Arnott’s doubling down on move into gluten free

Arnott’s is doubling down on its move into the high-growth gluten free segment with a multimillion-dollar upgrade of its manufacturing hub in Adelaide.

Inside the Arnott's gluten free factory at Marleston. Picture: Supplied by Arnott's

Arnott’s is doubling down on its move into the high-growth gluten free segment with a multimillion-dollar upgrade of its manufacturing hub in Adelaide.

Since launching its first gluten free range in 2021, the biscuit maker has grown its sales of gluten free biscuits to $35.6m, or 3 per cent of its total biscuit sales – a 175 per cent increase on the previous year as it continues to introduce new products to the range.

The ambition is to lift the company’s gluten free share of total biscuit sales to at least 10 per cent, in line with industry-wide consumption rates.

Arnott’s invested more than $30m in a new “gluten free bakery within a bakery” at its Marleston site last year, and a year on is injecting a further $14m into upgrades to increase capacity at the factory, upgrade machinery and introduce new capabilities in the gluten free area.

The 3800sq m allergen-free factory is equipped with two production lines – sweet and savoury – manufacturing more than 2 million kilograms, or 800,000 cases, of gluten free biscuits every year.

The Arnott’s Group chief marketing officer Jenni Dill said sales were “exceeding all of our expectations”, and the company was looking to introduce new products to the gluten free range.

Inside the Arnott's gluten free factory at Marleston. Picture: Supplied by Arnott's

“The gluten free market is now roughly 10 per cent of the biscuit category ... it’s growing at 40 per cent year on year, and we’re driving almost 80 per cent of that growth with our Arnott’s range of gluten free products,” she said.

“As we look at the market, and as we look at other markets around the world, it feels to be something in that 10 per cent to that 15 per cent range (of total biscuit sales) ... the business model would support around 10 per cent to 15 per cent.

“We are still in growth and expansion mode. We have some exciting new gluten free products coming out – roughly every six months we will aim to introduce a new product that is one of the biscuit category’s favourite products, to keep growing and keep expanding the gluten free range.

“And then we also have investment plans across the rest of the portfolio that will see us invest additional funds into our site in Marleston in Adelaide.”

KKR-owned Arnott’s operates three biscuit manufacturing sites in Australia – in Adelaide, Brisbane and Sydney – as well as a snacks, muesli bars and cereals factory in Melbourne and the Campbell’s soup site in Shepparton.

Its gluten free biscuit range launched in July 2021 with Scotch Finger, Tiny Teddy and Choc Ripple products, and has since been extended to include Mint Slice, Shortbread Cream, TeeVee Snacks, Tim Tam, Barbeque Shapes and Jatz alternatives.

Gluten free muesli bars, cereals and other snack products are manufactured at the company’s Melbourne facility.

Arnott's chief marketing officer Jenni Dill. Picture: Supplied by Arnott's

Ms Dill said around 3 per cent of Australians were diagnosed as Celiac, or had another condition that required the avoidance of gluten, while up to 25 per cent were reducing their gluten consumption by choice, due to health and other reasons.

And that presented a “massive opportunity” to cater to changing consumption habits, both in Australia and overseas.

“We believe there’s an opportunity to export, but we’re not quite at the point where we’re chasing that yet,” she said.

“We are seeing the same gluten free trends we’re seeing in Australia in big markets like the UK and the US predominantly, but also parts of Asia which typically have a lower level of gluten consumption.”

Ms Dill said sales across the entire Arnott’s biscuit range – including both its traditional and gluten free products – had increased by 5.5 per cent over the past 12 months, as consumers spent more time entertaining at home in order to cut down on their discretionary spending.

“Everyone is doing it tough at the moment, and everyone is trying to make their weekly budget stretch that little bit further,” she said.

“We’re actually seeing our broader business doing well at the moment, as consumers spend more time at home and try to make their budget stretch a little bit further, compared to buying a $5 cookie when you’re out and about or a banana bread – a whole packet of biscuits for the same price is great value.”