freshbake foods ltd (ag,bf,cm,jm,pos)

Freshbake Ltd

MBS Consulting

UNIVERSITY COLLEGE CORK FE6008

111222987, 115223844, 115223750, 115223553, 111356331

ContentsExecutive Summary.......................................................................................................2

Overview of the Bread Market.......................................................................................3

Freshbake Ltd: Analysis of Key Competencies.............................................................4

Distribution Channel Options........................................................................................5

1. Use a National distributor:............................................................................5

2. Outsource transportation & load share:........................................................5

3. Incorporate Food service distributor:............................................................5

4. Export markets- Appoint local importer/Distributor:...................................5

Strategic Options for Freshbake Ltd..............................................................................6

1. Focus on the Speciality Bread Market..........................................................6

2. Look to export markets (speciality products) PDO......................................7

3. Use another own brand:................................................................................7

Conclusion:....................................................................................................................8

References......................................................................................................................9

MBS Consulting 2 | P a g e

Executive SummaryThis 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.


Overview of the Bread MarketBread 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).


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.


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. Outsource transportation & 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).


Strategic Options for Freshbake Ltd1. 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.


2. Look to export markets (speciality products) PDOA 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.


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.


ReferencesBhandari, 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/

Documents/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
