Trends start on the coasts before working toward Middle America and Southern California often proves to be a trendsetter in many different facets, including food. Los Angeles and Southern California often evoke images of the glittering Hollywood elite, but the region is home to a fairly cutthroat in-store bakery market.
It is dominated by Kroger-owned Ralphs, Safeway’s Vons and Supervalu-owned Albertsons, but smaller chains, such as the independently-owned Bristol Farms, are making strides. Walmart and Tesco-owned Fresh & Easy are beginning to influence the region. Hispanic chains, such as Superior Grocers, El Super and Northgate Gonzalez Markets, also are major players.
Southern California has the largest Hispanic population in the United States, with 8 million out of the 14 million Hispanics in the state. For perspective, Texas has 9.5 million Hispanics, Florida numbers 4.2 million and New York, 3.4 million, according to U.S. 2010 census data. Mexico City is the only place with more Mexicans than the greater Los Angeles area, according to a report in Modern Baking’s sister publication, Supermarket News. In Southern California, including Los Angeles, Orange County and San Diego, Mexican consumers predominate.
Sales below average
Across the board, Southern Californians spend less in the in-store bakery than the average American. They spend $4,530 per in-store bakery per week on desserts, which accounts for more than 52 percent of in-store bakery sales. (All sales data is provided by Nielsen Perishables Group and is for the 52 weeks ending Feb. 25, 2012.) This is slightly more than the 47 percent national average.
Breads and rolls account for almost 27 percent of in-store bakery sales in Southern California, raking in $2,315 per store per week. In the United States as a whole, breads and rolls account for almost 30 percent of in-store bakery sales. Breakfast pastries post $1,592 in sales in Southern California, slightly more than 18 percent of sales, compared to 22 percent in the rest of the nation.
With the largest Hispanic population in the nation, it is no surprise that Hispanic sweetgoods sell four times better in Southern California compared to the rest of the nation, bringing in $81 per store per week in the region compared to only $22 nationally. Hispanic sweetgoods, a subsection of the breakfast category, include products such as bunuelos, concha, empanadas, pan de leche and other Hispanic sweetgoods.
The top three large chains, Ralphs, Vons and Albertsons, have been duking it out for years with the smaller chains, like Bristol Farms, and even independents for the Southern Californians’ dollar, but in the last several years, some new players have entered the market. Independent chains now account for 60 percent of the grocers in Southern California, compared to 30 years ago when they only numbered 20 percent.
Walmart, long the bane of rural and suburban supermarkets, has made significant strides in urban markets during the last decade. Last month, the behemoth announced plans to open its smaller footprint Neighborhood Markets in downtown Los Angeles, as well as in Orange, Ventura and San Diego counties; among the 13 Neighborhood Markets planned for California. Currently, Walmart operates 28 locations in Los Angeles county with five in the city of L.A.
The smaller Neighborhood Markets are about 4,200 sq. ft., compared to the 185,000-sq.-ft. SuperCenters, and many feature small in-store bakeries. According to published reports, Walmart does not plan to compete head-to-head with ethnic markets, but will make adjustments in product offerings according to customer feedback.
United Kingdom-based Tesco and its El Segundo, Calif.-based Fresh & Easy Neighborhood Market chain announced last year that it planned to add small bakeries to as many as 100 units. The chain currently operates 184 locations in California, Nevada and Arizona. The bakeries feature ovens for baking fresh bread supplied by Il Fornaio with the potential to bake off other bakery products.
Plans call for moving the bakery display from the back of the store to the front as part of the chain’s attempt to create a more welcoming atmosphere in the 10,000- to 12,000-sq.-ft. stores. The chain also plans to begin offering coffee and pastries to attract the morning commuter.
Fresh & Easy also is expanding its Express format in Southern California. These small 3,000-sq.-ft. stores feature fresh prepared foods and a small bakery. Eight Express stores currently have opened in the region, with additional units in the works.
For the most part, the mainstream chains like Ralphs, Vons and Albertsons, do not focus on the Hispanic consumer, leaving the market open for niche operators, including Northgate Gonzales Markets, Superior Grocers and El Super. About eight chains operate about 300 stores, with one-third owned by first- or second-generation Hispanic families.
What most mainstream operators fail to understand are the differences the Hispanic consumer look for in a shopping experience. Perishables make up more than half the volume at Hispanic-centric stores, with bakery accounting for up to 6 percent of sales. Bakery accounts for 4.4 percent of the average store sales, according to Modern Baking’s 2010 In-store Bakery Survey. They also shop for groceries on average three times more per month than the general population, according to the Food Marketing Institute.
The Hispanic chains also understand the differences between first-generation consumers and the generations after. Northgate Gonzalez Markets specializes in the Mexican consumer, with cakes, Mexican sweet breads and bread making up the three top-xselling bakery categories. The bread category extends beyond the traditional bolillos and telera rolls to include bagels and European-style crusty breads, which are popular among the assimilated second-generation.