sales but volumes remain flat and value growth lags the market at just 1.4%.

Another problem facing marmalade is its over-reliance on one meal occasion. “Marmalade has always been more linked to breakfast,” concedes Duerr’s sales and marketing director Richard Duerr.

This is where the preserve could learn a trick or two from the chocolate and hazelnut spread sector, which has seen sales grow 13.1% in value and 6.5% in volume [Kantar] thanks largely to the efforts of Ferrero’s Nutella. The brand has made a concerted attempt to look beyond breakfast and target particular events. Ferrero claims shoppers bought 1.1 million units of Nutella in the build-up to Pancake Day 2012 alone, with the event offering an incremental sales opportunity for retailers as 68% of shoppers were new to the brand.

Indeed, says Ferrero UK and Ireland customer development director Levi Boorer: “You may be surprised to hear Nutella is the UK’s number one selling pancake topping.”

That said, breakfast remains Nutella’s heartland and key breakfast consumption trends are also playing to the brand’s advantage - as they are to honey’s and peanut butter’s, claims Boorer. “Honey is playing a more and more important role in health, while peanut butter and chocolate and hazelnut spread have become more popular choices for the family breakfast,” he explains.

And he believes there’s more to come for the brand with Nutella currently boasting 19% penetration of the UK market, whereas in France its penetration of a similarly sized population is 53%. It’s for this reason that Ferrero has committed to heavy investment in the brand. The company spent £6m on above-the-line support for Nutella last year through its ‘Wake up to Nutella’ campaign, allowing it to “compete with cereal heavyweights in terms of our media spend”, says Boorer.

“Potential has been ignited through the consumer’s desire to snack healthily” Darren Robinson, 3V Natural Foods

Just how big chocolate and hazelnut spreads can become in the UK is anyone’s guess, but unlike the mature sub-categories of jam and marmalade, their penetration has probably not yet hit the ceiling. That’s not to say jam brands should be overly preoccupied with the growth of rival spreads. After all, leading brand Hartley’s has delivered more than respectable value growth of 9.2%, with volume up 13.2% during the past year. The jam market also remains significantly larger than chocolate spread and peanut butter combined,so even though there is more competition, there’s more to play for.

Another factor to bear in mind is that retail prices of peanut butter and chocolate spread are considerably higher than those of jam and marmalade, with chocolate spread commanding on average a 60% higher price per kg and a recent hike in the price of peanuts pushing up the price of peanut butter.

Duerr is certainly not unduly concerned. “It is unlikely that chocolate spreads would ever catch up with jam and marmalade in terms of volume as they are too expensive to be an everyday commodity,” he contends. “It is the value share of these that remains high.”

Nevertheless, if jam brands want to improve on category volume growth of just 0.1% they need to find new ways to entice consumers into the market. “It is important that jams keep communicating with their existing and potential new consumers,” says Paul Mercer, producer of WI Foods Jams and Preserves, the jam and marmalades range created by the Women’s Institute. “They need to ensure they have a use in modern households.”

“You may be surprised to hear Nutella is the UK’s number one-selling pancake topping” Levi Boorer, Ferrero

Duerr agrees that the spreads sector is very traditional and as such innovation is pretty limited. “Most NPD seems to focus on taking a much-loved product and adding something to it, but in my experience it rarely works,” he says. However, there are opportunities that have yet to be exploited, he insists.

Duerr’s, which is undertaking a rebranding exercise this year to unite its range under a single consistent brand, is looking to capitalise on the surge in interest in home baking, inspired by shows such as The Great British Bake Off, for instance.

Jam’s versatility has been amplified by its use in home baking, notes Duerr, who hopes to encourage bakers to see marmalade in the same way. To that end, the brand has created a series of “tongue-in-cheek” baking masterclasses, fronted by Duerr himself.

Having already tapped into the home baking trend, jam suppliers, meanwhile, must find new ways to boost sales. Communicating jam’s indulgence credentials is likely to be more fruitful than pursuing the health route, which is riddled with obstacles, the largest being that products must contain at least 60% sugars to call themselves a jam, as stipulated by the EU. “It is hard to promote the health benefits of a product that is simply fruit and sugar,” says Mercer, bluntly.

Honey brands, on the other hand, have benefited by playing up health credentials. For example, leading brand Rowse Honey ran a £3m marketing campaign last spring aimed at positioning Rowse as a natural source of slow-release energy for children. The campaign seems to have done the trick as value sales have increased by 5.5% to £36.2m [SymphonyIRI 52 w/e 1 October].

Honey sales are growing well across the board, with Sainsbury’s preserve buyer Mark Bartholomew singling out the top end of the market for particular praise. “Manuka honeys and other premium honeys such as our Taste The Difference range are both increasing sales year-on-year,” he notes, adding that peanut butter is another area growing in popularity among Sainsbury’s customers.

“It is hard to promote the health benefits of a product that is simply fruit and sugar” Paul Mercer, WI Foods

While the future for honey looks rosy, the outlook for peanut butter is less clear. In the US, the peanut butter industry is in turmoil thanks to a mass recall over fears of salmonella contamination and there’s a danger that the damage caused to consumer confidence in the US may trickle over here.

However, nut and seed butter brand Meridian believes that as one of only two British peanut butter producers it is well-placed to keep consumers on side. “Confidence in the integrity of peanut butter can be maintained and developed so long as we communicate clearly,” says Darren Robinson, group sales manager of Meridian brand owner 3V Natural Foods. Indeed, he predicts the sector will be able to build on recent value sales growth of 13.8% and volume growth of 8.3% [Kantar].

“The sector’s latent potential has been ignited through the consumer’s desire to snack healthily, fuelled by advice from nutritionists and sports stars who recommend nut butters as a positive choice,” says Robinson.

With sluggish sales of traditional marmalades, jams and spreads predicted to continue, the ability to tap into new, underexploited markets such as nut butters could well be crucial to the growth of the entire jams and spreads category.

Is Paddington the last fan of marmalade?