The future of bread making in Algeria
Algeria has a population of 45 million (2020 census), for whom durum wheat, followed later by soft wheat, is a staple. The technical expertise of bakers and pastry chefs, as well as bakery products, is one of the major features of Djazagro, which spotlights the strengths of Algerian food professionals.
How do things stand in this post-Covid period, which has taken its toll on both professionals and consumers? With the sound of cannon fire in Eastern Europe, should Algeria be speeding up its projects?
Durum wheat and soft wheat
These two grains are quite dissimilar. The first is very rich in plant proteins, with a hard and translucent husk, perfect for making pasta (without adding egg), semolina, or bulgur.
The second is less rich in total proteins, but contains enough gluten for its starch flour to be suitable for bread: the gluten network gelatinises as the baker kneads and under the effect of the sourdough, and captures the gas bubbles produced by the fermentation process, which gives the crumb its soft honeycomb texture.
Algerians, like many North Africans, have switched from durum wheat to soft wheat in the space of a hundred years.
Today the diet in Algeria, like in Egypt and Morocco, is based on flat bread, galettes and leavened bread, but this food staple is now threatened by the conflict which is having an impact on grain flows.
2020 & 2021: economic upheavals
In 2020 and 2021, bakery products were hit hard by the pandemic, and Algeria continues to experience serious economic difficulties. Consumer prices have risen and in real terms, growth in value is considerably slower than in 2020, as consumers turn to cheaper products whenever possible.
Growth in volume is expected to weaken as consumers seek to reduce their spending on less essential products, due to unfavourable economic conditions and growing uncertainty caused by the drop in international oil prices and the volatility of the local currency.
The retail sales value of bakery products in Algeria increased by 6% in 2021 to reach DZD 299 billion (€1.9 billion).
Retail sales are expected to grow at an average annual growth rate of 7% at current value.
Arrupan Sarl is the leader in 2021 with a retail value share of 2%.
The logistical difficulties experienced by most manufacturers and distributors during the Covid-19 pandemic in 2020 significantly slowed down business. However, although the health crisis is not yet over, consumption habits are picking up again.
Bread, a local food product
Historically, the competitive landscape in Algeria has been dominated by small artisanal bakers. The overwhelming share of value of these producers is based on their position as the main producers of the Algerian staple food, which is unpackaged sourdough bread.
These bakers are the main producers and the main retailers. In Algeria, there is a strong tradition of buying fresh bread directly from the local artisanal baker.
The government controls the prices of unpackaged traditional bread, which means that traditional bakers do not have any real competition.
Outlook & opportunities
A significant change in bread consumption habits is very unlikely, as young people are fond of this tradition.
Flat bread is a food staple for Algerian consumers. Despite changes in eating habits and lifestyles, consumption of flat bread is a well-entrenched habit that is not likely to change any time soon. This means that unpackaged bread will remain unbeaten among bakery products, despite the growth in production capacity of industrial bakery products. Affordable prices, wide-scale distribution and a strong tradition for unpackaged flat bread mean that it will not face any significant competition.
Lack of innovation is one of the many barriers to growth, and the threat of the end of subsidies may shake things up.
Sales of bakery products in Algeria are likely to slow down over time because stability of demand is uncertain as the country struggles to emerge from recession.
However, the government envisages the removal of state subsidies on the basic products that have maintained social peace, but have weighed heavily on budgets. This is the result of decreasing energy revenues.
Should this happen, the battle for manufacturers will be to persuade consumers to choose other products, in particular in a period where disposable income will probably remain limited. Most opportunities will therefore start at lower prices. The healthy compound annual average growth rate observed before the pandemic has been stimulated by the launch of new health and well-being products, such as organic and gluten-free bread, which have led to a very high rate of value growth. As product innovation slows down, we can expect growth to slow down.
Health and well-being: essential values
The main ingredients of bakery products are cereals and sugar, large quantities of which are imported and paid for in foreign currency. While the Algerian dinar continues to weaken over the forecast period following the economic and health crises, raw material costs are expected to rise significantly1. At the same time, due to inflation, labour and distribution costs should continue to increase. Consequently, prices will increase, with the exception of unpackaged sourdough bread.
Manufacturers therefore need to add value to their products to justify the higher prices. One way of doing this is to improve quality and taste, by offering product diversification and variety to meet consumer expectations.
We expect2 to see more varieties and larger quantities of healthier bread being sold, in particular in urban areas where food health trends have rapidly gained ground since the pandemic. An increase in the production of industrial bakery products is expected in supermarkets, which is a channel that continues to grow in line with urbanisation. Despite the majority of consumers still being fond of fresher, artisanal products, more active lifestyles and on-the-go consumption habits are driving the arrival of new, more industrialised products.
Djazagro always dedicates a large section to the bakery and pastry professions. With trends moving towards high out-of-home consumption during the day, the future looks promising for those who are able to offer healthy, delicious and convenient products.
Article written by NutriMarketing fot Djazagro
1 Euromonitor January 22
2 Euromonitor – Bakery April 2022