Australian Society of Baking19th October 2011

• Shannon O’Connell, National Sales Manager• Kate Hurley, Category Development Manager

Agenda

Market Trends

Kate Hurley

Category Development Manager

International Trade Show

Shannon O’ Connell

National Sales Manager

• Bakery industry influences & drivers• The bakery shopper• Bakery mega trends• Future growth opportunities

• International Dairy Deli and Bakery Association (IDDBA) June 2011• New products

Market InsightsKate Hurley

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Consumer/Shopper

Retail Environment

Grocery

46% share

Specialty/Route/P&C

33% share

Foodservice/Away from Home

21% share

The major supermarkets will continue to dominate and grow their share of Australian’s bakery goods expenditure.

Source: BIS Shrapnel, Aztec, Internal Estimates

The Shopper

SINKS/DINKS

% of Pop: 48%

Defined: Single Income No Kids(SINKS) and Double Income No Kids(DINKS) are typically aged between 25-35

• More disposable income • Quality, premium & gourmet • Willing to try new products• Entertain regularly• Single serve options

FAMILIES

% of Pop: 35%

Defined: Younger families have kids aged5-12 years and older families have kidsaged 13-17 years

Younger Families• Switch between brands

Older Families• Volume and private label based

EMPTY NESTERS

% of Pop: 17%

Defined: Empty nesters are parentswhose children have flown the familynest. They are aged 55 years+

• High disposable income• Brand loyal • Value for money• Less open to new products• More likely to buy mainstream

Source: Retail World, Australian Bureau of Statistics

Sinks/Dinks and Empty Nesters, currently two thirds of the market and growing, will be the key target groups with higher incomes seeking specialty products.

Demographic & Socio-Economic Drivers

65% of population growth is driven by migration

Population

Couples will outnumber families in the next 5 yearsHouseholds

The proportion of Australians over 65 is projected to increase from

13.9% to 22.6% in 2050Age

Average household income grew by 4% year on yearIncome

Increased demand for more ethnic products

Rising demand for smaller portion sizes

Products will need to be adapted to appeal to mature customers

Ongoing demand for premium products

The demographic and socio-economic factors in Australia will drive the need for more ethnic products, smaller portion sizes, high quality premium offerings and products that appeal to the over 65 age group

Source: ABS, Datamonitor

Influence of the following factors choosing food and beverage products

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Influences When Choosing A Food Product

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Source: Datamonitor BFCM0401, August 2010

The fundamental importance when choosing a food or drink is sensory appeal and value for money. Over half of Australians are also highly influenced by health.

Bakery Mega Trends

Natural/clean label

Functional ingredients

Seeds, grains & oats

Nuts & fruits

Organic

Gluten Free

Customised

Occasion Specific

Consumer Focused

Ethnic Proposition

Gourmet/Indulgent

Exotic flavours

Traditional/Authentic

Experience

Exclusive

Portion Control

Real Value for Money

Address a need

Bakery Innovation

Drivers New product launches need to deliver against

mega trends to be successful

Product innovation is a key driver of growth within the

Bakery market

Bakery Industry Influencers

Private label market share is expected to double to 50% by 2025Private label market share is expected to double to 50% by 2025

Increased labour and rent costs are big challenges Increased labour and rent costs are big challenges

Consumer confidence is in declineConsumer confidence is in decline

Increase in imported productsIncrease in imported products

Growth in the demand for convenient fully finished formatsGrowth in the demand for convenient fully finished formats

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The baking industry will be influenced by private label growth and imported products, increased labour costs, declining consumer confidence and increased demand for convenient formats.

Source: Rabobank, Datamonitor

Future Growth Opportunities

• Expand tiered offering

• Increase specialty offering

• Smaller convenience store formats

• Retailers and suppliers working together

• Implementing shopper marketing strategies

• Online retailing

• Social media

• ‘Village market’ feel

Retail Foodservice

• Regional expansion

• Product range expansion & improvements

• Celebrity endorsements

• 24 hour service

• Moving out of shopping centers

• Day part marketing

• Social media

• Experiential Merchandising

What does this mean?

Consumers are highly influenced by taste, price and health

Future product innovation and investment need to correlate with these

trends

IMPLICATIONS MARKET TREND

Increase in migrants, smaller households, over 65 population and

average income

Develop ethnic, mini, premium product concepts and adapt products to mature

consumers

The major supermarkets will continue to dominate and grow

Shift in manufacturers to entertain more private label manufacturing

Retail and foodservice players are under pressure from increasing costs

Decreased shop footprints and a move towards convenient formats

International Trade ShowShannon O’ Connell

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IDDBA Show held in June 2011 at Anehaim CA

• A 3 day event once a year

• Largest show in the world serving these categories

• 1,500 booths focussed on new products

• Broad spectrum of exhibitors from large multinational exhibitors

(CSM, Richs, General Mills) to small independently owned

businesses

• Over 8,000 attendees

• Fantastic guest speakers (Dr Condeeleza Rice, Joe Montana etc)

Rich’s Ancient GrainRange of all natural breads, one popular flavour being Ancient Grains supported by the Whole Grain stamp

Rich’s Par Bake All Natural range

Thin please…. sandwich bunsTurning thin…… sandwich thins popular in US and UK.

The bagel has also turned thin..Not just sandwich thins….introducing the `thin` Bagel

Various different flat breads with unique shapesFlat bread across a variety of shapes, ingredients and formats. Is this also

a case of clutter claim?

Functional Probiotic bread with GanedenBC30 to promote digestive health

Calorie counting across bread, cupcakes, biscuits etc….Calorie Counting to encourage sensible indulgence

Sugar Free (just add splender)Sugar alternatives with splender

Or is it……With Out Wheat

Improvement in taste and texture performance across gluten free products as technology improves

Kuko Bites

Wheat and dairy free. Packed with seeds, nuts, dried fruit, goji berries and cocoa nibs.

Wheat free and dairy free. Packed with seeds, nuts, dried fruit, goji berries and cocoa nibs

Supporting Breast Cancer Awareness with a Berry 5” Cake

Novelty donuts drive incremental sales during key seasonal or event activities

Key Focus Is Artisan

Canadian Baker – Boulart. Unique shapes all par bake

Ace Bakery - Raisin and Walnut

Focaccia flat style also popular

More shapes…..

Chunky hand cut cookiesHandcrafted chunky cookies with natural ingredients

Textured…filled and centredAll about texture….filled, soft, crunchy, oozing

Filled scones

`Centerfuls are delectable dollops of flavour surrounded by a soft chewy cookie`

Layer upon layer upon layer…….

“Desserts can fit into an overall healthy diet when used in small portions and balanced with healthy foods," said Melanie Douglass, a dietitian, personal trainer

and author of a new weight-loss book called "Losing It! 5 Keys to Successful

Just for me….

Layer upon layer upon layer…….Bite sized treats…..another dimension to portion control

Bite size Brownies

$19.004” – 6” cakes

$8.00

For the couple households – 5 “ cakes are exploding!

An American classic….. Red Velvet donuts, cookies, cupcakes, whoppies…..

In summary……

Natural clean label

Thin/Flat

Functional

Calorie Counting

No Added Sugar

Gluten Free

Kids Celebration Cakes

Cause-related

Seasonal Events

Artisan

Texture

Handcrafted

Portion Control

Exotic Flavours

Real Value for Money

Address a need

Bakery Innovation

Drivers

Thank you…

Please feel free to approach Kate or myself if you wish to obtain our contact details.