What a difference a decade makes. In 2002, the Top 50 wasn’t markedly different than it is today, but the supermarket industry was coming off several years of mergers and acquisitions that had a profound effect on in-store bakeries. With the new, national chains, many regional names disappeared or the bakeries’ product lines were altered significantly. The ensuing 10 years were a time of adjustment as many chains began to understand that cookie-cutter bakeries weren’t necessarily what customers wanted.
While supermarket chains are still growing and acquiring new stores and markets, only a few major acquisitions/divestments appear to be the works. Earlier this year, Bi-Lo, with 207 locations and the same number of bakeries, acquired Winn-Dixie Stores, which has 483 units, all featuring bakeries. Bi-Lo indicated it could take up to a year before the integration of the companies is complete.
Cerberus Capital Management, which purchased more than 600 Albertsons locations when that chain was sold, is looking to purchase Supervalu, which operates the remaining Albertsons locations among other banners. Cerberus would then put the various Supervalu banners, such as Jewel-Osco, on the block. Supervalu also announced earlier this year it plans to shutter 60 underperforming stores.
Whole Foods opened 25 stores during its fiscal year 2012, which ended Sept. 30; and the chain plans to open about 30 more in 2013 and an additional 25 in 2014. The key to its growth is a focus on smaller format stores based on Wild Oats Markets, which it acquired in 2007. Walmart plans 125 new supercenters in 2013 and about 100 of its smaller format Neighborhood Market stores, which will further solidify its place as the largest grocer in the United States. In 2002, Walmart was ranked fifth in the Top 50 In-store Bakeries, behind number one Kroger, followed by Albertsons, Food Lion and Safeway.
Several chains, including Supervalu, Kroger and Safeway, closed more stores than they opened in the past year, according to Modern Baking’s sister publication Supermarket News. However, many are choosing to focus on formats that have expanded fresh departments, good news for in-store bakeries. In-store bakeries brought in about $7 billion in sales in 2012, according to Nielsen Perishables Group. Click image at left to view larger version of Top 50 tables.
Importance of fresh
“Fresh has taken off in retail,” Jonna Parker, director of account services, Nielsen Perishables Group said during a presentation at All Things Baking in Houston. The five fresh categories in supermarkets, which include the in-store bakery, outsell grocery, she added. Bakery was one of only two fresh departments to grow in both dollar and unit sales this year (deli was the other), and since 2007, bakery has grown more than 5 percent annually, Parker said.
The fact that bakery continues to grow adds credence to the adage that bakery is a recession-proof department.
“People will give up a lot of things but they won’t give up their favorite cookie or coffee,” says Christina Jessie, bakery sales manager, Market of Choice, Eugene, Ore. “I just am really surprised at how our sales have stayed strong. We haven’t shown any downturn at all until this last year; we’re still showing an increase but it’s not as big of an increase. Up until this last year, we were at about a 5 percent increase over the year before.”
Jessie credits much of the growth to Market of Choice’s commitment to scratch baking and a focus on local ingredients–a trend that seems to be reaching even the larger chains. For several years, many of the smaller supermarket chains, such as Market of Choice (8 locations), Dorothy Lane (3) and Harmons (16) have featured scratch bakeries, making everything from artisan breads to pastries, but that trend is starting to trickle up to some of the Top 50 chains as well.
A scratch artisan bread program, using starters, isn’t easy to accomplish in an in-store environment. “Sourdough was something that someone told me I couldn’t accomplish, but I did,” Jessie says. “We introduced the starters about four or five years ago.”
Who shops the in-store bakery?
While anyone who walks into the supermarket is a potential customer for the in-store bakery, who are they and how often and when do they shop? The information was provided by Jonna Parker, director of account services, Nielsen Perishables Group during a presentation at All Things Baking in Houston.
• 94 percent of all regular shoppers purchased from the in-store bakery at least once in the last year.
• The average shopper makes 13 trips to the in-store bakery per year.
• On average, a shopper spends $59 per year in the in-store bakery.
• 65 percent of bakery sales occur Monday through Friday. (Don’t under staff your bakeries during the week to keep up with the weekend “rush,” Parker recommended.)
• 33 percent of sales happen after 5 p.m. (Bakeries should be staffed past mid-afternoon or you have the potential to lose sales, Parker added.)
•12 percent of bakery trips included more than one type of bakery product, meaning the customers purchased a bread item and a pastry item, for example.
• Two segments have the most buying power and account for 20 percent of sales: premium, healthy-living couples and quick, on-to-go families. The couples are drawn to breads and rolls and love savory meal companions. Families are looking for celebration products, such as cakes, as well as small packaged treats. “Bakery success is about understanding and appealing to your customer,” Parker said.
Last year, Brookshire Grocery Co., based in Tyler, Texas and operating 152 locations and 148 bakeries, opened its Fresh concept, which makes 95 percent of its products from scratch, including artisan breads from starters. This summer, Hy-Vee joined the scratch artisan bread bandwagon when it opened its newest location in Urbandale, Iowa. Both chains’ new bakery concepts feature open-air bread displays and ingredients, such as bags of flour, on display.
“This is the first time we’ve ever brought our ingredients out and on display. We feel that tells our customers, ‘Look at all this product we have to carry, look how fresh our ingredients are and this isn’t coming from a mix.’ It just sends a good-quality, made-from-scratch message,” says Tony Byington, assistant vice president of bakery operations for the 235-unit (195 bakeries) Hy-Vee, West Des Moines, Iowa.
Hy-Vee also reinforces that scratch image by positioning its four-deck oven directly behind the bread display. “We’re excited that customers can see the bread go in and they can see it come out. They can watch it be baked and they can smell it. They see the bakers working,” he adds. “It’s a whole new world for us that we really enjoy and it’s selling tremendously well.”
Harmons, a 16-unit chain based in West Valley City, Utah, credits its scratch artisan bread program with setting it apart from competitors. However, the program requires a large labor and time commitment.
“Customers can’t get this kind of bread anywhere else, but it’s a huge labor investment for us,” says Keli Lessing, fresh bakery sales director, Harmons. “This is a high-labor program, you can’t avoid that, but this is what drives customers to our department. Bakery is a destination item. It’s done a lot for our customer count, building customer confidence in us; bread is really the driver for the bakeries.”
“A lot of other stores tried to sell ‘fresh-baked’ artisan breads, and their bakeries don’t even have a mixer,” adds Jason Lindsay, bakery trainer, Harmons. “They weren’t lying, but it also didn’t last long.”
Consumers are becoming better educated and understand what it takes to make good food, and they aren’t as easily swayed. However, customer education is still a must. “We still have regulars who will come in early and see all the bakers and say, ‘You actually make all this here?’ We’re like, ‘Gosh, what are we doing wrong that people don’t know this,’” Lessing says.
Harmons stages events in the bakery where the bakers are out in the sales area explaining the baguette baking process, for example, and showing customers what to look for in a baguette. “Customers see another baguette for cheaper and don’t understand that there’s something about the crumb, flavor and texture that makes ours better. It can be a struggle to get people to know that,” she adds.
Overall bread sales are fairly stagnant and haven’t shown growth in both unit and dollar sales, Parker said, but artisan bread is still doing well and outperforms the crusty/hearth breads in the category. On the flip side, dessert offerings are doing well, especially smaller, individual size products. Portion control and smaller package sizes are one of the driving trends in bakery, Parker added.
“People love small, beautiful desserts,” Jessie says. “If they are really eye-appealing and small, I think consumers have this perception that they aren’t eating as many calories.” Market of Choice offers a variety of products in small sizes, including mousse cakes, tarts and pies. “I’ve seen families come in and spend way more money than what they used to just because each person got their own little dessert.”
Mini pies are one of the three hottest product groups for mini products, according to Nielsen Perishables Group. Mini pies sales grew 33 percent over the previous year for the 52 weeks ending March 31, 2012.
Cookies also are a popular handheld snack. Cookies brought in an average of $3,069 per week per store for the 52 weeks ending May 26, according to Nielsen Perishables Group. “We do a lot of scratch cookies,” Jessie says. “They are our fastest-growing category right now. Our cakes are what we sell the most of, but the fastest-growing category is cookies; we can’t keep up. I think it’s just the fact that we’re making them fresh. Customers are like, ‘My gosh, I do like that kind of cookie.’ It’s kind of amazing how good things can be when dealing with freshness.
“Having fresh, baked-in-store product is very important to customers. It’s really the key to our bakeries’ success.”