KANSAS CITY — While the pace of change varies by country, the highly segmented baking industry throughout Latin America is going through a significant, long-term transformation. In fact, the market is growing rapidly because of the many local and international players capturing a greater share of the market, according to Sourya Das Gupta, senior research analyst, Mordor Intelligence.

In its recent report on South America and the region, Mordor Intelligence projected the Latin American bakery market to expand at a 7.09% compound annual growth rate from 2018-2023.

While the major brands are gaining share, consumer sensitivity toward price is providing headwinds for accelerated growth. As a result, a dual market is emerging where more affluent consumers living predominately in urban areas are buying more branded packaged goods while the majority of consumers still prefer more affordable, fresh items produced by local bakeries.

“Favorable economic conditions such as increasing urbanization, changing food patterns and the companies’ new ways of producing and processing food are driving the economy, thereby leading to an upward mobility and changing the quality of food consumed by the people in the region,” Mr. Das Gupta told Baking & Snack earlier this year. “The emerging middle-class and upper-class segments of the consumers in Latin America are gradually purchasing prepared and packaged foods due to factors such as increasing buying power and busy lifestyles. The lower-class segment is still opting for home-cooked meals because of lower disposable income.”

 In many Central and South American markets, fresh-baked goods still reign in popularity while packaged goods, which tend to be higher priced, are becoming increasingly well-received, especially among more affluent, emerging middle- and upper-class consumers, according to Mr. Das Gupta.

In urban areas, convenience is still emerging as a trend. In fact, brands have relied on social media and other marketing channels to educate increasingly time-pressured consumers about the benefits of prepared and packaged convenience foods.

Distribution, however, remains a challenge for packaged food brands. In urban areas, congestion makes on-time shipping difficult while affordability becomes an issue to deliver products to more rural areas, where there are fewer supermarkets serving a wider, often expansive geographic area.

“Although the middle-class people in the region are willing to purchase the products at supermarkets, the distant locations of these stores reduce the number of trips made by the consumers,” Mr. Das Gupta explained.

Major global trends such as consumers’ inclination toward healthy eating and the increase penchant for clean label and sustainable foods are fueling sales of wholesale baked goods.

“They are demanding bakery products that are minimally processed and are fortified with nutrients, for health benefits,” Mr. Das Gupta observed. “They are increasingly purchasing fresh and unpackaged baked goods, such as artisanal bread, instead of branded products, thereby affecting the sales of major players [throughout Latin America].”

Mr. Das Gupta added that consumers are making more conscious purchase decisions, and this propensity requires companies to incorporate front-of-pack labeling for transparency so they can make more informed decisions relating to product purchases.

“In-store bakery is more popular in Latin America, as consumers prefer to purchase all their bakery products in one location,” he added. “Factors, such as convenience and quality perceptions, are increasing sales through in-store bakeries. People in the region prefer to make frequent trips [and spend less] to purchase baked goods. This is significantly hampering the sales of baked products by companies that distribute their products to other retail formats, such as supermarkets and hypermarkets.”