The Top 50 in-store bakery operators didn’t get to the top by passively waiting for sales to come to them. And now, under the yoke of a slow-to-warm economy, leading retailers are exhibiting creativity in developing sales in nontraditional spaces.
Outside of the Sunday morning dozen-donut sales, breakfast has traditionally been a nearly ignored daypart for the supermarket in-store bakery. But in the past year or so, breakfast items, especially donuts, sweetgoods, and general breakfast bakery have done extraordinarily well in both dollars and volume. And not just on the weekends, but all week long.
“It’s grown from a change in the way people eat, and change in the quality and variety of products available to consumers,” says Jonna Parker, director of account services, Perishables Group, Chicago. “For a breakfast eater, breakfast is the key daypart. It is every day; it’s a routine for consumers. A lot of retailers have figured that out. Despite the convenience, consumers tire of the expense of a cup of coffee and a scone at Starbucks. Smart retailers position themselves as an alternative.”
There are two important elements for in-store bakery operators to consider when targeting the breakfast daypart. First and foremost is quality. In the case of breakfast, bakeries aren’t losing sales to other parts of the supermarket, but to Panera or Dunkin’ Donuts.
“When it comes to breakfast, you’re competing with coffee shops and foodservice chains,” Parker says. “In order to compete, the quality has to be there.”
Bakeries also must consider that, counterintuitively, the battle for breakfast sales isn’t waged at 6:30 a.m. as consumers make their way into work. In fact, the hungry 6:30 a.m. commuter sale has already been lost, as supermarket bakeries can’t compete with the momentary convenience of a drive-through window.
Instead, competition for the breakfast daypart exists in the primary household shopper’s weekly trip to the supermarket. “It’s partially a factor of the economy; its expensive to go through that drive-through every day,” Parker says. A smart in-store bakery angles to replace two or three of what used to be four or five weekly trips to Starbucks.
A key to succeeding in breakfast is to consider volume. There may be only one person in a given household who participates in morning commuter breakfast routine, so a 50-pack of specialty donuts isn’t going to appeal to that household’s primary shopper. But a two- to three-pack might be a realistic weekly purchase. Bulk has done well overall in the in-store bakery, but the morning commuter’s breakfast isn’t a family occasion; rather an individual, one-off sale.
“When you think about it, a lot of cinnamon roll packs are four to six to a pack, but that takes four to six people to eat. That’s fine for Sunday, but not for everyday,” Parker says.
She points to trendy ultra-high end cupcakes as breakfast possibilities that could accompany traditional breakfast pastries and sweetgoods. Donuts are an interesting phenomenon, and have potential similar to the cupcake. An in-store bakery can produce a lot of variety from a single baseline product, just by tinkering with decorations and toppings.
“One of the things we did was we came out with like a donut of the month program. It’s an indulgence item, it’s all about taste,” said Bill Mihu, Schnuck’s Markets, at Modern Baking’s annual in-store roundtable. “And we did it with our existing SKUs, but it was about different decorations or toppings, and it was to add variety. It adds some excitement back to the cake donuts and really boosted our donut sales.”
Fresh baked Trojan horse
To make room for the in-store bakeries it is adding at its stores, Fresh & Easy Neighborhood Market, El Segundo, Calif., is adding a fourth tier to its dry produce displays. It is clearing space for more fresh items by removing The Kitchen Table demonstration area from a permanent spot in the stores and transferring it to a mobile cart that can be positioned in the department in which the merchandise it wants to sample is located. This concept could provide a mobile foot soldier to strategically inject fresh baked items into departments that might offer good pairings.
The secondary display is a concept that a lot of chains have tried, but it is a difficult one to master. It is necessary to understand the right application, because not every product will do well, and not every seemingly natural pairing will work for the bottom line.
“This is the subject of a lot of talk right now,” Parker says. “It’s tough for retailers because it is a tough product, compared with the long shelf lives of typical consumer packaged goods. But it has some interesting possibilities.”
To be successful, an in-store bakery operator has to make sure the display is stocked and fresh, which can be tough to implement at a store level. And at a corporate level, it’s often a politics game for one department to cede territory to another. Also, there’s always the wrinkle that you’ll make people realize in-store is more expensive than bread aisle items when you put them too close together.
“If store-made mini brownies are in the endcap near the milk, and then they’re next to commercial sweetgoods, and you have the consumer comparing prices,” Parker says. “If done correctly, you’ll realize there are different levels of consumers and you may get a consumer to trade up, but it will also scare people away. It doesn’t work automatically. You have to understand, who are these two different consumers? Safeway, for instance, pairs soups with breads or even a bread bowl. Thinking about who the consumers are, that’s the right pairing.”
It has to be done the right way, and meticulously maintained for freshness, but the secondary display is a gamble that in-store bakeries are increasingly taking. An operator can think of it as a Trojan horse through which fresh bakery products can be introduced outside of the boundaries of the typical in-store bakery footprint.
Proper approach to health
“Gluten-free statistics abound, certainly we’re seeing triple-digit growth in sales of products claiming gluten-free; however, growth is still from a small base,” Parker says. “Similar to gluten-free, we’ve seen retailers creating ‘sugar-free’ zones within their department.”
The key to the gluten-free market and any specialty health bakery market is understanding that it is a niche demand, and ought to be treated as such. Still, demonstrating an in-store bakery understands and can appeal to a niche consumer group without upsetting the balance of other groups is a great way to draw interest. Healthful product claims targeting a dietary need, such as celiac or diabetes, should be thought of differently than products geared towards a wide audience’s desire to eat more healthfully.
“We’re seeing growth of both in the bakery; however, it’s important to think of the two consumer ‘missions’ differently when strategizing the role products play within your in-store bakery,” Parker says.
And gluten-free isn’t a category to explore on a whim, or offer for the sake of appearing ahead of the curve. Consumers with celiac disease require gluten-free food throughout the store, so if other departments aren’t offering gluten-free alternatives, there’s less value in an in-store offering gluten-free.
“You’re not going meet all the customers’ gluten-free needs because they don’t offer it in other areas of the store. In other words, if you just offer it in bakery, it’s such a small segment, they may have to go to some other grocer to get the other items throughout the store,” Mihu said. “You have to have a strategic kind of approach to that to have any kind of success or resonate with your guests on gluten-free.”
As the number of people diagnosed with celiac disease has increased, so has demand for gluten-free products. Sales of labeled gluten-free bread and bakery foods in natural foods retail outlets increased 60 percent from $17 million for the 52 weeks ending June 2008 to an estimated $27.2 million for the like period ending June 2010, according to Mintel, Chicago.
Ethnic success
“The biggest trend to watch that we haven’t yet seen hit or make a complete impact in the in-store bakery has been the rise of ethnic flavors across the store, especially in fresh departments,” Parker says. “American cuisine isn’t just apple pie anymore.”
The Perishables Group has witnessed marked spikes in Hispanic offerings, as well as a rise in Middle Eastern, savory and decadent sweets. Calling a crusty roll a bolillo makes it more interesting to increasingly brave and flavor-curious shoppers. A bolillo is exciting, and the same kind of concept can be applied across the store to develop meal-building themes.
The most important thing with introducing new and ethnic flavors is to know your demographic. One chain says it has different names for rolls depending on the location of the store, taking that same tier and style of rolls throughout the South and only changing the name and merchandising. This keeps the products flexible enough to appeal to whom they are being marketed–whether it’s a Francophile population in Louisiana or a Hispanic customer base in south Texas.
“In-store bakeries haven’t embraced these ethnic skewing products enough. It’s a grey concept, but at the end of the day, it’s where the growth is,” Parker says.
Portion control
Many factors, such as smaller households, including the growing number of seniors, are driving demand for smaller sizes and portions. “Couples or small families still want cakes but maybe 7-in., rather than 8-in., cakes,” Mihu said. Schnucks’ bakeries currently offer both, but to help maintain consistencies in SKUs, the company is considering dropping the 7-in. size and offering 8-in. varieties in half sizes.
Demand also comes from people who want to reward themselves for whatever reason with a slice of cake, a donut, even a better-for-you product in a smaller size, Mihu continued. “Bakery still is an indulgence category–this is our guiding light. But, if a bakery product doesn’t taste good, nothing else matters, not even nutrition motives.
“If a bakery can make a nutrition claim about a product, great. Customers can feel better about themselves about buying it. But, that product had better taste good. Our industry has seen too many nutritionally oriented bakery products that didn’t taste good, were priced high and caused consumers to take bakery out of their diets.”
Daytime traffic in city centers and office complexes drives much of this demand, too, Mihu said, which comes from individuals picking up breakfast, lunch or treats for fellow workers. Most downsized Schnucks’ products are grab-and-go items that lend themselves to self-service merchandising. Forks, packed with slices, make buying them even more enticing.
The company introduced 3.4-oz. cupcakes that can be sold packaged individually in clamshells or from service cases. Decorated versions (8.4 ozs.) sell for $2.49 each, while decorated and filled cupcakes (9.4 ozs.) retail for $2.99 each. “These have broad appeal, such as to a [customer] treating herself or purchasing for a fellow worker celebrating a birthday,” Mihu explained.
Smaller-size products should be merchandised with their whole versions, he continued. “Customers go to whole versions to see what’s available. They may choose two cake slices, but the next time they may buy a whole cake because their needs are different.”
Demand for bread products in smaller sizes is less than that for sweets, largely because Schnucks’ in-stores already offer rolls and bagels in bulk displays, Mihu said. The bakeries standard offering–two-packs of 8-oz. mini loaves–is a top-selling bread item made from the same doughs as the best-selling whole versions in sourdough, garlic herb, sweet, whole wheat and cheese.
“Smaller sizes should be extensions of your best-selling products,” he said. “Think about your customer profile and what’s selling within your categories. Take those products that make sense and reduce their pack sizes. Our top-selling cake slices come from our best-selling whole cakes.”
Distinctions in the small-size market, require tailoring a program and knowing the customer.
“I think it may be hard to distinguish between an offering for portion control and an offering meant to appeal to smaller households–both of which have an important, and sometimes neglected, place in the in-store bakery,” Parker adds. MB
