Bruegger’s Bagels now offers baked-on-site bread to allow for more sandwich variety.

Consumer choice in the foodservice bakery market can be seen as a grid of competing values: health versus flavor, quality versus cost and atmosphere versus convenience. In any given socio-economic environment, sweet spots on the grid represent perceived value to a population and are exceptionally suited to do well given certain conditions.

Economic conditions have changed. People have less money in their wallets than they did a year ago and are spending less overall. The sweet spot on the grid has shifted, and the bakery café model sits in the center of it as consumers value both quality and lower prices.

“The over-arching trend right now, with the economy we sit in, is toward less expensive foods in general,” says Vladimir Alfa, C.E.O. at Paul, a century-old European chain that entered the U.S. market in Miami four years ago. “The fast food restaurants have been doing very well, in fact. But since opening in the U.S. market, we have found that there are lots of people still looking for an inexpensive, quality meal; people who are unwilling to go the fast food route.”

Other values have remained constant, though. “We have evergreen trends of health and convenience that bear mention because they continue to remain strong motivators, year after year,” says Tom Piper, vice president of marketing for Bruegger's Bagels, Burlington, Vt. “Those are two factors that have evolved into a balance; people aren't going to give up on taste and convenience for health, but for the most part, they aren't going to sacrifice their health, either. They are looking for solutions that combine the two in harmony, and we are well positioned for that as a bakery café.”

The fast casual bakery cafe format sits at a crossroads of values. Bakery cafes cost more than quick service restaurants, but also are less expensive than casual sit down restaurants whose waitstaff's require tips. The bakery cafe format all but matches quick service in terms of convenience, and far outstrips them in atmosphere and ambiance. And the bakery café offers an impression of healthfulness and freshness with which few quick service restaurants can compete. Those qualities combine to make it perfectly suited for modern American consumers concerned about prices, but unwilling to give up on health and convenience.

Price has new weight

The bakery café category suffered along with other bakery segments under the recent commodity crisis. Some customers were balking at the price increases necessary to cover production and delivery of baked products, bakers report.

Founded in Paris in 1889, Paul bakery cafe chain, popular in Europe, arrived in Miami four years ago.

“Interestingly enough, I think the commodity price issue is actually a relief in 2009,” says Tom Gumpel, director of research and development at St. Louis-based Panera Bread Co. “The commodities crisis made companies say ‘where are we?’ We're kind of over that, and hopefully we won't have to see that again too soon.”

Bakery cafés that stayed true to their brand found themselves with a pricing advantage after grain and gasoline prices hit a crescendo and began to settle. The paper-thin margins that once gave quick service restaurants a strong advantage in price point also forced them to violently ratchet up prices when commodities were at their highest.

Bakery cafés, which generally carry larger built-in margins than the huge quick service chains, were able to absorb the volatile ingredient costs with fewer price increases. The result was a closing of the gap between price points in the quick service sector and the bakery café. For the value-minded consumer, this tipped scales to bakery cafés' advantage.

“The obvious movement in foodservice is the complete panic search for value,” Piper says. “But price points aside, I think we also have an advantage from a conceptual standpoint-there's a psychological component to being a neighborhood bakery.”

Despite the panic, he says people's lives haven't been completely thrown upside down by the market downturn. Most merely have had to look more closely at value and make wise choices with perhaps more limited means. The bakery café, associated with fresh ingredients, wholesome bread and recognizable foods, has an advantage over the quick service format in terms of value perception.

Value to whom?

According to Gumpel and Piper, the primary market for the American bakery café has long been women, aged 26 to 50. The gender gap is due to the bakery café's wholesome, more healthful image, as women tend to be more health conscious than men. Also, the bracket is strongly composed of mothers, where health is a major dietary choice motivator.

But the category is growing into other demographic groups, the most important of which being convenience-minded professionals and commuters. Coffee and lunch programs have been crucial to growth in these catagories.

Panera, Corner Bakery and others have carefully cultivated their brands as lunch destinations, placing soups and sandwiches at the core of their business model. Through catering programs, bakery cafés have expanded their reach to the working professionals with strict lunch hours and corporate meetings.

“Bakery cafes have four walls, but catering allows you to reach outside of those four walls and start feeding businesses, not just individuals,” Gumpel says. “The bakery café is in great shape with catering, in part because the person who makes the decisions about corporate catering is likely to be within our primary demographic of 26 to 50-year old-women.”