In-store bakery regional outlook–Boston

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.”