Retail bakeries share how they generate more foot traffic and greater sales during traditionally slow periods by implementing peripheral product lines, such as sandwiches, candy and gourmet coffee.

Pistachio Sweet Kitchen is moving to a larger location based largely on the success of its new confectionery items.

Rick Boone plans to bring the soup and sandwich section to the front of his bakery, and create a full smoothie, juice and coffee bar to wrap around the seating area. Merchandisers and showcases will position products within customers’ reach.

Porto’s Bakery has established itself as a lunchtime destination in the Los Angeles area while maintaining lively business in decorated cakes and other, more traditional bakery products.

 

Bakers may not like to admit it, but man cannot live by bread alone. As bakery cafe chains, such as Panera Bread Co. and Atlanta Bread Co., usher in a new model of bakery, complete with built in synergies between baked products and foodservice, retail bakeries are looking beyond traditional lines of bread, cakes and pastries to generate revenue.

Sandwiches, beverages and candy can be natural outgrowths for bakeries. Each has the potential to stand alone as a successful product while simultaneously working to bolster bakery sales.

“A large percentage of our customers that come in to get sandwiches will pick something up from the bakery and vice versa,” says Raul Porto of Porto’s Bakery, Glendale, Calif. “We didn’t realize that until we got into food. We knew we’d increase sales from beverages and sandwiches, but we didn’t realize that bakery sales would go up.”

Getting started
Porto’s Bakery opened in 1971, but didn’t expand beyond baked products until the early 1980s. “I’d love to tell you that we were anticipating the market and knew where it was going, but we didn’t,” Porto says. “It’s ironic that the sandwich bakery is such a hot concept, for us it seemed like the only way to go.”

Porto’s transformation began organically, mostly as a result of adapting to demand. Some customers requested to have milk with their donut, while others wanted meat and cheese to put on the bread they were buying, so product line diversification occurred gradually. Bakeries hoping to capitalize on profits beyond baked products, though, often are seeking more immediate results.

After a year of experimenting with deli items as an add-on to his traditional full-line bakery, Rick Boone of Rick’s Bakery in Fayetteville, Ark., is declaring the venture a success and designating a section in his bakery to devote to soups and sandwiches. In addition, he’s adding a new beverage bar to offer smoothies, coffee and juices. Randy McArthur, McArthur’s Bakery, St. Louis, also is in the process of channeling energy toward gourmet coffees and his existing soup and sandwich shop. Michael Concannon of Concannon’s Bakery in Muncie, Ind., began augmenting his baked product lines with candy in 2001, and has transformed it into an integral part of his business. Meanwhile, the confections at Columbus, Ohio-based Pistachio pastry shop will soon outpace bakery products in sales. Clearly, bakeries nationwide are taking advantage of additional profit streams without losing focus on traditional product lines.

Product lines drive one another
“There are a lot of synergies built in. We are basically three businesses in one that feed off each other,” Porto says. “People will come for one thing, like coffee, but they see a muffin and they say, ‘I’ll have a muffin.’ Or people picking up a cake order, they will also have a sandwich and a coffee to go. They all help each other out; they all drive each other.”

Boone agrees that while everything he does still revolves around baking, but the bakery’s customers are pushing the deli sales upward.

These natural synergies allow for clever marketing strategies, pairing beverages, soups, sandwiches and baked products. The potential for up-selling means that the total number of discrete customers doesn’t have to change to see additional profits.

“Your regular customers will repeat your business more often, so you don’t even need new customers. Your regulars will keep you busy all year long, seven days a week,” Porto says. “We are busier on weekends, but the sandwiches get people coming in more regularly through the week.”

Reduce fluctuations in sales volume
“Forty years ago, people used to go into the bakery three or four times per week,” McArthur says. “Now the local bakery has become a shop that people only go to on special occasions.”

Indeed, retail baking can be a feast or famine business. Thanksgiving through Christmas and the multitude of late-spring and early-summer holidays transform bakeries into relative boom towns, and the sales volume reflects the demand. Other periods can be much more difficult, and McArthur notes that bakeries are still paying for overhead in those slow, low sales-volume periods. “January, February, March and August, when there’s nothing going on, our revenue goes down so low and our volume goes down so low that we were beginning to die,” he says. In order to maximize the return on costs of space, ingredients and labor, McArthur is looking to his sandwich line.  

Cognizant that his deli puts him in lunch competition with all the foodservice big boys, McArthur says that he knows he isn’t going to be a world beater in that department. The goal is to become enough of a player in food so that people are at least thinking of the bakery as an option. McArthur’s plan is to increase daily revenue and daily traffic without reducing the boom of holiday seasons.

Porto says that the work day can be seen as a microcosm of the all-or-nothing nature of bakery sales.
“Bakeries are generally busy only during certain hours of the day, but by adding a few items, you can be busy during breakfast, lunch and dinner,” he says. “It smooths out your sales throughout the day and throughout the year, so you can have more consistent sales.”

Chocolates and confections
While soup and sandwiches add consistency to the bakery during lean periods, candy can work to further amplify sales. Concannon believes that the one thing that’s certain about people who are coming to his bakery is that they are coming with a sweet tooth. With that in mind, he went after the candy market by adding chocolates and flavored popcorn to his product line.

Concannon says that candies and chocolate are seasonal–even more so than bakery items–but mitigating against their seasonality is how well they work with bakery items year-round. “There is a lot of interchange,” he says. “You can enrobe cookies with chocolate, drizzle chocolate on cakes, use chocolate shavings anywhere. A popular item year round is our chocolate sucker, which we can shape to reflect the season and display all over the store.”

Shelf-life is a major advantage of chocolates, candy, and even popcorn, making them ideal for gift packages. Particularly during the winter gift-giving season, Concannon’s packages draw large dollar amounts from local corporations that bakery products might not be able to generate.

“Gift packaging is so expressive, too, that it gives us a lot of flexibility to deal with addressing events,” he says. “We packaged team-colored popcorn in Bears and Colts tins, making them popular Super Bowl items.”

Spencer Budros, owner of Pistachio, a sweet kitchen, introduced a line of confections, truffles, and pates de fruits about a year after opening his dessert-only business in 2004. Like Concannon, he quickly found that confectionery items and their long shelf lives had great potential as gifts. Pistachio will be moving from its current 2,300-sq.-ft. location into a more than 5,000-sq.-ft. building to better pursue its confections’ potential.

“We will grow our business mostly out of our confectionery items due to the gift-giving opportunities,” Budros says. “When it comes to volume, we’ve found that we really need to go after the personal and wholesale gift-giving market.”

Front and center
Rick’s Bakery added an espresso bar when he moved to his current location five years ago, but it never proved successful. The coffee vendors suggested different positioning, and Boone moved the bar throughout the bakery with decreasing success before he finally gave up on the idea.

Then, one morning while eating breakfast at a Village Inn, he noticed its lonely espresso machine against a wall. When his mind’s eye compared that metal coffee machine in the back of a Village Inn to the sensory circus that is a trip to Starbucks, his minor coffee failures made perfect sense.

Along with the planned juice bar, Boone is planning a front and center gourmet coffee station, complete with a barrista who will engage and stimulate customers, and perhaps suggest a few bakery products that go especially well with cappuccino.

McArthur’s soup, sandwich and coffee efforts had a similar problem. Though the lines had been able to earn their keep in sales, McArthur feels there is a lot more potential that he intends to tap.

“There’s no retail presence, and that’s where we need to improve,” he says. “It’s shallow to think you can just hang a sign and expect people to buy our lunch item, we need to do a better job merchandising.”
He echoes Boone in the necessity to get new items out in front of customers, and is in the process of selecting the right display cases to accomplish that mission.

Challenges
According to those bakers who have successfully sought profits from sources beyond baked products, challenges exist, but aren’t prohibitive.

“There’s more work and more of a learning curve, but you are already doing the hardest thing–the baking,” Porto says. Both McArthur and Porto say that bakeries already have a lot of the equipment they need to make sandwiches–and probably all of it they need to make bread.

Some candy, chocolates and confections require specialty equipment. Budros succeeded with the simple addition of a confectionery guitar cutter, but will be equipping his new space to better deal with larger confectionery volumes. Concannon’s candy production has grown to the point of requiring a chocolate enrober (in its own room), marble toffee pulling tables and copper pots for boiling toffee.
“Go to a candy show, the yearly ones in Philadelphia are great,” he says. “They have all the resources you need and ideas from packaging to production.”

Other product extensions, such as smoothies and coffees, are low cost to get into, Boone says. “Most bakeries are already doing some kind of coffee. How much would it cost to add another pot and do a new flavor of the day?” he adds.

This is not to say that all retail bakeries are compelled to expand their product lines to seek profits from non-baked items, but it seems that most bakeries are moving in one of two directions; they are either becoming more inclusive or more exclusive with their product lines.

“If you’re making a great specialty product, and you’re willing to live within the market you’re in, you’re fine,” Porto says. But for bakeries not willing to head down the road towards specialization and niche markets, diversifying product lines to reach profits beyond bakery products is a viable way to remain relevant.

“If you would have asked me 20 years ago, I’d have said I’d never do foodservice, but we have to change with the times,” McArthur says.