No free ride

While no food categories are recession-proof, few manufacturers have such a captive audience as those supplying the burgeoning gluten-free market (coeliacs can't trade down to 'normal' bread to save cash).

But this doesn't mean burgeoning profits have necessarily followed for suppliers, and the rates of growth many enjoyed at the turn of the century have started to slow, while smaller brands have struggled to retain shelf space in the supermarkets as larger own-label suppliers have muscled in.

As for new products, the range is growing all the time, with gluten free now embracing everything from sausages, beer, pizza, ice cream cones, stuffing mixes, Yorkshire puddings and lasagne to porridge, chilli, syrup pudding and par-baked baguettes. But there is still room for improvement. Frustratingly for coeliacs who would love to see more fresh and chilled products, the relatively low rates of sale for gluten free mean supermarkets continue to focus on frozen and ambient long-life products to avoid wastage, while many caterers offer an even more limited range.

But there are glimmers of hope on the horizon, notably from United Central Bakeries (UCB), which has just struck a deal with chef and author Lucinda Bruce-Gardyne to launch fresh gluten-free wrapped bread into 700 Tesco stores under the Genius brand - a major gamble.

While supermarkets have historically been reluctant to risk the potential wastage this could incur, the time is now right, insists UCB sales and marketing director Paddy Cronin. "Space allocation in the free from aisles has probably peaked, but there is a huge opportunity in fresh if you have the right products. The other retailers are watching this launch very carefully."

Other recent developments in UCB's gluten-free range, which is growing at 20% year-on-year, also attempt to address demand for fresher products, says Cronin. "Our best sellers are bread and rolls followed by pitta bread, crumpets and muffins, but we've also launched a Victoria sponge with less than a month's life - which is pretty close to standard packaged cakes. I'm convinced that fresh is what's going to shake up this market. Long-life packaging puts people off."

His aim is to double gluten-free turnover in the next three years, which would take sales into 'eight-figure' [£10M] territory. And foodservice is next on the hit list: "If a pub chain did gluten free properly, the exposure would be great."

Bruce-Gardyne is also convinced that foodservice companies that don't cater for special diets are missing a trick. "You can do gluten-free at the start of the day, switch over to standard afterwards and clean at the end of the day. There are ways of scheduling production to make it work."

Catering is potentially the most exciting and challenging opportunity, agrees Bob Trice, marketing director at Nutrition Point, the firm behind gluten-free brands Dietary Specials, Trufree and Glutafin.

"Coeliacs consistently say eating out is the biggest problem, but there are issues of waste, portion control and segregation in kitchens. We have products listed with 3663 but I can see loads of potential. It would be great for coeliacs to go to a hotel and have gluten-free cereal and a slice of toast."

Paula Deacon from gluten-free manufacturer G-Free would also like to see more savoury products for coeliacs. "We've recently expanded into pies, pasties and meat products to meet demand. Coeliacs want to be able to pick up something savoury for lunch out like everyone else."

The number of UK residents with coeliac disease is judged to be around 600,000 (one in every 100 people, according to charity Coeliac UK) although only an eighth of these realise they have it. So not, on the face of it, a huge target audience.

However, the number of positive diagnoses is rising, says Trice. And when you add to this group the scores of people avoiding wheat or 'carbs' and the family members of all the above, the size of the prize looks far more appealing. It is also a competitive issue, he points out. If you cater for the coeliac in the family, you will also pick up the rest of that family's weekly shop."I'd say the gluten-free market is probably worth about £100M with retail worth £60M plus, the prescription market £30M plus and catering the rest.

"Growth varies, but in some categories like frozen, which are far less mature, we're seeing growth of more than 30% - we've got pizzas, pies, ready meals, Yorkshire puddings and now new sausage rolls and ready-to-use shortcrust pastry."

NO FREE LUNCH​

Like organics, another 'niche' category that has moved into the mainstream, free from started exclusively with brands and has gradually been infiltrated by own-label, says Trice. "There is a danger that the balance has shifted too far in this direction as consumers do not have the choice they once did." Gluten Free Foods founder Richard Ward agrees. "Coeliacs are all eating the same products in different packaging"

Pricing pressure from generalist grocery buyers now responsible for the category and focused purely on margin, price and volume, is also driving down quality, argues Philip Buckingham at PGR Health Foods, which supplies gluten-free wholegrain rice-based pasta under the Rizopia brand. "Our pasta is more expensive than pasta made with corn or wheat flour with gluten removed, but it's also better quality and better in terms of nutrition. It frustrates me to go to Tesco and Asda and see all these sugary gluten-free biscuits and snacks. Coeliacs deserve healthy products too."

While small companies with dedicated facilities might on the face of it have a better chance of securing coveted supermarket listings (as larger manufacturers don't want the hassle of segregating facilities), they are frequently not geared up to supply major retailers.

And even those that do have the scale to deal with Tesco & Co are increasingly exploring alternative routes to market, says John Pedley, md at S D Parr, which supplies gluten-free pasta, bread, cakes, muffins and pizza bases under the Proceli brand. The biggest growth opportunities are in pharmacy chains, independent wholesalers and distributors and health food stores, he says. "If you are doing well in the supermarkets, six to nine months later you could be replaced with own-label."

Many free from manufacturers have had a particularly challenging year owing to lack of access to credit, late payment from customers, summary demands for reductions in invoice prices and the sudden withdrawal of credit insurance.

Even the most innovative firms are not immune. Perhaps the most unlucky is Castle Kitchens (the first company to supply chilled free from ready meals to the supermarkets), which was forced to call in administrators earlier this year.

But it's also been something of an annus horribilis for Pure Organics (which supplies frozen sausages, ready meals and other free from products) after some products were withdrawn by Sainsbury after testing positive for gluten and dairy derivatives.

HOME FREE FOR SOME​

But there are still grounds for optimism, notably in the drinks aisles. It took almost two years of blood sweat and tears to perfect the recipe, fermentation, filtration and maturation of his gluten-free ale and lager, says Hambleton Ales founder Nick Stafford. But it was worth it in the end, even if the ingredients (chiefly sorghum) cost "twice as much". "We've got listings in Asda and Tesco and export sales are going very well. Gluten free probably represents 30-40% of our bottled beer sales now."

Derek Green, md at rival Green's Beers, works with a brewer in Belgium to produce eight gluten free beers using rice, millet, buckwheat and sorghum under the Discovery, Herald, Pioneer and Trailblazer brands. These are now listed in several supermarkets and growing steadily, says Green. He is also seeing strong export sales.

Another firm also on the up is Park Royal-based American Muffin Co, which secured its first listings with Tesco and Sainsbury in January 2008 and has since picked up business with Waitrose and Asda for its flow-wrapped muffins. The muffins, made with corn, potato starch and rice flour, are growing at 50% year-on-year, says director Jose Mulji.

"We're doing gluten free for three days a week now but I can see us doing it full time in the next couple of years." I'd also like to explore more export opportunities and get into foodservice but it's a question of managing our growth and cash flow. Let's say that the banks are not very supportive. We've got an invoice discounting facility, but these things come at a price." FIHN