It may seem odd to discuss upscaling product lines while in the throes of a volatile market. After all, consumers have less overall buying power and are forced to stretch each dollar just to afford the basics. It would hardly seem the time to appeal to luxury or opulence. But, perhaps counter-intuitively, upscaling also effectively appeals to a desire for added value.
Ron Danko, senior vice president of Summit International LLC, a supermarket consulting firm in Sedona, Ariz., says baked products are in a unique position among other foods during turbulent financial times. Sweetgoods, for instance, rarely appear on consumer shopping lists. Instead, they are often impulse buys, and may not be subject to the same rational, cost-benefit planning that goes into other food selections. To a lesser extent, breads' close association with healthfulness, a relatively economy-proof concern, also opens avenues for upscaling.
“Breads are fairly stable, and don't have to change as much. But sweetgoods are all about what excites the customer, so if they see the same thing every week, you lose the excitement effect,” Danko says. “Pastries and sweetgoods have to be extra tempting and stimulating, because in order to make the sale, a retailer has to overcome consumer resistance to price, calorie-consciousness and so on. Familiarity brings boredom, but a big part of what upscale, value-added products bring to the retailer is differentiation.”
Bakers primarily differentiate themselves in one of two ways: price or quality. Danko believes in high-quality, value-added products because being first to the market with a product, or offering an upscale version of a product, creates a situation where there is little to no competetive pricing. But if everybody offers the same products, the competition among them pushes retail prices down. At that point, offering an even lower price is all that's left to differentiate retailers.
Where to upscale
Currently, healthfulness is a primary trend in upscaling. To many health-minded consumers, no preservatives, whole grain and all-natural are perceived as important added values to baked products.
“Healthfulness transcends all price levels, and it's an especially big factor with the older generation,” Danko says. “The average age keeps going up, an entire generation has to be health-conscious just to stay alive. And younger folks have grown up with healthful trends.”
Andrew Swartz, owner of Andrew's Pastry Shop, Columbus, Ohio, sees growth in individually sized items and smaller portion sizes. Waste is something that weighs heavily on the minds of financially conscious consumers, and if they find themselves throwing away the staling remains of a 10-in. cake, that customer may not buy that cake again.
“People are avoiding major purchases like cars and washing machines. An entire cake or torte is, for a bakery customer, the equivalent of a substantial purchase,” Swartz says. “I've noticed sales for our high end items, like our New York cheesecakes, have dipped. But people are still willing to spend $10 for a quarter of the cheesecake, or buy just a slice.”
Individual slices of cake, cookies and cupcakes aren't seen as a major expenditure, and they don't have much potential for waste on the consumer end. Selling individual slices of cake circumvents the bad taste that waste can leave in a consumer's mouth.
When bakers downsize, it gives them the benefit of having a smaller unit retail. Plus, people tend to be more daring when they aren't committing more than $10 for a cake. Plus, if it's smaller and it's consumed faster, the customer will be back sooner.
“Right now, you'll probably sell a lot more 5-in. cakes for $9.99 than 9-in. cakes for $19.99,” Danko says. “I marvel when I look at showcases, and see these huge pies, huge cakes, and I just wonder-who buys those? Family sizes are smaller, people have less to spend-who eats those?”
Reduced size and individually portioned items are prime candidates for upscaling. A slice of cake doesn't carry the same visual cache as the whole, completed product, so bakers have to take the time to ensure each slice, each bon bon and each cupcake has the feel of a completed product that stands on its own as a dessert.
“Obviously, dessert is not eaten to sustain one's self, it's consumed for pure pleasure,” says Spencer Budros, owner of Pistacia Vera, Columbus, Ohio, “What we've found is that the more special it is, the more attractive it is, the more likely it will be for someone to splurge.”
Budros says upscaling isn't just about what you add to a product, it also is about what you don't add. He forces himself to exercise restraint to keep products simple and elegant, and avoid going over the top. With a minimalist approach to plating and product appearance, Budros finds it important to explain to the customer what differentiates his products.
“Educating the customer is key. We changed all of our counter signage to include not only the name of the dessert, but also a descriptor explaining what we are most proud of in the dessert,” Budros says. “You have a product that's different and maybe more expensive than others, brag about it, and make sure your staff is trained to brag about it. Let people know what sets you apart.”
Food as escapism
Another major trend to keep in mind when upscaling a product line is comfort food. “Unemployed people eat more donuts,” Danko says. “It's sad, but it's a reality. For people down on their luck, it's comforting to eat something that was a treat when they were children.”
Danko suggests an all-natural cinnamon roll, covered in icing, as an example of an item that combines homespun, nostalgic memories with ongoing health trends. Now, clearly, a gooey cinnamon bun isn't healthful per se, but consumers respond to the added value of no preservatives. Upscaling provides the requisite bit of differentiation to turn a run of the mill hockey puck of a cinnamon roll into a wholesome treat that Mom would approve of, making all of the difference in a sale.
Swartz has always served products with a simple, nostalgic flair, and recognizes the appeal of comfort foods.
“The country has been in a funk, so people revert back to a simpler time,” Swartz says. “A big part of that childhood is food. Cupcakes, cookies and other simple items provide a sense of relief. Cookies and cupcakes are easy to customize without a lot of labor, and you can charge more per dozen.”
He cautions against spending too much time on upscaling, saying it doesn't necessarily take a lot of work to add value to desserts. But he's been producing high-quality baked products for 13 years, and already enjoys a reputation in the community that differentiates his shop. For him, instead of seeking further measures of differentiation, he has to guard against taking a step back in quality in his customers eyes.
“In times like this, there's pressure to take a shortcut on ingredient quality, especially with high prices. But that's the absolute worst thing you can do,” he says. “Your customers expect a certain thing from you, and you've worked hard to earn that expectation. Your customers have learned that they want something from you, make sure you give them what they want.”
Danko agrees that knowing where and how to upscale is, more than anything, a matter of knowing your market. He urges supermarket in-store operators to use the wealth of scan data they likely have at their fingertips to make informed decisions about where it is smart to upscale. But in looking into the data, it's essential to keep data from individual stores isolated instead of taking an average across the breadth of a chain.
“We've found vast differences in sales right down to the item level based on area demographics. We've urged some chains in affluent areas not to sell donuts, which surprises people,” Danko says. “But donuts aren't upscale enough for some markets. If the demographics indicate that donuts are not a great seller for a particular store, we don't want to waste display space on them when other items would get more volume.”
Supermarkets' new clientele
During comparable socioeconomic times shortly after Sept. 11, 2001, Danko saw a similar spike in comfort food items. Because we are only eight years removed from that period, and retailers can look back at it without having to account for generational differences, the post-Sept. 11 climate can serve as a valuable template for what to expect in the immediate future.
“What happens when times get tough is a phenomenon that you could call a step-ladder effect. Everybody goes down one rung on the food ladder,” he says. “People who used to go to a white tablecloth establishment will begin to frequent more mid-price areas. The spending on food goes down one notch and you have a great deal of people who will be making that transition from higher cost items to buying things in supermarkets.”
These wealthier customers who are increasingly shopping at supermarkets are used to upscale baked products, so the necessity for upscaling in supermarket in-stores is growing. Danko says this boon of new customers can be tricky to deal with. For one, upscale products demand more attention to detail. The higher the price point, the more particular the customers are. People expect more quality and greater freshness and flavor; and they know their food products. A customer that may have spent a lot of time and money at restaurants is very aware of the food they eat, so a bakery staff will have to pay a lot more attention to detail.
Another characteristic of the new supermarket in-store clientele is that as the price rises, the customer expects less packaging. Danko recommends a lot of transparency on the packaging, as consumers of upscale items don't like a lot of camouflage on their products. That an upscale shopper is more likely to be interested in sustainability, source reduction, and locality and the environment is another reason to be wary of over-packaging.
Also, retailers can't rely on packaging alone to convey an upscale feel and command higher prices. Even the best designed packaging won't work if it contains a product of the same old quality or freshness level. To be perceived as a value even though it's more expensive, it has to live up to heightened expectations.
At their core, adding value and upscaling are means of differentiating baked products to make them stand above the din and prompt customers to buy. Bakeries have to impart a set of qualities that will allow consumers to justify the higher retail price. Upscaling appeals not to luxury, but to perceptions of value. And in today's economic conditions, value is as important as ever.