Flour Power: Small Companies Exploit Healthy Grain-Based Food Niche, While Major Players Spend Dough to Acquire Them

Flour Power: Small Companies Exploit Healthy Grain-Based Food Niche, While Major Players Spend Dough to Acquire Them

Due to the advent of ketogenic and gluten-free diets, consumers want healthy grain-based foods – and they’re willing to pay more for them. One segment of the industry that has benefited is small start-up baking companies. They’ve boosted revenues by offering healthy grain-based products inside the healthy eating niche in the market. However, the major food manufacturers are responding through acquisition of many of these small health-focused food brands to diversify their portfolio.

Small Companies Go Against the Grain with Unique Product Offerings

As consumers have become choosy about what they purchase, major grain-based food purveyors have seen relatively flat revenues. However, smaller organizations have proven to be profitable, often focusing on niche products; using alternative grain types; or creating foods perceived by consumers as healthy, natural, or free from undesirable additives. For example, Annie’s (General Mills) creates a wide variety of cookies, crackers, doughs, and mixes using primarily organic ingredients to cater to consumer perceptions of organic grains as a healthy food choice.

Companies have also created new offerings in response to the rising popularity of specialty artisan products. For example, Pepperidge Farm (Campbell Soup Company) added Stone Baked Artisan Rolls to its lineup of baked goods in 2017. In addition, Food for Life offers bread under brands Ezekiel 4:9, made with sprouted grains (grains that have been permitted to germinate), and Genesis 1:29, which incorporates a variety of ancient grains (i.e., grains such as buckwheat, kamut, quinoa, and spelt that have undergone less selective breeding than wheat). In general, specialty products often feature higher prices than their regular counterparts, contributing to growth.

Large Food Manufacturers Gulp Down Health-Focused Companies

As small brands generate strong growth through exploiting a niche in the market, large companies often respond via acquisition of the brand. For example, in June 2018, Mondelēz paid $500 million to acquire Tate's Bake Shop, a fast-growing firm focused on producing fresh cookies and baked goods without GMOs (genetically modified organisms). Additionally, in October 2017, Kellogg acquired Chicago Bar Company, the manufacturer of RXBAR (a high-protein snack bar using simple ingredients) for $600 million. Large food manufacturers use these acquisitions to harness growing companies as future revenue streams and reduce competition with other brands in their portfolio.

Learn More

For more insights into the US grain-based food industry, see Grain-Based Foods: United States, a report published by the Freedonia Focus Reports division of The Freedonia Group. This report forecasts US grain-based foods demand and shipments in nominal US dollars at the manufacturer level to 2022. Total demand and shipments are segmented by product in terms of:

  • commercial and retail bakeries
  • dough, pasta, and tortillas
  • crackers
  • cookies
  • breakfast cereals
  • frozen goods
  • other products such as granola and cereal bars, non-frozen perishable prepared foods, and grain-based snack foods

To illustrate historical trends, total demand, total shipments, the various segments, and trade are provided in annual series from 2007 to 2017.

Related Focus Reports include:

About the Author

Owen Stuart is a Market Research Analyst with Freedonia Focus Reports. He conducts research and writes a variety of Focus Reports, and his experience as an analyst covers multiple industries.