Spanish and Portuguese Governments Took Fiscal Measures to Protect the Baking Industry. Did They Work?

In the Iberian Peninsula, consumers faced significant inflation and that informed their purchasing decisions, especially when it comes to staple foods like bread. The fiscal measures the Spanish and Portuguese governments took in 2023 helped alleviate this trend and helped bakers and consumers alike.

According to ASEMAC, the Spanish professional association of bakers, consumption of food and beverages remained almost stable in Spain in 2023 – declining by 0.7% compared to the previous year. The evolution of expenditure was higher, growing by 7.5%, reaching a total of EUR116m, or EUR2,732 per capita in 2023.

Regarding bread, on average, each Spaniard consumed 27.35 kg of bread in 2023, a 2.1% decrease compared to the previous year, representing 96 million fewer loaves sold. Bread now represents less than 5% of the total household basket volume in Spain. It is still a staple, though, and an important part of the local diet.

The market analysts at Euromonitor International looked at how the Spanish and Portuguese market evolved in the past year and what were the most important drivers of change, from changing lifestyles to fiscal measures to economic realities.

SPAIN

Sales Stabilize in 2023 After a Difficult Couple of Years

According to Euromonitor International, despite the uncertainties arising from Russia’s ongoing war in Ukraine and the delicate nature of the grain corridor deal between Russia and Ukraine, the prices of baked goods are increasing at a slower rate in 2023 compared to 2022. In an effort to mitigate the impact of inflation, the government has implemented a temporary measure for 2023 whereby it has reduced the value-added tax (VAT) on bread from 4% to 0%. This has helped to stabilize the category, with bread sales seeing a much smaller decline in retail volume terms in 2023 compared to the previous two years.

In 2022, baked goods experienced a significant decline in retail volume terms which was primarily driven by consumer efforts to reduce costs in response to a sharp rise in the cost of living. This decline was particularly apparent in cakes. Consumers began to reduce the frequency of their purchases and showed a preference for packaged leavened bread over unpackaged, despite it being perceived as less healthy. The longer shelf life of packaged bread made it an appealing option during 2022 as it was seen to help reduce waste. However, in 2023, Spaniards have been gradually reverting to their previous consumption habits, which had been temporarily affected by the surging prices. Key factors such as healthy ingredients, freshness, and indulgence are once again becoming important considerations for consumers in their purchasing decisions when it comes to baked goods.

E-commerce and Discounters Continue to Gain Share as Consumer Shopping Habits Change

Despite baked goods traditionally being purchased offline to allow consumers to inspect the freshness and quality, the pandemic encouraged more people to explore the benefits of online shopping. With consumers returning to busier lives now that the pandemic is over there is a growing need for convenience and this has encouraged retailers and manufacturers to venture into the e-commerce space. 

Read the rest of the analysis in the latest issue of European Baker & Biscuit!