Sales of biscuits topped £2bn for the first time this year, jumping 8.3% to £2.11bn, despite relatively flat volumes, up 0.7% [TNS 52 w/e 9 August]. Sales of cakes also had a sweet year, up a healthy 3.4% to £1.24bn, on volumes up 0.9%. "When there is belt tightening, this category tends to do well as people spend more time at home," says Mark Sugden, director of market strategy and planning at United Biscuits.
But for biscuits and, especially, cakes, downsizing, sharing bags and, increasingly, convergence with the confectionery aisle are being seen. The four biggest growth areas in the cake category are individual small cakes, up 8.6% to £116.4m; cake bars and mini rolls, up 8.9% to £114.2m; small pies, up 9% to £93.6m; and cake slices, up 11.9% to £93.3m. All four areas have also exceeded the category's volume growth, with cake bars and mini rolls, in particular, soaring 10.7% [TNS]. "The focus of NPD is now bite-size," says Versha Patel, head of category for sweet for Mr Kipling owner Premier Foods. "We're seeing big improvements to the lunchbox cake offer, but eating at home is also a key trend."
Cakes and biscuits are benefiting from seemingly contrasting trends: a rise in eating at home; and conversely, alongside more out-of-home eating occasions. However, they are both recession-induced and constitute a double-win for the category. As more people forego dining out, they are opting to eat in and often spending a little extra to treat themselves. On top of that, the recession has led to a rise in money-saving lunchboxes as people swap the sandwich-run for a home-prepared lunch.
"The downturn has played a major part in category trends," says Jennifer Salamony, senior buyer in bakery for Sainsbury's. "The growth in the lunchbox category is as a result of consumers seeking out more efficient ways of using their money. As a result, the lunchbox occasion has grown at a rate of about 5% this year."
Cakes, particularly small and individually wrapped cakes, are being added to more occasions, adds Patel. "It's all a bit nostalgic a modern-day tea-time. People want a slice of cake with a cup of tea. If you have a whole cake, you take a slice and you have to finish it. But with nibbles and bites people can get portion control."
There are also many more cake-eating occasions emerging, she says. "Instead of chocolate, people may opt for small eats, such as bite-size cakes, while sitting down to watch a DVD."
To capitalise on this, in September Premier Foods unveiled Cadbury Mini Bakes individually wrapped chocolate brownies and chocolate flapjacks with an rsp of £1.99 and two additions to the Mr Kipling range, intended to shake off the "dusty" image of tarts.
It also introduced a Cadbury Fudge variant of its one-year-old £2m Cake Bites range in July, which it hopes will benefit from its association with the confectionery brand. Next year Premier's NPD will continue to focus on wrapped cake bars, targeting the on-the-go trend. "We have a lot of exciting stuff in the pipeline, including strong lunchbox lines," says Patel. "At the back end of 2010 we also expect to see indulgence creeping back in, with people extending their repertoire and adding more indulgent treats."
The popularity of the mini format in cakes is also now the focus for biscuit NPD, says Sue Garfitt, head of insights, category and marketing planning at Burton's. "Bite-size is now key in cakes but we can adopt it more in biscuits.
"Currently, only 38% of biscuits are eaten out-of-home, compared with 50% of confectionery and 80% of bagged snacks."
However, many production lines were laid down a long time ago, so moving towards different packaging formats is challenging.
Garfitt also concedes that the biscuit category has been "stuck in the biscuit barrel of the 1950s" for too long. "The biscuit barrel accounts for £600m of the £2bn category, but if we want to grow the market we need to offer greater opportunities around treating."
In June, Burton's launched a new treat-based Cadbury Fingers sku called Snack Bites, an adult-oriented on-the-go range (see p55). Also under the Cadbury brand, Burton's is planning to expand in the special treats sub-category with a further range next year. Although plans are still under wraps, Garfitt says portion control and in-home sharing are important factors.
"It's not a top-end product, but trading consumers up out of standard half-coated chocolate biscuits that were once considered a luxury," she says.
United Biscuits claims to have a 49% share of the minis category, with its sales in the sector growing at 11% compared with 10% for the total market, says Sugden. "On-the-go is the future for biscuits and continues to prove itself. We are seeing 16% of households buying our Minis, with a repeat rate of 41%. We've also launched sharing bags, which are at the more treaty end of the market."
In August, United Biscuits also mirrored the success of its savoury snack brand Mini Cheddars with the launch of Jacob's Crack'o'Bites.
While launching new formats may have risks, Garfitt argues it is worth it because of their potential to attract new, younger consumers.
"The core biscuit eaters are the over-45s, who make up 46% of the market," says Garfitt. "We want to make sure we are engaging consumers from cradle to grave with life-long relevance, which means modernising. Children still love biscuits, but as they grow up they opt for other sweet treats. We as an industry need to use brands such as Oreo, Penguin and Kit Kat to make sure we are appealing to consumers in that teen group."
And bite-size is succeeding at bringing in a new, younger audience. "We closely monitor all emerging trends to understand the broader market," says Sainsbury's Salamony. "Bite-size cakes have emerged as a new segment that meets the needs of the younger consumer."
But while the category's vibrancy comes from targeting the younger consumer, Garfitt says Burton's is still working hard not to alienate the older audience. "We still place a lot of emphasis on them, as does Fox's. It's about balance."
And despite repositioning Mr Kipling in August to attract a "lost generation" of younger consumers, Premier says it is also careful not to overlook the older market. "We have some whole cake NPD coming out in January," says Patel. "Cake has a 95% household penetration, so we need to be relevant and not disengage any segments of the market."
At Fox's, bite-size is also being watched with "keen interest" says Rachel Moffatt, brands sector director. It relaunched an existing mini kids range this year under the new Mini Moos brand and sales are up by about 50%, she says. But the company's main focus is on in-home treating as it believes consumers are buying biscuits more often and opting for more luxury lines. "As consumers seek a cheaper alternative to eating out, they are not just looking for cheap biscuits but special indulgent biscuits that represent good value for money."
But while the special treats segment of biscuits had the highest value growth this year, up 16.3% to £143m, with volumes up 6.9%, it was everyday treats that had the highest volume growth, up 7.2%, as value rose an impressive 11% to £270m [TNS, 52 w/e 9 August].
And David Jago, Mintel's head of innovation and insight, says indulgence has taken a back seat in the past year in terms of NPD. "The number of launches that would be considered premium are right down. Smaller cakes and biscuits have been the massive movement because they offer affordability as well as more usage occasions," he says.
As recession took hold, the premium offer in biscuits and cakes has often been a casualty in supermarkets, particularly for own label. "Many large retailers have taken their eye off the premium ball, as they fight to gain market share in the value sector," says Jon Dance, marketing manager of premium biscuit brand Bahlsen. "Our latest data shows a 4% value and 9% volume decline for own-label premium business."
Bahlsen, by comparison, is up 13% by value and 12% by volume [Nielsen 52w/e 8 August], assisted by a hefty £1.67m advertising spend (see box p61).
Supermarkets have also demanded more value lines in cakes. "We have been doing a fair bit of repositioning of price points for the multiples with premium being replaced by more standard ranges," says John Duffy, chief executive of Finsbury Food Group.
In the meantime, the premium cake sector is down 2.5% by value [Nielsen 52w/e 11 July]. And while a year ago Finsbury was producing premium cakes with rsps of £9.99 and £10.99-plus, it has now brought that top-end price down to £7.99-£8.99. "We didn't re-engineer products but started from scratch," he says.
However, Finsbury has started to see a slight rise in the number of consumption occasions for more premium indulgence products in recent months, says brands director Mark Bruce.
"Consumers realise shopping at the supermarket is cheaper than eating out so even premium can be value for money. Retailers are now reacting to that and they're looking for the value-for-money combination of quality and price. As a result, we've been hearing from retailers that they are seeing some trading up in cakes again. Thornton's, for example, has grown sales 70% in the category in the past year, largely thanks to an extended range and revamped packaging last year."
Finsbury, which produces Thornton's cakes under licence in the bite-size and celebration cake market, is about to launch three Thornton's round cakes to join an existing chocolate cake. Unlike the celebration cakes, these will be everyday cakes, including coffee and lemon flavours, priced between £2 and £2.49.
Sales of large whole cakes in the take-home market are down 4.5% in value to £122.1m, with volumes down 1.7%, in the year to August [TNS]. However, the sector appears to be stabilising. "The whole-cake market is steady now, but the category was having a difficult time," adds Bruce. "Some value offers were quickly pushed into the fixture last year and it resulted in a short-term negative effect; there was no consumer choice about it."
Although the large sharing cake market is mature, it is now growing 1.5% in value according to its own data, he says. "I don't believe we're seeing consumers switching from whole cake to snacking." The sales growth from snacking-based product has come from a different occasion. "And with a brand like Thornton's we're even seeing people start to trade up to more premium cake," Bruce adds.
Quality may even be taking over from health as the key category driver, claims Dave Roberts, Dawn Foods' national accounts controller. "Consumers are looking for value for money but this doesn't mean 'cheap'. When it comes to sweet bakery, it must deliver on taste, satisfaction and real indulgence."
But while health is no longer the biggest driver, it is still a focal point for many manufacturers and the portion control of bite-size offers a healthier eating alternative for some cash-strapped shoppers. Healthier biscuits make up the largest part of the biscuit aisle, up 4.5% in the year to August to £397.2m, though volumes slipped 2.1% [TNS]. And in the six months to June, a further 250 products were reformulated,taking the total of more than 700 since January 2007, according to Mintel.
But there are mixed views about the continuing importance of health as an overall trend. "We polled our database of 60,000 consumers and not one single person ticked the box for a reduction in fat," says The Fabulous Bakin' Boys MD Gary Frank. "Consumers recognise that if they're buying cake, they don't expect it to be healthy. "We took out hydrogenated fat two years ago and we don't use preservatives, but health claims just aren't important in this category. Does the average consumer even understand what sat fats are? If you ask whether health is important to this category, the answer is no."
Nestlé, however, has focused on improving its existing lines from a health perspective. "In August we relaunched Breakaway using 100% wholemeal and oat flour, giving it a health advantage with mums," says trade communications manager Graham Walker. "We're also now promoting Breakaway and Blue Riband, along with Toffee Crisp and Drifter, as 99 calories."
Premier's Patel agrees that the words health and cake don't sit together easily, but nonetheless a healthier choice can play its part in the aisle. "Our research shows that 75% of cakes are bought for enjoyment," says Patel. "But there is a health element as people are looking for something a bit less guilty and perhaps with wholesome ingredients."
Appearing to confirm this trend is the fact the healthy cake market is not only tiny at 4% of the category but is in decline, down 3.9% for the year to 11 July [Nielsen]. However, the decline has not been at the expense of the fixture's main player.
"Weight Watchers is in very strong value growth, up 25% year-on-year, and now has a 70% share of the market," says Finsbury's Bruce, who oversees the cakes licence for Weight Watchers. This month Weight Watchers introduced Caramel Mallows to its range. The marshmallow and wafer sandwich has just one Weight Watchers point per 100g snack. A pack of six has an rsp of £1.49. The brand says it is intended to provide a sweet fix while still being very low-fat. "The Weight Watchers consumer is quite different from a standard shopper; they're part of that lifestyle and are loyal to the brand, even during the recession," says Bruce.
As for the future, Mintel is just one observer predicting good times next year if economic recovery kicks in. "I expect we'll see an NPD shake-up," says Jago. "We're hearing about a lot of NPD in the pipeline, which has been postponed. Now is typically the time that new products come to market, but heading into spring we will see a raft of new launches."
Most manufacturers are optimistic that if they can keep a lid on input costs and retailers take the lead by backing premium again, then a buoyant time is ahead. Then everyone can have their cake and eat it.
Focus On Cakes & Biscuits