Free-from Developments and Bakery Product Innovation

1. Free-from Developments and Bakery Product Innovation British Society of Baking Autumn Conference, 14th October 2015

2. Agenda • The global development of free-from and what is driving the trend in the UK • What innovation focus are we seeing from the world’s biggest bakery companies

3. The rapid rise of allergen-free products in food & drink NPD Fastest rising claims in food & drink product launches, Top 5 – Global 2015 is Jan-Sept Source: Mintel GNPD

4. Gluten-free is the driving force Gluten-free claim penetration in food & drink launches - per region Driven by legislative requirement for gluten disclosure in Brazil The most innovative regions by some distance Consistent progress, led by Spain, Germany, UK, Italy 2015 is Jan-Sept Source: Mintel GNPD

5. US, by far the largest market for gluten-free Gluten-free food & drink Source: Mintel Reports A wide range of health-related issues influence perception of gluten-free $8.8 bn market value in 2014 Other (than intolerance/sensitivity) reasons for eating gluten-free foods, US, June 2014 62% value growth forecast 2014-2017 25% of adults said they eat gluten-free versions of food in June 2015, compared to 22% in June 2014

6. The UK is less dynamic (than the US), but still a fast growing market Total UK free from market valued at £365m in 2014, forecast to grow by 50% by 2019 Both the dairy-free and gluten-free segments continue to record impressive growth (both seeing 15% growth between 2013 and 2014) Excludes prescription sales Source: Mintel Reports (based on IRI/Mintel) 2014: Gluten/wheat-free: £184m +15.0% on 2013 Dairy/lactose-free: £181m +15.3% on 2013

7. Penetration of free-from food reaches 30% Three in 10 people in the UK had bought or eaten free-from food in the six months to June 2014, with gluten-free and dairy substitutes being the most commonly purchased/eaten – by 18% and 17% respectively. Source: Mintel Reports

8. Millennials are more influenced by new ‘free from’ lifestyles UK 16-34 year olds are 31% more likely than average to avoid red meat or poultry Theyare 40% more likely than average to avoid dairy or lactose Theyare also 40% more likely than average to avoid wheat or gluten Source: Mintel Reports Source: Free-from Foods - UK - November 2014

9. The “Lifestylers” account for almost half of the ‘free from’ audience 39% of people live in households where somebody is avoiding specific foods/ingredients because of an allergy/intolerance or because of a lifestyle choice Of the avoiders, almost half (46%) do so “as part of a general healthy lifestyle” with the remainder having “an allergy or food tolerance” Source: Mintel Reports

10. UK: avoidance driven as much by healthy lifestyles than intolerance Types of food avoided, UK, June 2014 Source: Mintel Reports

11. Healthy image, variety, naturalness and weight control benefits all appeal above personal allergy/intolerance Reasons for eating free-from foods, UK, September 2015 • The top reason consumers don’t eat free-from foods is because they are deemed as too expensive compared to standard foods (39%), followed by the belief that they do not taste as good as standard alternatives (22%) Source: Mintel Reports

12. Food launches by selected health/natural claim: GF vs. Non-GF Gluten-free vs. Non-Gluten-free, Europe, Oct 2012 – Sept 15 % of launches by selected claim A gluten-free product is much more likely to be organic, low in sugar and fat, with no additives or preservative than a ‘regular’ product

13. Riding the craze for trendy ingredients – protein, ancient grains, almond/coconut High protein claims are increasingly coming into mainstream products but free-from has already been riding the craze Source: Mintel GNPD Melro's Best Simply Oragnic Raw Coconut Brownie (France) Enjoy Life Brownie Mix with Ancient Grain made with teff and flaxseed (US) Wholesome Chow Organic Gluten Free Hi-Protein Pancake & Baking Mix (US)

14. Bread brands work harder to convey health Genius adapts its bread recipes – now boasting low levels of saturated fat and high levels of fibre, as well as no artificial preservatives and additional vitamins and minerals (some lines containing omega-3 or iron) Dr.SchärUSA revamps with a new line of Artisan Baker breads, baked with ancient grains Silver Hills Gluten Free Omega Flax Bread contains high fibre omega 3 flax seeds (US) PureBred Bakery Multigrain Farmhouse Loaf is a gluten-free, five grain high fibre loaf with omega 3 rich seed mix (UK) Source: Mintel GNPD

15. What’s next – watch for grain-free Criticism of typical western diets being highly dependent on refined processed grains has contributed to a negative stigma attached to grains Grain-free is starting to emerge as the next generation of (and healthier alternative to) gluten-free with Paleo and other ‘raw’ food diets entering the mainstream Nut, fruit and vegetable ingredients are gaining use instead. Almond and coconut flours/ingredients are particularly trendy Simple Mills Naturally Gluten-Free Chocolate Muffin & Cake Almond Flour Mix (US) Paleonola Pumpkin Pie Grain Free Granola (US) Source: Mintel GNPD

16. Key points for the future Foods bearing a free-from claim appear increasingly relevant to a wider number of consumers These foods, in consumers’ eyes, are closely tied to health – whether their own, their family’s, or the planet’s Health hooks such as high protein, ancient grains, fruit/nuts are ways to boost free-from health benefits Taste leads in the appeal of non-dairy milk and taste concerns hold back gluten-free The more taste appeal that can be brought in, the more likelihood of success for individual products Health halo of “free-from” is key There are more ways to ‘sell’ health But taste remains key

17. Innovation from the Global Bakery Big Guns

18. So, who are the Big Guns Top 5 global bakery companies ranked by sales, 2014 *Food group revenue only Source: Mintel from Company Information 1. __________________________ 2. __________________________ 3. __________________________ 4. __________________________ 5. __________________________ 2014 sales: Local currency US$ equivalent using 2014 av. exchange rate Ps. 187.1bn $14.07bn ￥695.5bn $6.57bn €3.39bn* $4.52bn* $3.75bn $3.75bn $3.30bn $3.30bn Grupo Bimbo (Mexico) Yamazaki Baking (Japan) Aryzta (Switzerland) Flowers Foods (US) Rich Products (US)

19. Bakery remains fragmented globally • No.1 in North America • 26% value share of bread market in the US • 32% in Canada • No. 1 in Latin America, e.g.: • 34% value share of bread market in Brazil • 55% in Chile • 56% in Colombia • 85% in Mexico • Also a leader in sweet bakery in those regions • But elsewhere it’s more ‘patchy’: • No.1 in Spain/Portugal and also present in the UK with New York Bakery Co. • Small presence in China (c1% share) • Grupo Bimbo is the biggest baking company in the world but it still claims less than a 5% share of the global baking industry according to its own estimates. This despite a very acquisitive few years for the company, including buying Canada Bread in 2014 **Market share Source: Grupo Bimbo company information / Mintel Market Sizes

20. Grupo Bimbo - recent NPD of note Bimbo Bakeries in the US has a range of mainstream bread brands and has been prioritising a healthier positioning for many of these. The company has had particular recent success with the Thomas’ brand, with high recent sellers including a limited edition cinnamon vanilla English muffin, and protein and fibre fortified versions Source: Mintel GNPD Thomas' Double Protein Oatmeal English Muffins Comprise a blend of wheat and rice protein. The low fat product is free from trans fat and cholesterol, it contains 7g of protein per serving Healthfull Bread - available in Flax & Sunflower, Steel Cut Oats & Honey, and Nuts & Seedsvariations Contains no high-fructose corn syrup or artificial colors or flavors Brownberry Natural Health Nut Bread Made with natural ingredients, including almonds/walnuts, provides 8g of wholegrain and 3g of fiber per slice

21. Yamazaki Baking – recent NPD of note Yamazaki Lunchpack Milk Coffee Cream Sandwich (limited edition) Features milk coffee cream designed to resemble Ucc Milk Coffee Yamazaki Lunch Pack Three Berries Chocolate Tablet & Yogurt Cream Sandwich Fiilled with a chocolate tablet with three berry syrups and yogurt cream with Disney design Yamazaki has used seasonaility in many of its launches, as well as co-branding, and has also more directly targeted children through new products such as lunch pack sandwiches aimed specifically at this demographic Source: Mintel GNPD Yamazaki Wonut Strawberry Chocolate Waffle Doughnut Yamazaki has introduced numerous packaged hybrid bakery products, such as cronut variants and this ‘Wonut’ Yamazaki Ensaïmada Originally from Spain. The soft fluffy bread contains cheese and is saturated in sugar and margarine. It is common to see European specialities re-configured in the Yamazaki range and in single-portion packs

22. Aryzta – recent NPD of note US retail push for Otis Spunkmeyer The new retail line will begin hitting shelves in early 2016 and will go beyond the cookies and muffins the company long has been known for On the back growth for American-style bakery products in Europe, Aryzta has launched its Otis Spunkmeyer brand into the foodservice sector in Europe with its range of cookies, donuts and muffins. It is also embarking on a US retail push for the brand n 2016 Source: Mintel GNPD Aryzta has also been expanding its Wrapped to Go range in the UK, including with the above salted caramel shortbread bar Under the Cuisine de France unit, Aryzta has also recently launched ‘Le Twist’, an almond encrusted pastry filled with crème patissiere In the UK, Aryzta has been focussing on the ethnic bread market recently, launching a new line of Planet Deli naan breads in the retail market

23. Flowers Foods – recent NPD of note Pushing naturalness/quality under Nature’s Own and Cobblestone Bread Co. brands, although more NPD can be expected from the Wonder brand following its integration into the business in 2013/2014 Has also made a big push into organic in 2015, buying Dave’s Killer Bread and Alpine Valley Natures Own White Enriched Bread No trans fat, cholesterol, artificial preservatives, colors, flavors or HFCS. 35% less sodium and x5 the fiber of enriched white bread Flowers has this year cut the number of ingredients in Nature’s Own bread (the best-selling bread brand in the US) to 14 from 26 Source: Mintel GNPD Cobblestone Bread Co. Knead for Seed 12 Grain Bread Cobblestone is Flowers new brand described as “everyday artisan” bread aimed at the millennial generation with a big focus on social media and sandwich recipe idea generation “The cure for the sandwich rut” Dave's Killer Bread Sprouted Wheat Organic Bread Free from GMO, animal products, artificial preservatives, artificial ingredients, HFCS and power-packed with wholegrain nutrition. Alpine Valley Natural Whole Grain Breads Organic multi-grain bread with omega-3

24. Rich Products – recent NPD of note Rich Products has aimed to take advantage of the flatbread boom in the US with anew retail range, as well brand licensing opportunities (in its ice cream cakes) and the demand for more varied flavours in sweet bakery (via its in-store bakery range) Rich’s Extreme (in-store bakery) Line-up of indulgent, decadent treats includes six items portioned for one to two people: Mini Chocolate Brownie Extreme, Mini Caramel Sea Salt Blondie Extreme, Mini Boston Crème, and three flavours of bar cake (Red Velvet, Triple Chocolate, and Carrot) Source: Mintel GNPD Our Specialty is a new line of 10 retail-packaged, premium flatbread products The new items include traditional flatbread products such as original naan, original pita, wheat pita, white Sandwich Flats and multigrain Sandwich Flats, as well as garlic cheese naan, original rustic Flats, Italian herb Flats, chipotle Flats, and garlic and herb pizza crust. Rich's Wishes Chocolate Cake & Vanilla Ice Cream & Hello Kitty licensed Ice Cream Cake The company has a range of Happy Birthday ice cream cakes, with other licences including Oreo, Twix, Snickers, Chips Ahoy! And recently the Peanuts comic strip

25. Top 6 other global bread and sweet bakery innovations (last 12 months) Woolworths Food CarbClever Cauliflower Wraps (SA) Food for Life Sprouted for Life Gluten-Free Almond Bread (US) Windy City Organics Rawmio Organic Raw Chocolate Truffle Cake (US) Dahls Coarse Coffee Bread baked with coffee and flavoured with cranberries (Sweden) Atrian Home Crok Glas croissant-doughnut pastry (Spain) New formats and new ingredients a feature Source: Mintel GNPD Ferrero Nutella B-Ready Bread Wafer with a Nutella Filling (Italy)

26. Conclusions Major bread players are pushing more heavily into healthy product variants as a way to negate diet trends and consumer health concerns Time-saving formats and convenient packaging are being used to help consumers reappraise when and where to consume bakery products A focus on flavour and taste, as well as engaging formats and packaging is being used to help position bakery products as having more fun appeal Healthy Convenient Fun

27. Chris Brockman Research Manager, Mintel Food & Drink - EMEA region cbrockman@mintel.com Thank you!