As 2009 draws to a close, few in-store bakery operators are sad to see it end. Although commodities prices found equilibrium this year, continued high unemployment and consumers' tight purse strings marked 2009 as one of the most difficult in recent memory, especially for in-store bakeries selling indulgent food. “Bakery always had the advantage of being a low-cost treat, but with the economy, even treats are being cut out,” says Joye Crosby, bakery buyer, Superior Super Warehouses, Santa Fe Springs, Calif. “People are only buying what they need and nothing more. I hope that is not a continuing trend.”

According to the Perishables Group's Pricing Consumer Research Project 2009, which surveyed 1,000 consumers on the East and West Coasts, 34 percent of shoppers said they are buying fewer baked products from the in-store bakery. To save money, 35 percent of those surveyed are turning to the center store aisles to purchase bakery items.

Jeffrey Naaman, director of deli/bakery, Meijer, Grand Rapids, Mich., is seeing this statistic played out in his stores. “With the economic downturn, we are seeing more items being purchased when they are on sale.” The Perishables Group survey found 45 percent of shoppers said they only purchased in-store bakery items when they were on sale. Customers have been placing a lot of emphasis on price during the past year, and price is a large factor in their decision making process, Naaman adds. “We don't see a lot of large-dollar purchases.”

Many in-store directors echo this observation. “What I've seen is they want a treat, but not a $9 item,” says Christian Lucas, director of deli/bakery, Houchens Industries, Bowling Green, Ken. “They want the same quality, but at a $5 or less price point.” Houchens, which operates locations under the Hometown IGA banner, is slicing up its 8-in. round dessert cakes and selling them as desserts for two.

Scratch production allows in-stores to offer a truly unique product, and a bread program differentiates the in-store from the center aisles.

At Superior, Crosby is seeing an increase in sales of 10-in. cakes as customers downsize from ½ sheet or ¼ sheet cakes. United Supermarkets, Lubbock, Texas, has experienced a lot of success with 4-in. and 5-in. cakes, especially its Critter cake program, which retails for $5.99. “We're selling almost $1,000 of them a week,” says Tammy Kampsula, bakery director for United. “That's all incremental sales.”

Customers also are looking for small product count sizes. Schnuck Markets, St. Louis, now offers 4-count cupcake packages, downsizing from 6-count. “Customers are looking for something smaller in size,” says Bill Mihu, vice president of bakery operations for Schnucks.

All in-stores are reporting sales growth in individual-sized items. “We've seen some deflation, which is self-imposed with the downsized packaging,” Mihu says. “”But unit sales have held up. Bigger is not better in bakery.”

However, while dessert or indulgent-type product sales may be suffering, United has seen an increase in products that consumers eat every day, such as artisan bread and crusty bread and rolls. Even cookie sales are growing. The increase is due to more consumers eating at home, Kampsula says. “So, it works both ways. Dessert sales are down, but bread sales are up.”

Make the most of sales

The in-store bakery is not alone in dealing with the new frugality of consumers. “The economy has been the biggest factor this year,” Kampsula adds. “Shoppers don't have much discretionary income.”

Almost all major supermarket chains are advertising “new” lower prices to attract more shoppers and boost sales. This summer, for example, Stater Bros., San Bernardino, Calif., lowered prices on the 10,000 products that shoppers buy on a daily basis. For some chains, such as Food Lion, the new pricing strategy is an effort to take on Wal-Mart's prices, often the lowest in the industry.