2. MBS Consulting 2 | P a g e
Contents
Executive Summary.......................................................................................................3
Overview of the Bread Market.......................................................................................4
Freshbake Ltd: Analysis of Key Competencies .............................................................5
Distribution Channel Options ........................................................................................6
1. Use a National distributor:............................................................................6
2. Outsource transportation & load share: ........................................................6
3. Incorporate Food service distributor:............................................................6
4. Export markets- Appoint local importer/Distributor:...................................6
Strategic Options for Freshbake Ltd ..............................................................................7
1. Focus on the Speciality Bread Market..........................................................7
2. Look to export markets (speciality products) PDO ......................................8
3. Use another own brand:................................................................................8
Conclusion: ....................................................................................................................9
References....................................................................................................................10
3. MBS Consulting 3 | P a g e
Executive Summary
This report provides an analysis of research carried out by MBS consultants on behalf of
Freshbake Foods Ltd. The followings aspects were carried out:
An overview of the overall bread market
An outline of the various distribution channels available
An analysis of the Freshbake business with regards to key competencies and market
opportunities
The identification of strategic options Freshbake could implement to further enhance
their business.
Key trends have been identified within the current market. These include a shift
towards Health and Wellness, the demand for value added offerings (for example high-fibre
and gluten free) and lastly and ongoing concern in the area of bread waste when it comes to
aspects such as packaging, variety and size.
Innovation, knowledge, and flexibility have been identified as Freshbakes key
competencies. These competencies are realized through a dedicated R&D department, and
flexible production line that supports the production of a wide product range. Freshbakes
‘traditional and sliced buttermilk’ sodas are strong brands in their category, which represents
another key competency.
With regards to market opportunities we identified the speciality bread segment as an
area where there is substantial scope for growth. This is encouraging to see as this market
already accounts for 25% of Freshbakes sales, despite not having a proper strategy in place to
focus on the market. Market trends suggest that this segment is growing due to increasing
consumer demands for speciality products that suit their needs.
Based on Freshbakes existing competencies and given the current market
environment, a strategy is put forth to guide Freshbake Ltd going forward. It is suggested that
Freshbake Ltd can adapt their existing supply chain to capitalize on the changing market
structures, and differentiate themselves by focusing on the speciality bread segment with a
variety of added-value offerings.
4. MBS Consulting 4 | P a g e
Overview of the Bread Market
Bread is the most popular category of Baked Goods products sold in Ireland
(Euromonitor, 2015). The Irish Bread market suffered a value sales decline of 4% in 2014
due to price reductions (Bord Bia, 2016), resulting in an approximate valuation of €318m
(Ignite Research, 2014). The most popular types of bread are (Ignite Research, 2014):
1. Packaged sliced pan
2. French breads – Baguettes
3. Soda/stoneground bread
Brennans Bread remains the most popular brand, ranking third in the list of the Top
100 selling brands in Ireland, with Irish Pride ranking 14th
(Nielsen, 2015). Brennan's hold the
largest share of the bread market (12%), however private-label brands dominate the market
(Euromonitor, 2015).
Store-Based Retail remains the dominant distribution channel, with over 98% of the
value of baked goods in Ireland coming through this channel (Euromonitor, 2015). An
important factor to note is that Musgraves (owner of Supervalu/Centra) recently acquired the
Superquinn chain (Mulligan, 2014).As a result of their’ preferred supplier strategy’, 55% of
our 2014 customer sales will no longer be available to us.
A number of current trends in Ireland have significance for the Irish bread market, the
key ones are briefly outlined below:
Growing consumer trends about Health & Wellness have put pressure on
manufacturers to reduce the amount of additives in their products. (Ignite Research,
2014).
Value-added offerings are growing in demand, with high-fibre and gluten-free
alternatives among the most prominent (Euromonitor, 2015).
Bread waste continues to be an issue for Irish consumers, many want reduced
packaging, variety amongst smaller sized pans, and snack sized bread on the go (Bord
Bia, 2016).
In general, packaged sliced-white bread remains a staple purchase for many, however
as the Irish economy recovers and disposable income increases, consumers are beginning to
spend more on ‘small luxuries’ such as fresh cakes and muffins (Euromonitor, 2015).
5. MBS Consulting 5 | P a g e
Freshbake Ltd: Key Competencies & Market
Opportunities
Freshbake Ltd possess a number of competencies that allow you to create a
competitive edge. The addition of the R&D department has allowed you to compete in the
speciality breads market, suggesting that innovation is one of your key competencies. This
has proven successful, as it accounts for 25% of sales.
Based on the percent of sales it is quite evident that another one of your key
competencies is knowledge of specialty food products. The fact that none of your speciality
foods are sold under own label implies that Freshbake has developed a strong reputation
within the field.
While it is not encouraging to see the new production line of scones and muffins only
operating at 30% capacity, Freshbake have the “ability” to ramp up production if needed
without significant investment in new facilities.
Freshbake Ltd has been seen to be flexible when it comes to business strategies.
Previous distribution channels targeted at various customer profiles combined with their door
to door delivery service provides evidence of the firm's ability to adapt.
With regards to market opportunities, as previously alluded to recent trends have
made consumers more conscious when it comes to health and wellbeing and value-added
offerings are growing in demand, with high-fibre and gluten-free alternatives among the most
prominent. This implies that there is ample opportunities within the specialty bread sector. A
suggestion would be to put a greater emphasis into marketing efforts in ensuring consumers
know that these products are not sold under one supermarkets own label which would help to
establish the Freshbake brand in the speciality market.
6. MBS Consulting 6 | P a g e
Distribution Channel Options
“Logistics plays a key role in the bread industry, as the proper logistic support enables the
producer to transport his products in the market at the right time” (Bhandari, 2013).
1. Use a National distributor:
Using a national distributor can help maximise sales potential along with leaving the
business focus on its key business areas. It allows for rapid roll out which in turn can increase
the overall efficiency of the business. The food producer is only responsible for dropping its
product to one central depot, a retailer’s central depot or that of a foodservice distribution
company. The retailer or foodservice distribution company then distributes it to the relevant
outlets. This can often be complex for food producers, it is important to make sure that all
elements of the supply chain are in place as it can be a very attractive route to market.
2. Outsourcetransportation & load share:
This will help the company to reduce costs, increase the speed of delivery and reduce
overall risk. Load sharing is also a viable option for SMES as their budgets tend to be tight.
Improving efficiency will reduce the number of transactions and create bulk for
transportation thus reducing costs. This in turn enables small food producers to concentrate
on the production and sales of the product (outsourcing what you don't specialise in enables
you to spend more time on what you do specialise in)
3. Incorporate Food service distributor:
The food service sector is a sector where sales may increase as artisan foods are
becoming increasingly popular. Introducing a food service distributor can increase sales as
they have a high level of expertise and can expose the brand in a positive light.
4. Export markets- Appoint local importer/Distributor:
Exporting can be a viable option for speciality products such as bread using local
importers and distributors can offer good local knowledge both regionally and
nationally. This distribution approach can increase the company’s reputation in other
markets which in turn can increase sales (Bord Bia, 2008).
7. MBS Consulting 7 | P a g e
Strategic Options for Freshbake Ltd
1. Focus on the Speciality Bread Market
Having examined the market, we have established that it is highly volatile/uncertain
given that Supervalu/Centra (and now Superquinn) have embarked on a ‘preferred supplier
strategy’. It is likely that the other retailers could pursue a similar strategy, which is
problematic for you given that retail accounted for 90% of your sales in 2014.
Based on this insight, we have identified an opportunity to leverage your key
competencies to become a brand leader in the speciality bread market within retailers and
local food-service outlets. You already have a strong reputation for your ‘traditional and
sliced buttermilk’ sodas, it would be a viable strategic option to build upon this by offering a
wider variety of products which can be supported by your production capabilities.
Your R&D department has potential to keep you updated on current trends and
consumer demands within the market. The fully automated bakery facilitates the production
of a wide range of products which, as indicated in our market overview, are a current
consumer demand. Currently, you utilise just 30% of your new production line, which was
added in 2014. An option would be to utilise a greater level of this capacity by developing a
wider range of speciality products that can demand a higher premium. Based on the nature of
the speciality bread market, however, it would be important to reserve a certain amount of
line capacity to cope with immediate fluctuations in demand.
Our analysis has indicated that value has been declining in the premium white-sliced
markets given the downward pressure on price within retailers. Based on our analysis, this
strategic option would differentiate you from your competition allowing you to gain a
competitive advantage in a currently fragmented speciality bread segment.
Freshbake Ltd. would be well positioned to quickly respond to changing consumer
demands, thus creating a competitive advantage. It would be possible to target food-
service customers in the Dublin region by offering them customised products to suit their
needs. Pursuing this strategy would also shield Freshbake Ltd. from any turbulence in the
retail market by strengthening your presence amongst local food service customers. Building
reputation through this channel would increase demand for products and optimise utilisation
of your local distribution fleet.
8. MBS Consulting 8 | P a g e
2. Look to export markets (speciality products)PDO
A significant way for Freshbake Ltd. to expand as a bread company is to export to
global markets. A strategy that has worked for Irish companies in the past is requesting
a (PDO), which is a protected designation of origin, this is designed to protect both the name
of the products and the traditions that are associated with it.We propose that Freshbake Ltd.
request a PDO for the speciality products of traditional and sliced buttermilk bread that they
already produce. In the past, companies producing floury baps in Waterford, otherwise
known as ‘blaa’s’ requested for their products to be protected, as a result they are now
regarded as regionally protected products and have had greater success as a result. Another
company that has implemented a PDO is the well renowned Parma Ham,
Through higher levels of bread production, economies of scale can be realised which
would result in greater profit maximisation. Should you decide to export your products, you
can create a globally recognised brand name and as a result create more trust and credibility
which will in turn lead to more loyal customers.
3. Use another own brand:
As Supervalu are no longer selling Freshbake Ltd. products under their own brand, it
is suggested that you deal with another retailers such as Dunnes Stores. Retailers accounted
for 75 % of overall sales in 2014 however margins generally tended to be relatively low. One
option would be for Freshbake Ltd. to incorporate a lean supply chain for their main products
in order to save costs and maximise profits. A national distribution channel would be very
suitable for this option.
Furthermore Freshbake Ltd. could sell traditional and sliced buttermilk sodas under
own brand labels as they are strong brands in their categories and accounted for 20 % of
overall sales in 2014. Working under an own-label brand should increase volume of sales
which in turn will lead to better profit margins.
9. MBS Consulting 9 | P a g e
Conclusion:
The bread market is currently a very volatile/uncertain market, consumers tend to
differentiate standard products such as sliced pan based on price and speciality products
based on the benefits that are acquired or other credence attributes which allows for a
premium price.
Your current strategy poses serious threat given the strategy embarked upon by
Supervalu, with other suppliers potentially following suit. Continuing with the current
strategy will have a negative impact on sales given that your margin with the remaining
retailers is less than the margin obtained with Supervalu.
With this in mind, we identified a substantial opportunity to differentiate your
offering by leveraging your key competencies. There is potential to adapt and become a
strong brand in the speciality bread market, which is not saturated unlike the premium (own-
brand) sliced-white bread market where there is a high downward pressure on price.
Speciality bread products enjoy a premium price over other offerings, and consumer insight
shows that these products are growing in demand.
10. MBS Consulting 10 | P a g e
References
Bhandari, S. (2013). Distribution Channels- Logistics et al. Retrieved from Marketing
Journal Britannia - Daily Fresh Bread:
http://sharmilabhandari15.blogspot.ie/2013/10/distribution-channels-logistics-et-
al.html
Bord Bia. (2008). Guide to Distribution for Food and Drink Producers in Ireland. Bord Bia.
Retrieved from
http://www.bordbia.ie/industry/manufacturers/GrowingYourBusiness/DistributorSear
ch/Documents/BordBia-DistributionGuide.pdf
Bord Bia. (2016). Market Overview ROI & UK: Category Snapshot: - Bakery. Bord Bia.
Retrieved from http://www.bordbiavantage.ie/market-information/sector-
overviews/bakery/market-overview-roi-uk/
Euromonitor. (2015). Baked Goods in Ireland. Euromonitor. Retrieved from http://0-
www.portal.euromonitor.com.library.ucc.ie/portal/analysis/tab
Euromonitor. (2015). Brennan Bakeries Ltd, Joseph in Packaged Food (Ireland).
Euromonitor. Retrieved from http://0-
www.portal.euromonitor.com.library.ucc.ie/portal/analysis/tab
Ignite Research. (2014). Bakery Research: Growing the success of Irish food & horticulture.
Bord Bia. Retrieved from
http://www.bordbia.ie/industry/manufacturers/insight/publications/bbreports/Docume
nts/Consumer%20Bakery%20Research.pdf
Mulligan, J. (2014). Musgraves in for long-haul despite Superquinn sales decline. The Irish
Independent. Retrieved from http://www.independent.ie/business/irish/musgrave-in-
for-longhaul-despite-superquinn-sales-declines-30460479.html
Nielsen. (2015). Ireland's Biggest Selling Brands Revealed: Checkout Top 100 Brands 2015.
Checkout. Retrieved from http://www.checkout.ie/irelands-biggest-selling-brands-
revealed-checkout-top-100-brands/19115
