The main products in the industry are sweet biscuits, which are estimated to generate 72.5% of revenue in 2014-15, but products also include crackers, preserved cakes and pastries, and snack foods produced from grain, such as tortilla chips.
Demand for biscuits is predominantly driven by demand from supermarkets, grocery wholesalers and bakery retailers. Rising supermarket demand has fed into increased demand for products within the industry, particularly for own-label merchandise, which has grown significantly over the past five years. Greater consumer interest in health and well-being has affected the food manufacturing sector. Biscuits with high-fat and high-sugar content have somewhat fallen out of favour, whilst those considered to be of higher nutritional value have become more appealing, especially among women.
Labour costs are estimated to account for 19.9% of revenue, making them the second-largest cost component. Wages absorb a higher proportion of costs than in other food processing industries because the production process is more labour-intensive and thus demands a much higher level of human involvement. The industry's major players have lower wage costs, as they benefit from economies of scale and their production processes tend to be more automated due to greater availability of resources such as capital. However, given the large number of small- to medium-size producers in the industry, labour costs are significant.
The trend towards healthier living over recent years, with increased awareness regarding issues related to obesity and nutrition, has made consumers more discerning. Sweet, high-sugar varieties remain popular, with the McVitie's Chocolate Digestive the nation's branded biscuit of choice. A large minority of people, however, continue to have misgivings regarding the healthiness of biscuits, believing not enough healthy varieties are available. Roughly one-third of people feel guilty when consuming biscuits and this is particularly pronounced amongst women. Healthy biscuits have an unfavourable reputation among many people with regards to taste, presenting an additional challenge to manufacturers. However, industry producers have successfully channelled these two concerns into new product developments over the past five years, which has resulted in popular healthy varieties hitting the market. For example, the McVitie's Medley range includes biscuits that contain fruit and nuts.
Overall, healthy biscuits and snacks have been subject to strong growth. The trend towards replacing certain meals with snacks has also been successfully exploited by manufacturers. Many of these snack products are purchased through bakery product retailers who rely on consumers who face severe time pressures and so resort to snacking.
Manufacturers' ability to adapt to growing health consciousness is also reflected in revenue performance. Companies have responded to consumer health concerns through product relaunches and new releases, and combined this with aggressive marketing. This is particularly relevant for the largest producers. Some consolidation has occurred during the past five years as smaller firms have found it difficult to compete in an increasingly challenging environment.
Retail traders 54.6%
Grocery wholesalers 31.3%
Food service sector 4.4%
Speciality stores 5.7%