Although West Coast cities are often credited with setting the trends in the United States, New England’s unofficial capital city of Boston is not to be overlooked. Perceived as more willing to indulge than most health-conscious West Coast cities, the tenth largest metropolitan area in the nation has a strong penchant for bakery products. Also considered an international hub for higher education, the city offers an exciting food culture steeped in rich history.
“We serve a very educated audience. We have a lot of colleges and universities, and people who come here for school often end up staying here. They travel, they know food trends,” says Cindy Deluca, sales and merchandising manager at Shaw’s Supermarkets, West Bridgewater, Mass., which was sold by parent company Supervalu to a group of investors led by Cerberus Capital Management last month along with upscale Star Market.
Photos provided by Supermarket News staff.
New England is home to several of the nation’s top-performing retailers–including Ahold USA (Stop & Shop, Giant Landover), BJ’s Wholesale Club and Demoulas Market Basket–each pulling in more than $1 billion in annual sales across their various banners, according to Supermarket News. In addition to competing with one another for shrinking market share, they must contend with family-owned, independent chains like Roche Bros. and Big Y that thrive in the densely populated, urban areas of the Northeast.
In recent years, supermarket chains across the country have focused their attention on urban grocery store formats as a new avenue for growth. Many have their sights set on Boston, despite its reputation for being a tough market to penetrate.
Rochester, N.Y.-based Wegmans Markets, which launched its first Massachusetts store in 2011, is looking to expand in Boston with a smaller urban concept that’s roughly half the square footage of its typical 130,000-sq.-ft. size. Despite the chain’s overwhelming popularity with consumers, chief executive officer Danny Wegman called the prospect of entering Boston “terrifying,” acknowledging the challenges of opening a much smaller concept in such a competitive city.
Leading low-cost competitor Walmart also has struggled to break into cities, although the mass merchant has targeted New England as a major focus for its expansion. Last year, Walmart opened its first Northeast-region “market” grocery store in Somerville, Mass. Dubbed Walmart Market, the store is roughly 34,000 sq. ft., part of a notable change in strategy from the company that built its name on sprawling, big-box sites.
In a similar vein, since expanding to the Northeast in the 1990s, Austin, Texas-based Whole Foods has streamlined for aggressive growth nationwide in part by decreasing its prototype store footprint to 38,000 sq. ft. from 50,000 sq. ft. The natural grocery store chain found further opportunity for expansion in the Boston area late last year when it acquired six Johnnie’s Foodmaster stores after the Chelsea, Mass.-based chain announced it would shutter all 10 locations.
Fresh is key
Across the board, New Englanders spend more money in the in-store bakery than the average American, especially in Boston, where average weekly in-store bakery sales are 33 percent higher than the national average. (All sales data is provided by Nielsen Perishables Group and is for the 52 weeks ending Nov. 24, 2012.) These numbers could be attributed in part to the strong emphasis on fresh departments and the effort to make bakery a key point of differentiation among top retailers in the Northeast. Click on image at left to view larger, downloadable version.
“In the Northeast, you have these leading grocery bakeries that are on the early part of the adoption curve,” says Jonna Parker, director of account services for Nielsen Perishables Group. “For these retailers, bakery and fresh departments have continued to be part of their strategies for success. Boston is an area of the country where there is a high concentration of population. There are a lot of people close together who look to the supermarket for solutions.”
For Donelon’s Supermarkets, Littleton, Mass., the fresh department is key to establishing a relationship with the customer, since it’s more service-oriented than the center aisle.
“I’m seeing more of a focus on customer service in the bakery,” says Eric Prehl, bakery and deli director. “Big-box stores can beat us on the sale point, but the customer is coming to us because they want to know who they’re buying from, they want a familiar face. You’re seeing a lot of bakeries in the Northeast going back to service cases. We’re doing that with bagels, which used to be self-serve.”
Fresh departments also are benefitting from the fact that consumers shop the supermarket more frequently than they used to, according to Deluca. “I think because the way the economy is, people don’t want to throw anything out,” she says. “Food shopping today is more of an experience, more interactive. We do a lot of sampling and try to give the customer a great experience when they come in. We try to tie in all the fresh departments. Our business model is more about fresh. Anyone can sell Coke or Pepsi in the center aisle; that’s why the fresh departments have really become the anchors for our stores.”
Despite the evolution the bakery department has seen in recent years amid changing consumer habits and preferences, breads and cakes remain the anchors for most in-stores, regardless of location. The exception? Breads track much higher in the Northeast than they do nationally, Parker says. “If you took the other three regions and looked at the bread category, the Northeast would be much higher. Bread is more important there than the other regions, and Boston blows it through the roof.”
In the Boston region, roughly 23 percent of average weekly sales come from the bread category, significantly higher than the 18 percent average for the Northeast region, which still trends higher than the national average of 16 percent.
“Breads…are a real workhorse for us,” Deluca says. “In the artisan bread category, there’s obviously been a lot of health-conscious folks out there so multigrain type items are doing well.” She adds that sales are up for smaller portions, particularly for stores near Boston’s inner city. “People are looking for portions that they can use for one meal versus buying loaves of bread for a whole week.”
“We’ve seen the crusty breads category really evolve,” Prehl says. “Coming in a scratch baker, I can’t believe crusty breads have become such a huge item, but it’s a big line for us.”
Photo provided by Supermarket News.
Parker attributes the success of bread to its positioning in most Boston-area in-store bakeries as a low-price leader item. “Stores have the strongest penetration and most frequent mover in bread, so they make sure it is in stock, easy to find and they offer crazy sales on that item,” she says. “That’s a strategy they have employed that others could learn from. A lot of retailers are instead spreading focus in breads across a wide variety. The ‘leader item’ strategy gets those customers who might be looking for something quick for tonight, but they also offer a variety for bread enthusiasts.”
The ever-shrinking cake
The continued dominance of cupcakes has no doubt given the cake category a lift, which accounts for more than 24 percent of weekly bakery sales in the Northeast and 21 percent of weekly bakery sales in Boston (less than the 30 percent national average). But smaller sized cakes also are making inroads with customers from all demographics.
“On the cake side, things have gotten a little smaller,” Deluca says. “And especially with the cupcake craze. Boston is no different from any other area with what people see on Food Network and TLC, now they want to buy or prepare it. We provide a big array of cupcakes. We do custom designed, fun cupcakes, but also more indulgent flavor profiles. With cakes, people are looking for fun designs–it’s not as staunch as it used to be.”
“Smaller cakes and smaller portions in general have been a trend for the past few years,” says David Hay, bakery buyer for BJ’s Wholesale Club, Westborough, Mass., which sees significant business from decorated occasion cakes “It’s not always a full sheet cake, smaller households often look for the quarter sheet cakes. They don’t want to waste anything.”
Customers are requesting more nuanced colors than ever before in decorated cakes.
Hay notes that customers are more interested in customized creations than ever before. “Just looking at the color palette that’s available with our occasion cakes, customers are requesting amazing colors,” he adds. “We used to just offer yellow, orange and blue. Now we’re taking it to violet and asparagus green–and customizing that at the club level. We’re also playing around with flavors. Red velvet has stayed strong, but we’re also bringing in flavors like coconut and tres leches.”
Prehl echoes the sentiment that customers are requesting more vibrant colors and flavored icings, from “plum” purple to “tranquil” turquoise. “They’re more informed. I think a lot of that is from TV shows. It’s interesting to see the effects of that.”
The year of…?
Whether it’s the year of the donut, black and white cookies, bittersweet chocolate or the locavore movement remains to be seen. But like everywhere else, retailers in the Northeast are faced with a customer who thinks more globally than ever before.
“One big quandary the Northeast has that we might see in future is figuring out if bakery is truly regional anymore,” Parker says. “We are a global nation now. Everybody’s looking for next big thing outside their region’s borders. And how can they bring people that new experience? I really believe that what is so inherently regional about the bakery is retailer-driven. If you only give people things they think they want that’s all they are going to buy. You don’t know if they’re open to new flavors if you don’t offer them those flavors.”
She notes the tendency of retailers to maintain the status quo simply because it’s what they’ve always done, using the example of muffins, which have a reputation for being a staple in the Northeast. “We consistently see retailers in the Northeast over-SKU in muffins,” Parker says. “They’re not a main driver on a national scale; it’s not necessary to have a 10 percent share of muffins. When we ask why they have it, they tell us, ‘It’s just what we’ve always done.’”
But the winds of change are blowing, as in-stores are forced to be more nimble than ever in the face of a shrinking market for customers’ precious dollars. Beyond independent bakeries and bakery cafés, Starbucks and McDonald’s are also encroaching on their territory with a greater focus on breakfast offerings.
“The in-store bakery is big here in the Northeast, but in the Greater Boston area, you also have the corner bakeries you need to contend with,” Deluca says. “Not only that, but people are looking to save that extra dollar whether they buy coffee in morning or a Danish or a muffin. Today, McDonald’s and everybody else is vying for your business.”