MARKET PULSE July 2017
BITING INTO THE BISCUIT INDUSTRY OF BANGLADESH The global biscuits market is currently highly favorable and is expected to witness an enduring growth. Continual innovation in products is shifting the dynamics of the global market. Variety of flavors, added on newness in taste, packing, shapes and sizes combined is attracting consumers of all age groups. Biscuits are so popular among different age groups and the very popularity of biscuits is supporting the growth of the market. The demand for organic and sugar free biscuits is growing with the growing number of health conscious population. Global biscuits market players are ensuring to be innovative while building up the marketing strategies. This in return, is providing them with a strong consumer base. Consumers are majorly concerned about ingredients and health benefits and hence manufacturers are supplying to their demand. While Europe and North America continues to be the largest manufacturers of the biscuit industry, countries in Asia Pacific represents the fastest growing market for biscuits led by China and India. By Farahnaz Zarrin Photo: Internet
July 2017 MARKET PULSE
14 Opinion
GL BAL BISCUIT INDUSTRY
The global biscuit market is worth USD 101.614 billion as of 2016. The market size was USD 42.75 billion back in 2014. The industry saw a growth of 138% in just a span of two years. MARKET PULSE July 2017
GLOBAL BISCUIT INDUSTRY Europe is a dominating market in terms of biscuit consumption, followed by North America. Collectively, North America and Europe hold more than 50% market share; the growth in these regions clearly lags behind the projected market growth in the developing countries. MARKET OVERVIEW The global biscuit market is highly fragmented; wherein, every region is characterized by the presence of several local players and few large players. Biscuits are popular snacks in the global food industry, due to their flavors, taste and innovative packaging. The major factors driving the growth of the biscuits market are the increasing preference for convenience foods, food safety concerns and busy lifestyles. The increasing urbanization, due to the change in demographics and high disposable income in South America and Asia-Pacific further creates scope for growth. The high profit margins and proliferation of supermarkets have led to a growing interest in premium products, which would provide future growth opportunities. The global biscuits market is segmented on the basis of product type into sweet biscuits, plain biscuits, savory
biscuits, filled/coated biscuits, fortified/ functional biscuits, cookies and others. Cookies represent the largest, as well as, the fastest-growing segment in the global biscuits market. The cookies (sweet biscuits) market consists of the retail sales of American cookies, assortment cookies, butter-based cookies, chocolate cookies, cream-filled cookies, plain cookies, wafer cookies, artisanal cookies, in-store bakery cookies and egg-based cookies. The market is valued according to retail selling price (RSP) and includes any applicable taxes. Europe is a dominating market in terms of biscuit consumption, followed by North America. Collectively, North America and Europe hold more than 50% market share; the growth in these regions clearly lags behind the projected market growth in the developing countries. AsiaPacific represents the fastest-growing market for biscuits, led by China and India.
MARKET TRENDS Regardless of their economic situation, people continue to indulge in biscuits, which is evident from the increasing volume of cookies in the biscuit market, globally. Beyond North America, which is their place of origin, cookies are driving the biscuit retail sales more than other categories. The only exception is the sandwich biscuit in Europe. Sandwich biscuits are proving as robust as cookies, even in the Asia-Pacific region. The Chinese bakery industry has been witnessing high growth from the past few years. Rapid urbanization, changing food habits and increase in middle-class incomes are factors making bakery products popular in China, which is the second largest biscuit manufacturing country in the world, after the United States. The manufacturers in emerging economies are aiming to add value to their products. For instance, in India, the domestic player Parle Products, launched a new
July 2017 MARKET PULSE
16 16 Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh range of plain sweet biscuits – Parle Milk Power in May 2011, fortified with vitamins, iron, protein and calcium. This is an attempt to address the growing health concerns of its target audience.
Breakfast Biscuits As the consumers crave for convenient breakfast options, the breakfast biscuit category continues to grow at a fast pace. One aspect that attracts customers is a convenient and healthy on-the-go snack and breakfast biscuits fit into this bracket. While the other categories of wheatflour based goods are impacted by health concerns surrounding carbohydrates and gluten, the biscuits, cookies and crackers segment does not have any significant impact. This segment continues to evolve with greater variety of nutritional benefits.
Cookie Creativity Tradition meets innovation in the biscuit (cookie) business when gingersnaps,
MARKET PULSE July 2017
snicker doodles and other classic cookies are prepared as sophisticated new desserts, such as cinnamon oatmeal custard bars with rum raisin sauce or a gingersnap crème Brule. This is based on the trend predictions from the insights provided by a global team of chefs.
Thin Cookies Thin cookies are gaining popularity as the customers look for indulgence but want to avoid overeating. With thinner cookies, they can enjoy a few more cookies for fewer calories. Salem Baking claims its Moravian cookie as the “world’s thinnest cookie.” Mondelez International, Deerfield, IL, introduced Oreo Thins, a thinner, crispier version of the classic Oreo.
MARKET DYNAMICS The major factors driving the global biscuit market are the easy availability and affordability of the product across
the globe. Moreover, the increasing preference for convenience foods, due to urbanization and busy lifestyles, is further driving the market. The growing number of global population suffering from diseases such as high blood pressure and diabetes is further driving the market demand for health and wellness products segment.
The organic biscuit segment saw 7.4% growth in the 2014 global product launches; whereas, new GMOfree products launched globally, made up 3.3%, up from 2.4% in 2013, with no signs of slowing down.
17
In the United States alone one in ten new products launched in 2015 had an organic claim, with three-fourth of consumers in the United States claiming to read the nutritional and ingredient labels of food products; displaying the interest and awareness of the population regarding environment-friendly and high quality nutritious products. The premium biscuits segment has seen high growth in the past decade, specifically in products using imported chocolate and flavorings.
Cookies category is the largest category, by type. This category holds around 26% share of the global biscuit consumption. During 2016, the market size of cookies is estimated at USD 26.87 billion and it is expected to reach USD 32.58 billion by 2021, at 4.1% CAGR. USA is the largest cookie market in recent times. One of the most widely known specialty biscuit brand is Royal Dansk, which produces premium butter flavor biscuits exported across the world. The company relies on the high quality butter flavoring for its premium quality biscuits. The current trend of high quality, healthy, and clean label ingredients is showing promising growth in the global biscuit market, with popular organic food companies such as Doves Farm and Bear Naked launching a wide range of organic biscuit flavors. In fact, many major players such as Kraft,
Britannia and Nestle are investing heavily in specialty biscuits to cater to the health conscious population.
MARKET SEGMENTATION The increasing biscuit consumption trend, globally, has placed the biscuit industry into the more prosperous and attractive baking sector in the world. There are several types of biscuits consumed across the world, which are categorized as per taste, flour and texture. Regarding the type of biscuits, the market is segmented into sweet biscuits, plain biscuits, savory biscuits, coated biscuits, fortified functional biscuits, cookies and others. Among all these biscuit types, cookies segment is the largest followed by coated biscuits sweet biscuits and plain biscuits. Other biscuit types have smaller market share in the global biscuit consumption, with the cookies category growing at a fast pace, when compared to other biscuit types. Cookies category is the largest category, by type. This category holds around 26% share of the global biscuit consumption. During 2016, the market size of cookies is estimated at USD 26.87 billion and it is expected to reach USD 32.58 billion by 2021, at 4.1% CAGR. USA is the largest cookie market in recent times. Sweet biscuits category is the third largest category, by type. This category holds around 21% share of the global biscuit consumption. During 2016, the market size of sweet biscuits is estimated
July 2017 MARKET PULSE
Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
High quality premium food accounts for 12% share of the food and beverage industry, with 51% of consumers expecting high quality ingredients to be used in these products. Premium food products appeal to consumers who crave uniqueness and health benefits. The segment is largely driven due to the developed countries, where per capita income is high; however, due to the increasing disposable incomes in the developing regions, premium products are seeing rapid growth in these countries, as well. Clear labelling that include organic, and GMO-free aspects are the major trends in the premium food and beverage market, with many major food and beverage companies committing to removing artificial ingredients from products during the previous year. The organic biscuit segment saw 7.4% growth in the 2014 global product launches; whereas, new GMO-free products launched globally, made up 3.3%, up from 2.4% in 2013, with no signs of slowing down.
18 18 Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
at USD 21.04 billion. Earlier, sweet biscuits were considered as ready-to-eat ordinary snacks; however, through various innovations manufactures are now trying to position them as premium snacks, as well as, “treat” based products. The other market trend, which is pushing the sweet biscuit market growth, is the “better for you” products, with no hydrogenated fat, no artificial color and low-sugar content. For example, Nestle launched a biscuit range with the name of ‘99-calorie’ with all these attributes. Sweet biscuits with chocolate flavor, accounted for 48% of the total sales in the sweet biscuit category. Other plain and kid’s segment of sweet biscuits hold 35% of the market share. Europe is the largest market for sweet biscuit consumption, currently, and the Asia-Pacific region is the fastestgrowing market for sweet biscuits. Highfiber, multigrain, and natural sweet containing sweet biscuits are recent innovations in the sweet biscuit market.
fortified/functional biscuits. Globally, the consumers are shifting towards wholegrain, high-fiber, low-fat and low-sugar attributes of health oriented biscuits. The Asia-Pacific region remains as the fastest-growing market; however, North America and Europe are growing at a slow rate.
Europe Europe is the largest producer of biscuits worldwide. EU countries (particularly the UK, Germany, Belgium, Italy, France, Spain and the Netherlands) and Canada are the leading biscuit manufacturers and exporters in the world. According to 2014 data of Euromonitor, Western Europe is one of the areas with the highest sugar biscuit
GLOBAL BISCUIT PRODUCTION AND CONSUMPTION The global biscuit market is broadly divided into five regions such as North America, South America, Asia-Pacific, Europe and Africa. Europe is the largest consumer of biscuits, with more than 30% of the total market share, followed by North America (26%), Asia-Pacific (25%-30%), South America (10%20%) and Africa (below 10%). Based on the consumer preference, the biscuit market is categorized into indulgent and health-oriented biscuit products. Indulgent biscuits include cookies and coated biscuits, while health-oriented biscuits include plain biscuits, sweet, and
MARKET PULSE July 2017
consumption in the world. It is followed by Eastern Europe, North America and Latin America. According to data of CAOBISCO, the biscuit consumption in the EU was 3,9113,000 ton in 2009, and it increased to 4,120,000 tons in 2010. Biscuit consumption fell back to 4 million tons in 2011 and 2012, and then went up again to 4,128,000 tons in 2013. The amount of biscuits consumed in 2012 was recorded at 4,084,000 tons. According to the data of Chocolate, Biscuits and Confectionery of Europe (CAOBISCO), the total biscuit production in the EU, Sweden and Japan was 4,553,365 tons in 2015. The consumption was 4,179,345
tons in 2015. Europe exported 1,005,925 tons of fine bakery in 2015.
US North America is the second largest market for biscuits globally, in terms of consumption, with almost 26% market share. The biscuit market size of the region was valued USD 25.18 billion in 2015 and is expected to grow USD 29.59 billion by 2021, at a CAGR of 2.79%. North America includes three major countries, namely, the United States, Canada and Mexico. The United States is the largest market for biscuits with 48% share, followed by Canada, Mexico and others. The per capita consumption of biscuit is highest in the United States. In North America, the sales of biscuits through retail channels is on rise. Hypermarkets and supermarkets are the most significant market channels for overall sales of biscuits in North America. As per consumer preferences in the region, Americans are mostly inclined toward purchase of cookies, compared to other biscuit categories. The United States of America is the largest consumer of biscuits, in North America, accounting for around 48% of the overall biscuit consumption in the region. The United States biscuit market was USD 12.17 billion in 2015 and is expected to reach USD 14.13 billion by 2021, at a CAGR of 2.5%. South Atlantic, East North Central and Mid-Atlantic states are the top regions for biscuits consumption in the United States. The East North Central region accounts for around 25% of the biscuit consumption in the United States. During the last five years, the per capita consumption of cookies and sweet biscuits, either at or away from home, almost remain
19 the Asian market. The world’s second and third largest biscuits market have been enjoying strong economic growth, steady increase in disposable income and rapid urbanization, people are consuming biscuits more often. According to the report dated November 2015 issued by MarketLine Industry Profile, global biscuit consumption increased by 3.5% from 2010 to 2014, reaching 11, 798 million tons. The source of this increase in biscuit consumption is mainly Asian countries. However, the expectations for biscuit consumption in Europe d o
Asia-Pacific The Asia-Pacific biscuits market had total revenues of $10,867 million in 2014, representing a compound annual growth rate (CAGR) of 7% between 2010 and 2014. Market consumption volume increased with a CAGR of 8.5% between 2010-2014, to reach a total of 4,227.8 million kilograms in 2014. India and China are the driving force behind the exceptional growth rate in
not tend to increase. The reason for this is the financial contraction.
GLOBAL BISCUIT EXPORTS The European Union countries which are leading the global biscuit production are also the leading exporters globally. The global sweet biscuit exports fell in
2009 from the previous year by 7% to approximately USD 5.4 billion. In 2011, in increased by 21% from the previous year, to approximately USD 6.8 billion. In 2010, the leading exporter was Germany, with an export share of 12.2% with USD 660 million, followed by Belgium with 10,1%, the Netherlands with 8,5%, the UK with 6,3% and France with 6%. In 2011, Germany, the Netherlands, Belgium, the UK and Canada were among the top exporters in the world. On value basis, these countries managed approximately 40% of the total global biscuit exports in the world.
GLOBAL BISCUIT IMPORTS Global biscuit imports were decreased by 9% to approximately USD 5.4 billion in 2009, and the leading markets were the US, France, Germany, the UK and Belgium. The total import share of these 5 countries was 41%. The leading importer of biscuits is the US with an approximate import of USD 767 million and an import share of 14.1%. The US is followed by France with 9.7%, Germany with 6.8%, the UK with 5.8%, and Belgium with 4.8%. Global biscuit imports increased by 18% to approximately USD 6.8 billion in 2011, and the leading markets were the US, France, Germany, the UK and Belgium again. The total import share of these 5 countries is was 38% in 2011.
July 2017 MARKET PULSE
Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
unchanged. Cookies are the most often consumed snacks in all biscuit categories, accounting for more than 50% share of the biscuit consumption, during snack time. A study reveals that the consumption of cookies and sweet biscuits in the United States is highest on weekdays, such as Monday and lowest consumption on Sunday. The overall cookie consumption is higher in winter (Sept-Feb) season. On an average, 75% of the biscuit market in the United States is controlled by branded products and only 25% by private products. Currently in the United States, 90% of new product launches are related to cookies and sweet biscuit categories. The demand for healthy cookies, fortified biscuits and sandwich biscuits are continuous growing in the region. Kraft Food, Kellogg, Aldi and General Mills are major biscuit manufacture companies in the United States of America.
20 20 Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
GLOBAL BISCUIT INDUSTRY AT A GLANCE Global Biscuit Market Revenue (USD Billion)
98.38
101.614
42.75
The global biscuit market saw a growth of
138%
2014
2015
2016
between 2014 and 2016.
Source: Mordor Intelligence Market Research
Global Biscuit Market Share, by Type SWEET BISCUITS
COOKIES
21.04 21%
26.87 26%
USD Billion
USD Billion
TOTAL
OTHERS
53.704 53% USD Billion
The other segment includes plain biscuits, savoury biscuits, filled/coated biscuits and fortified/ functional biscuits.
101.614 100% USD Billion
Source: Mordor Intelligence Market Research
Global Biscuit Market Share, by Region Europe is the largest consumer of biscuits, with more than 30% of the total market share, followed by North America (26%), AsiaPacific (25%-30%), South America (10%-20%) and Africa (below 10%). above
26%
30% Europe
North America
below
10%20% South America
Source: Mordor Intelligence Market Research MARKET PULSE July 2017
10% Africa
20%25% Asia-Pacific
21
3.28
1.03
1
0.94
0.81
OREO
GAMESA
BRITTANIA
CHIPS AHOY
KEEBLER
0.8
0.62
0.6
0.53
0.43
PARLE
ARNOTT’S
GIRL SCOUT COOKIES
LITTLE DEBBIE
PEPPERIDGE FARM
Source: Statista
Some Key Players
Mondelēz International (U.S.)
Cadbury (U.K.),
Nestlé (Switzerland)
Lotus Bakeries NV (Belgium),
Leibniz-Keks (Germany)
Goteborgs Ballerina Cookies (Sweden)
Kellogg Co (U.S.)
Britannia (India)
Cookies category is the largest category, by type. This category holds around 26% share of the global biscuit consumption.
July 2017 MARKET PULSE
Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
Sales of the Leading Cookie Brands Worldwide in 2014 (in billion U.S. dollars)
22 Opinion
L CAL BISCUIT INDUSTRY
MARKET PULSE July 2017
23 Opinion
LOCAL BISCUIT INDUSTRY The biscuits and confectionary industry in Bangladesh is comprised of few industrialized manufacturers and small, local bakeries throughout the nation. The branded biscuit industry’s annual size in 2016 is estimated at BDT 36 bn with annual production of ~400,000 MT of products.
THE CURRENT FMCG MARKET Currently, Bangladesh boasts a vibrant FMCG industry. According to AC Nielsen data, the annual size of Bangladeshi branded FMCG industry is estimated at BDT 268.7bn as of June 2016. Between 2010 and 2015, the branded FMCG market has grown at a 12.8% CAGR. Looking within the FMCG industry, the non-food
products seem to have experienced slightly faster growth, particularly since 2013. Between 2010 and 2015, non-food FMCG items have grown with a 13.5% CAGR compared to FMCG products in the food segments which with have held a 12.1% CAGR. Confectionary is expected to be the third largest contributor in the FMCG
sector, posting almost 19.6% growth. The high potential for growth in consumer good segments is will be brought about by rising income levels, growing income levels and a largely, young population.
MARKET OVERVIEW The
processed
food
industry
has
Expected Annual Growth Rate of Selected Food-based Consumer Product Segments (Between 2014 and 2018)
24.3%
21.9%
19.6%
17.2%
17.2%
16.8%
15.8%
Dairy
Baby Food
Confectionary
Sweet and Savoury
Noodles and pasta
Oils and Fats
Ice Cream
14.9%
14.0%
13.5%
12.9%
10.6%
8.1%
8.1%
Soup
Frozen/Chiled Sauces, Dressing Processed Food & Condim ents
Bakery
Dried Processed Canned/ Food Preserved Food
Spreads
Source: LBSL Reasearch
July 2017 MARKET PULSE
24 24 Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
potential to contribute to value addition and employment value addition in Bangladesh. It accounts for over 22% of all manufacturing production and employs 20% of the manufacturing labor force. The biscuits and confectionary industry in Bangladesh is comprised of few industrialized manufacturers and small, local bakeries throughout the nation. The biscuits and confectionary industry in Bangladesh is comprised of few industrialized manufacturers and small, local bakeries throughout the nation. The branded biscuit industry’s annual size in 2016 is estimated at BDT 36 billion with annual production of ~400,000 MT of products. The total installed capacity of the industry is 30,000 tons per month. The bakeries and unorganized segments is worth BDT 24 billion per annum while the market for cake and toast biscuits is worth another BDT 8 to BDT 9 billion annually. The entire industry (both branded and informal) is estimated to be worth more
than BDT 60 billion by market participants. According to Bangladesh Auto Biscuit & Bread Manufacturing Association (BABBMA), today, nearly 5,000 bread and baked goods makers, including 100 automatic and semi-automatic bakeries, are operating in the segment in the country. Biscuits are fast becoming the snack of choice for Bangladeshi consumers, enabling the market to grow 15% a year and are expected to grow at the same pace in the next 10-15 years. According to MATRIX, the market size in 2012 was estimated to be BDT 2.37 bn. According to president of BABBMA (Bangladesh Auto Biscuits and Bread Manufacturing Association, this industry was growing 15-20% per year. MATRIX found that about 12 factories were producing HEB (High Energy Biscuits) back in 2012 by the support of various donors and development organizations mainly to support government school feeding programs. 57% factories were
concentrated in Dhaka division followed by Chittagong 14% and the rest of the manufacturing companies were dispersed over the country. Of the industrialized manufacturers, Olympic, Haque, Pran, Danish, Fuwang, Nabisco and Bangas are household names. Olympic is the market leader, with an estimated of more than 30% market share of the branded, industrialized biscuit market followed by Haque and Pran. Other participants hold less than 5% each of the total market share in the biscuit business in Bangladesh. The local firms have been able to win the confidence of consumers by improving food quality and keeping prices reasonable. As a result, they have been able to sustain their position in the market by driving away the imported products. Domestic manufacturers now meet 90-95% of demand for biscuits; some of them also export biscuits, according to the operators.
Auto Biscuit Industry Size in Bangladesh (BDT billion)
2.37 2012
36.0
CAGR
11%
2016
Source: LBSL Reasearch
THE GROWING FAVORABLE DEMOGRAPHICS ENCOURAGING BISCUIT CONSUMPTION There is a growing middle and affluent class in Bangladesh. Though middle and affluent class comprises only 7% of the population today, according to a study by
MARKET PULSE July 2017
Boston Consultancy Group, it will reach 17% by 2025. Bangladesh’s middle and affluent class population is increasing rapidly by an average 10.5% annually. It is evident that consumer product companies have great opportunities to reap benefit from this burgeoning consumer class. By
The biscuit market is growing mainly because of consumers' hunt for hygienically prepared foods.
25 MARKET TRENDS Psychologically speaking, biscuits used to be a considered a snack for the urban middle class, mainly to be consumed with the afternoon or, evening tea. With passage of time, biscuit has become one of the common man’s snacks, enjoyed by people from every social class. The relatively affordable nature of the products from the organized biscuits industry has been paramount in their mass popularity. The industry is expected to grow at 12-15% in next 5 years. Recently, there is increasing presence of imported brands in the market. These imported biscuits mostly fall in the premier segments. As the income level of the population is increasing, there is an emerging demand of value added products. The value addition is being done in the forms of premium ingredients, new flavors or, increase of cream or, chocolate portions. The extra value addition and variety are key reasons behind the recent emergence of imports. The lucrative nature of Bangladesh’s biscuit market is also attracting interests of foreign biscuit manufacturing giants. Sri Lanka’s CBL (Ceylon Biscuits Limited) has entered Bangladesh market with their own manufacturing facility.
CATEGORY OF BISCUIT Biscuit can be classified into four broad categories - glucose, arrow root (marie), sweet assorted (including coconut
Category of Biscuit as a Percentage of Total Production
Recently, there is increasing presence of imported brands in the market. These imported biscuits mostly fall in the premier segments. As the income level of the population is increasing, there is an emerging demand of value added products. cookies, cream sandwich biscuits etc.) and plain salted. Among these four types, glucose biscuit dominates the market with almost 60% contribution to the total biscuit production in the country. This is because, most of the biscuit consumers in Bangladesh belong to middle and lower middle income groups and prefer lowpriced glucose biscuit over the premium ones. With increasing per capita income and improved customer sophistication, a steady rise in demand for premium biscuits in the years to come is expected. The other types of biscuit - sweet assorted accounts for 25% of total biscuit production, marie about 10% and salted about 5%. Under the glucose segment, the two most popular brands in the market are Energy Plus (OLYMPIC) and Glucose (Nabisco Biscuit Company Ltd.). Other popular brands in the biscuit industry include - Horlicks Biscuit (GlaxoSmithKline Bangladesh Ltd.), TIP (OLYMPIC), Lite Crackers (Romania Food & Beverage Ltd), Marie Biscuit (Haque Biscuit Ltd) and others.
5%
10%
25%
60%
Salted
Marie
Sweet
Glucose
Source: Small Industry Setup and Costing, Website
July 2017 MARKET PULSE
Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
2025, 2 million additional Bangladeshis are expected to reach annual income of $5,000 and another 30-40 million people are expected to come out of poverty. Though restrained by financial constraints, 69% of the people responded that there are more things they would like to buy. This consumer class intends to spend more on consumer goods which will drive the growth of this sector. The rising income levels of the nation’s population is another sign of the growing purchasing power of the country’s large population. As of 2016, the annual per capita income stands at USD 1,465, which has grown at BDT 114,621 (USD 1,465), which has grown at 12.4% on average over the last ten years in local currency unit ( and 10.4% in USD terms). The biscuit market is growing mainly because of consumers' hunt for hygienically prepared foods. Demand for biscuits is growing as entrepreneurs have shifted to automation in baking and consumers are looking for a variety of quality foods at low prices. Encouraged by rising demand, particularly from the lower middle and middle income groups, a number of large firms have joined the foray in the last several years. Some old players have also expanded their production capacity. Biscuits are a common snack to entertain guests at home and office. Because of packaging, it is also convenient to carry them. Innovation is another factor behind the high demand.
26 26 Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
CONSUMPTION OF BISCUIT BY DIFFERENT INCOME GROUPS Biscuit is generally considered as a food item of mass consumption due to its low price. In developing countries like Bangladesh, the middle income and lower middle income groups account for about 95% of total consumption of biscuit. The remaining 5% includes the upper income group that mostly consume imported biscuits accounting for only 2% of the volume. Market Share of Local & Imported Biscuits
98%
2%
Local Biscuits
Imported Biscuits
Consumption by Middle & Upper Income Groups
95%
5%
Middle & Lower-Middle Class
Upper Class
Source: Nabisco Biscuit Bangladesh, 2014
MARKET SHARE OF LOCAL & IMPORTED BISCUIT
MAJOR PLAYERS IN THE INDUSTRY
In the recent time, 98% of total biscuit
There are about 160 companies in the automated biscuit industry - out of them only 30 to 40 are currently in operation. The top eleven companies hold about 62.4% share of the total biscuit market as of 2011. The remaining 37.6% of the market share is occupied by a large number of small biscuit manufacturers. Based on a past survey on biscuit industry (conducted by Matrix Consulting Ltd. in 2011), OLYMPIC was found to be the market leader in 2011 with 16% market share. According to the industry experts, OLYMPIC still holds on to its leadership position in the automated biscuit industry and enjoys more than 30% market share. In fact, the company has retained the top position in the last couple of years. However, the second position has hovered around a number of companies in the last few years. Al Amin Bread & Biscuits Ltd. used to rank second in 2011. The company has recently resumed its operations after remaining inactive for some time during 2012-13. The brief demise of a strong competitor like Al-Amin certainly helped
consumption
is
met
by
the
local
manufacturers while only 2% is being imported abroad. However, in earlier times, imported biscuits used to hover around 25% of total biscuit consumption in Bangladesh. One of the reasons behind the falling demand for imported biscuits is high supplementary duty (SD) imposed on imported biscuits. Government imposes heavy duties and taxes on imported biscuit to promote local value-adding food processing industries, thereby substituting imports. Although, SD on imported (sweet) biscuits has been cut down from 100% in FY 2013 to 60% in FY 2014, the total tax rate (including SD) on imported biscuits is quite significant and sum up to 200%. The taxes and duties included in the computation of total tax (on imported biscuits) are supplementary duty, import tax, regulatory duty, advance trade tax, pre-shipment inspection tax etc. Whereas, the sales tax on local biscuits is 15%.
MARKET PULSE July 2017
OLYMPIC to enhance its market share in the last two years. The other strong players in the industry are Pran Food Ltd., Nabisco Bread & Biscuit Ltd., Globe Biscuit & Dairy Milk Ltd., Romania Foods & Beverages Ltd. GlaxoSmithKline Bangladesh has recently entered into the automated biscuit industry by leveraging its strong brand name “Horlicks�. The company launched its Horlicks biscuit and cookies in market in early 2013. However, GLAXOSMITH does not manufacture Horlicks biscuits in its own factories rather outsources the entire production to OLYMPIC. The Horlicks brand has gained much popularity within the first year of launching.
Government imposes heavy duties and axes on imported biscuit to promote local value-adding food processing industries, thereby substituting imports.
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33% to 38%
7% to 9%
3% to 5%
2% to 3%
7% to 9%
3% to 5%
1.5% to 2%
3% to 5%
1.5% to 2%
*Source: Market Participants Note: Pran however has significantly larger market share if you include similar non-biscuit items such as as bread and cake
INFORMAL PLAYERS IN THE INDUSTRY Outside the automated biscuit industry, a number of small bakeries and shops are also involved in the manufacturing of biscuits. These informal players sell non-branded biscuits in market along with other fast food items. In addition to the small bakeries, there are also many small entrepreneurs which supply home-made biscuits to the retail stores.
BACKWARD LINKAGE For biscuit production, sugar and wheat are key commodities. Both the commodities had been on a downward trajectory for a while. Sugar price reached a 7-year low on August 2015. But since then, Sugar prices have increasing steadily and prices are back at ~USD 0.2/ lb (No. 11 Sugar futures) levels. Sugar prices initially started their decline from this level in 2012. The outlook for sugar price movements do not show much room for upward movement. Anticipating output volatility in 2017 due to the El Nino weather cycle impacting production in India and Thailand, sugar futures has seen increased volume in 2016, which saw sugar become the best performing soft commodity in 2016.
Overall, the consensus estimate seems to be that sugar prices have peaked and high global demand in the face of volatile production and depleting reserves point to another year of rebuilding supplies amid steadier prices. On the other hand, wheat prices have continued to slide down amidst production glut worldwide. Wheat was one of the weakest performing commodities in 2016, with ~18% price decline in 2016. Unless a significant production decrease happens in 2017, the declining trend is set to continue. Palm oil, another relevant commodity for biscuit production, is also on the up following a prolonged slump.
OLYMPIC was found to be the market leader in 2011 with 16.0% market share. According to the industry experts, OLYMPIC still holds on to its leadership position in the automated biscuit industry and enjoys more than 30% market share. In fact, the company has retained the top position in the last couple of years.
July 2017 MARKET PULSE
Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
Estimated Market Share of Industry Participants
28 28 Opinion COVER STORY | Biting into the Biscuit Industry of Bangladesh
REGULATORY BODY OF BISCUIT INDUSTRY
HACCP (Hazard Analysis & Critical Control Points)
Bangladesh Standard and Testing Institution (BSTI) is a government body regulating and supervising the industrial, food and chemical industries of the country. Hence, It is mandatory for every company in food processing and related industries to comply with BSTI certification before selling their products in the market. The BSTI certification ensures quality and standard of each product for both local consumption and export. In addition to BSTI certification, some food processing companies hold international standards e.g. ISO standard (International Organization for Standardization) and
PEER COMPARISON The organized segment of the biscuit industry in Bangladesh is growing at 8 to 9 percent annually. This number is still not very high compared to other growing markets in the world. For example, SouthAsian countries like India (10-12%) and Pakistan (12-14%) has faster-growing biscuit industries. Biscuit consumption in Bangladesh has significant room to increase. India’s per capita biscuit consumption is about 2.2kg compared to 1.8kg in Bangladesh. Sri Lanka’s per capita consumption has grown to and
plateaued around the 4kg mark. Lankan biscuit consumption levels are among the highest in the continent. The Chinese biscuit industry has experienced a major boom in the recent years. According to data from IBIS World, the industry has grown from US$ 12.2 billion in 2009 to US$ 25.2 billion in 2014 with a CAGR of 15.61%. According to Canadian International Markets Bureau report on Packaged Food in Vietnam, the biscuit industry in Vietnam has grown with a CAGR of 20.1% from 2005 to 2010. The macro-economic factors and consumption patterns of the country are in favor for the Bangladeshi biscuit industry to experience a similar growth.
Per Capita Annual Biscuit Consumption (in kg)
5.0
JAPAN
4.0
SRI LANKA
2.2
INDIA
1.8
BANGLADESH
Source: LBSL Reasearch
The Chinese biscuit industry has experienced a major boom in the recent years. According to data from IBIS World, the industry has grown from US$ 12.2 billion in 2009 to US$ 25.2 billion in 2014 with a CAGR of 15.61%. According to Canadian International Markets Bureau report on Packaged Food in Vietnam, the biscuit industry in Vietnam has grown with a CAGR of 20.1% from 2005 to 2010.
MARKET PULSE July 2017