Exclusive Profile: South America Prefers Industrial over Artisan Bread

Consumers in South America are increasingly becoming wary about the carbohydrate and sugar content in baked products, including bread. This factor is making the consumers reach out to for healthier bread variants, writes Jibanjyothi Sethi, lead analyst with the research company Technavio.

Lifestyle changes continue to drive consumer preference for packaged bread that is easily available and is convenient to store. The retail sector is supporting this inclination by enabling easy access. The once-popular artisan bread perhaps has fallen out of favor because consumers no longer consider it a healthier option.

At the same time, a typical bread consumer in South America is also a more conscientious one that expects manufacturers and others in the supply chain to follow sustainable practices in product development and distribution.

Furthermore, the young consumer group in the region is the one driving the innovative and healthier trends in this market. Concurrently, these buyers are also demanding greater transparency in the ingredients and manufacturing practices. With this, product labeling has emerged as an important factor determining purchase.

Bread Is Here to Stay

Bread is an important component of the diet of South America and natural ingredients are on demand. In recent years, the increasing availability of low-carb, high fiber, multigrain, and fortified bread has triggered purchase among consumers that are health-conscious, thus leading to substantial growth in the bread market in the region. Recognizing this trend, manufacturers are including natural ingredients that provide health benefits into their products and this includes natural preservatives and antioxidants. The demand for gluten-free and organic bread is high. Concurrently, bread claiming to be light (low on some ingredient or energy form such as fat) and high in fiber has seen a high demand. Dietary fibers are believed to prevent health conditions such as obesity and cardiovascular diseases.

This trend is encouraging companies to focus on launching organic and natural products. More so, as many small players are entering the market with innovative products.

In addition, healthy grain options such as quinoa and corn are increasingly replacing wheat flour in bakery products, including bread, in the region, thus leading to the manufacture of new products in the gluten free segment — new products with millet grains, exotic grains, and functional grains have been witnessing a high demand lately. However, traditional white bread continues to find the backing of some consumers who do not favor the appearance, texture, or flavor of whole grain bread.

As of 2016, around 1% of the population of Brazil was living with celiac disease (gluten intolerance). These consumers are increasingly opting for gluten-free food to stay healthy, which drives the gluten-free bread market, alongside the markets for other gluten-free food products.  As a result, the number of gluten-free bread brands available in South America has increased significantly.

Packaged or Unpackaged

Recent market numbers indicate that the sale of packaged bread has outnumbered that of unpackaged bread in South America. For instance, according to a leading manufacturer/seller of bread in the region, the market penetration of packaged bread is the highest in Columbia (17%), followed by Brazil (12%), Venezuela (9%), and Argentina (7%). The urban population, in particular, is opting for packaged bread because of easy availability and long shelf life. Also, packaged bread is considered to be healthy and is associated with hygienic manufacturing and packaging practices. Furthermore, changing consumer preferences and the availability of a wide variety of products in the packaged bread category has pushed sales in the region.

Artisan bread has been an important component of the food basket of South Americans. But, in the last few years, it has failed to find favor with consumers. Recent studies indicate that artisan bread differs from processed bread only in terms of appearance, texture, and flavor and does not provide any added benefits as was once perceived. Contrary to mass-produced bread, natural enzymes are used in the fermentation of artisan bread, which introduces the flavor to the bread. But studies have not been able to find any difference in effect on the human body with the consumption of the two types of bread. Furthermore, the US FDA does not have any standard of identity for artisan bread, where ingredients and processing differ by baker/manufacturer.

Bread sales in South America, which is a developing region, are benefiting from the increase in disposable income, which is enabling consumers to purchase a variety of food products, including bread. High urbanization is bringing about a change in lifestyle and food preferences, where consumers are opting for food that is easy to procure, store, and consume. The bread market, with the variety of products it offers, is benefiting from this change in consumer food habits.

The Challenges

Bread as a product has high market penetration in some of the largest countries in South America. For instance, in Brazil, it has almost 97% consumer penetration. This factor represents probably the biggest challenge for the market, where manufacturers are striving to increase sales volume.

The changing demographics of the region can also be cited as a reason for the declining per capita consumption; the region is expected to have a large older adult population (over 65 years) in the next couple of decades, which is expected to bring about a change in dietary habits and consumer preferences, including the consumption of bread.

The market is also facing the brunt of consumer perception that baked products, including bread, are high on fat and sugar. Manufacturers are responding to this challenge by flooding the market with low-calorie and sugar-free bread, both in the packaged and the artisan categories.

Fluctuations in the cost of raw materials such as wheat and sugar also remain a challenge for market growth, thus compelling the market to explore alternatives such as cassava flour for baked products, including bread.

Private Labels

The private-label market in South America is small. But, the economic conditions of the region, that are overall challenging, create a conducive environment for private brands to provide value to consumers. The expansion of organized retail that includes both global and local retailers is expected to have a positive impact on the acceptance of private brands, and that includes private brands in the bread market. The increasing penetration and adoption of private brands will go a long way in driving the growth of the bread market in South America by private brands. However, the growth is not likely to be uniform in all countries in the region.

You can read additional information on South American bread market in our World Bakers Digital magazine, Spring 2019!  

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