Spreading the market out thinly

With the demise of breakfasts at home, spreads are coming under increasing pressure as consumers demand increasingly convenient and on-the-go foods, reveals the latest report from marketing analysts Euromonitor.

A stagnation in sales of breakfast cereals between 1998 and 2002 is a clear indication that breakfasts at home are becoming less common as consumers juggle increasingly hectic and varied lifestyles. With value sales of bread declining over the review period it is clear that spreads, typically consumed at home and with bread, are under threat. Indeed, value sales only increased 0.4 per cent over the period, compared to the explosive breakfast bar sector which saw 22 per cent growth.

Spreads competing with convenience foods​

Breakfast bars, either fruit-filled, like Kellogg's Nutri-grain, or cereal branded like Kellogg's Special K, are key competitors for the more traditional toast and spread combination. Such products require no preparation, create no mess and can be eaten on the go. Moreover, breakfast bars, and snack bars more generally, typically promote their health benefits through fortification with vitamins and minerals.

Where spreads are also traditionally consumed at lunch-times, for example in the US where peanut butter and jelly sandwiches are common, the report highlights that they are also coming under increasing competition. Chilled lunch kits like Altria's Lunchables (formerly Philip Morris) have seen a rate of growth which outpaces even that of breakfast bars. In addition to competing in terms of convenience, and preparation time, they also provide a degree of entertainment for everyone from school children to busy executives, which sandwiches lack.

In the US fears over allergies have prompted many schools to ban peanut butter, although almond and soy nut butters are becoming more prevalent as replacements.In Germany, however, another key spreads consumer, food safety scares have positively impacted sales. Here fears over BSE negatively impacted the consumption of chilled meats, sliced sausages and savoury meat patés which are normally consumed at breakfast, in packed lunches and even for Abendbrot (supper) in more traditional households. These products have increasingly been substituted with sweet spreads, leading to a reversal in the value and volume declines in spreads at the start of the review period.

Savoury spreads increasingly popular​

Due to the shift towards sweet spreads, some dairy companies have launched fruit-flavoured spreadable cheeses, like the Exquisa brand in strawberry and pineapple-mango flavours from Karwendel-Werke Huber. However, Germany, like the third ranking spread market, Japan, has also seen an increase in spicy and herb-based spreads which compete with sweeter honeys and jams. In Germany these are predominantly spreadable cheeses with herbs and spices, while in Japan both garlic and sesame spreads are proving especially popular.

A key tactic for spreads manufacturers to boost sales has been to promote the health benefits of their products, the report finds. In the US, a key peanut butter market, positive media articles about snack nuts, including peanuts, helped increase sales of peanut butter despite consumer concerns about the fat content of peanut butter, as well as allergies. According to various studies, health benefits for peanuts include a reduced risk of heart disease and that the consumption of monounsaturated fats such as peanut butter allows people to maintain weight loss more effectively.

Also in the US, the National Honey Board has helped fund scientific studies of honey. The results of studies released in 2001 showed that honey may help in the treatment of periodontal disease and gingivitis, as well in treating skin lesions. Additional studies found that honey could be a good carbohydrate source for athletes too, while in Japan many consumers were keen to use honey as a sugar substitute because of its health benefits.

Jams with a high fruit content, and those which are sugar-free have also been on the increase. Formerly the province of health food and diabetic manufacturers, low-sugar and sugar free jams are now available from market leaders like Smuckers in the US, while low sugar jam now represents more than 50 per cent of total Japanese jam sales.

Adding value with NPD​

Other tactics for adding value to spreads includes producing organic variants and premiumising the products more generally. This was particularly prevalent in jams in Germany, where Zentis's Bel Royal increased its share through introducing smaller packaging and seasonal limited edition flavours. In both Germany and Japan honey sales benefited from an increase in specialist varieties which galvanised interest in the sector.

The report also finds that beyond creating flavour interest and repackaging products for single-person households or for convenience more generally - squeezable packaging has proved popular - there seems to be little else that manufacturers can do to maintain interest in the sector.

Smuckers has developed the lunch kit idea and produced Uncrustables, frozen jam sandwiches which defrost by lunchtime, and Snackers, which are crackers spread with peanut butter and jam. Other developments could include breakfast kits with pancakes, pastries or rolls plus a spread portion. However, the key ingredient in these packs is always the bakery product, rather than the spread, meaning that while spread manufacturers can improve brand recognition by moving into these areas, actual spread sales will increase very little.