As the saying goes, everything is bigger in Texas; except for the appetite for bakery. According to the Perishables Group data, Dallas consumers spend less than the rest of the country in almost every category of in-store bakery products. For example, Dallas consumers spend $1,807 per store per week on breads and rolls. However, the rest of the country spends $3,078, nearly twice as much.

When you factor in the saturated Dallas market with regard to supermarkets, gaining more dollars in the in-store bakery becomes even more challenging. Walmart, the largest grocer in the nation, is the key player with nearly 35 percent marketshare, but Safeway’s Tom Thumb and Randalls, Kroger, Supervalu’s Albertsons as well as United’s Market Street and H.E.B.’s Central Market also have a significant presence.

Janet Rowan, bakery sales manager, southern division, Albertsons, agrees that the Dallas market is very crowded, especially when compared to other regions in her charge.

“You have every different type of grocery chain available there, from high end to everyday traditional to discount,” she says. “There’s tight competition here compared to Louisiana, Florida, and some other areas of Texas. In Louisiana, for instance, you have a lot of mom and pops and a couple competitors, but nothing like you have here.”

Several of the chains are fairly recent entrants to the Dallas market. H.E. Butt Grocery, based in Austin, opened its first H.E. Butt grocery almost two years ago and now has three locations in Dallas proper and several more in the surrounding metroplex. The company first entered the market 10 years ago with its Central Market concept in Fort Worth. It now has half a dozen locations in the Dallas market. H.E.B. also is exploring opening smaller footprint Central Market stores, which could be the prototype for its future expansions.

Other recent entrants include Trader Joe’s, Sprouts and Sunflower Market. Walmart is opening several Neighborhood Markets, its smaller format concept. Albertsons recently announced plans to open five more stores in the Dallas area. So the already saturated market is about to get more competition.

Operators also need to factor in all the outlets customers have for bakery purchases. “The Dallas-Ft. Worth metropolis seems to have a donut shop on every corner,” says John Rose, bakery category manager, Brookshire Grocery Co., Tyler, Texas. Brookshire operates about half a dozen stores in the outlying metro area. While the “donut shop on every corner” analogy is an exaggeration, Rose recognizes that in-store bakeries in the area face steep competition from both other in-stores as well as other bakery outlets.

Demographic makeup

According to the 2010 census, Dallas’ population grew by less than 1 percent since 2000. It is the ninth largest city in the United States and the third largest in Texas, and features a more ethnically diverse population when compared to the rest of Texas and the United States.

Whites account for 30 percent of the population in Dallas, compared to 45 percent of Texas and 64 percent in the United States. A quarter of the city population is black, while blacks only account for 12 percent in the rest of the state and 13 percent of the country. The demographic group that perhaps gets the most attention is Hispanics, who account for 42 percent of the Dallas population, 38 percent of Texas and 16 percent of the United States.

Obviously as the largest demographic group, Hispanics are vital to the success of area in-store bakeries. On the surface, it would seem important to cater to the Hispanic community by offering a selection of conchas, bolillos, galletas and dulce de leche to simulate authentic Mexican panaderias. In reality, though, the ethnic and demographic dynamic at play among the region’s in-store bakeries makes focusing on more traditional American offerings a wiser option for most supermarket chains.

According to Rowan, there’s a certain behavioral drift or assimilation that takes place over generations of Mexican immigrants in the United States. First-generation immigrants grew up with authentic panaderias, and upon arriving in Dallas, are reluctant to venture outside of the similarly authentic Mexican niche bakeries.

The first step might be to a Fiesta Mart, a supermarket chain of 60 stores serving Latino communities in the Houston, Dallas-Fort Worth and Austin markets, which eases the transition from panaderia to in-store bakery by offering a full line of authentic ethnic bread and sweetgoods in a supermarket setting. This familiarizes immigrants and their children with the supermarket setting.

By the second or third generation, immigrants’ children have assimilated to American culture enough to frequent traditional American supermarkets and consume more traditional American baked products. In fact, some immigrants’ children and grandchildren are “Americanized” to the extent that they shy away from the ethnic supermarkets as a means of confirming their assimilation. Most non-ethnic in-store bakeries thus tend to concede authentic Mexican bakery sales to the specialty grocers who target that market, instead focusing on second- and third-generation Hispanic Americans with more conventional American tastes.

This isn’t to say that non-ethnic supermarket chains aren’t capable of producing genuine Mexican breads and sweetgoods. Many of the bakers employed in the in-store bakeries of traditional American supermarkets are Mexican immigrants themselves, possibly having learned their trade in Mexican panaderias. But the first-generation immigrant’s perception of authenticity is difficult to overcome, so Dallas area in-store bakeries focus on areas where they can better compete.

What are they buying?

The category that garners the most sales is desserts. In-store bakeries sell an average $4,570 worth of desserts per store per week, which accounts for nearly 57 percent dollar contribution to department, according to Perishables Group data from the 52 weeks ending Sept. 24. These numbers include cakes, which sell extremely well. “In general, it seems people in this part of the country enjoy cakes for all types of occasions,” Rose says.

Bread and rolls, the second most popular category, account for 22 percent contribution to department. Breakfast pastries, which include donuts, bagels and muffins, are a distant third, selling only $1,161 per store per week, accounting for 14 percent contribution to department.

As demographically diverse as the Dallas market is, supermarket in-store bakeries experience demand that is similar to the rest of the country. “I would posit the product mix is the same,” Rose says. “Thus we focus a lot of attention on exemplary customer service.” MB