Along with upscale dessert cakes, cupcakes are proving to be a growth product for in-store bakeries. Taking a cue from the wave of specialty cupcake bakeries, in-stores are dressing up the single-serve treats with more than a simple dollop of icing. Schnuck's, for example, promotes a cupcake of the month with creative flavors, such as chocolate mint and Key lime. “We're taking the trend and making it work for us by getting crazy with some of the icing colors and flavors,” Schnuck's McFadden says.

More cupcake options

Buehler Food Market has expanded its cupcake offerings with a range of products, such as cupcake cakes (cupcakes positioned together and iced as a single, larger cake), mini cakes (cupcakes removed from their wrappers, iced and decorated as single-serve cakes), piped character-topped cupcakes (bumble bees, mice, etc.), and gourmet cupcakes (with ornate icing decorations and value-added toppings, such as sprinkles, nuts and candies.)

“The retail price on these is higher. It doesn't seem to matter what the economic situation is, customers like the specialty cupcakes, and no one bats an eye at the retail on them,” Krueger says.

Donuts, white bread and bagels are among the sales decliners this year. Nineteen percent of operators reported sales declines in donuts and white bread, and sixteen percent reported sales declines in bagels.

The donut category's less than stellar performance this year can be attributed at least in part to the Krispy Kreme bandwagon that crashed and burned many in-store bakeries. As Krispy Kreme set up branded merchandisers in convenience stores, gas stations, supermarkets and other retail chains, it strayed away from its core concept of “hot” glazed donuts. The company became challenged to stock and maintain the merchandisers, and the donuts lost their glamour when they became available in so many outlets.

Some in-store bakeries even dropped their on-premise donut programs for the Krispy Kreme concept. Ironically, many in-store bakery directors were wary of the inherent problems in the branded concept, but were mandated by corporate management to jump on the bandwagon. Those in-stores that continue on-premise donut production, including frying and/or finishing, have maintained or even grown the category.

Successful in-store bakery chains have become adept at adjusting their bakery production methods to balance costs and create product lines that differentiate their bakeries. On premise baking is essential, but operators are using DSD products from area bakeries with a strong local brand and sourcing specialty items with longer shelf lives (ie.: biscotti and cookies) to keep shelves looking full on slower days.

“The key is you can't be afraid to make a change. You can't just keep doing the same thing day after day, year after year,” Downey says. “Go out to all the food shows and see what's new out there. You can't expect people to keep calling you and bringing you products.”

Healthful niche grows

Niche categories, such as products for customers with special dietary needs, are finding growth among in-store bakeries, and most operators are choosing to outsource these products rather than produce them at store level. More in-stores than ever are offering organic/natural and gluten-free products.

The percentage of operators that sell organic/natural products is up by 20 percentage points compared to two years ago; gluten-free is up 27 points to more than a third of in-stores selling the products. More importantly, more operators are reporting sales gains in the two categories. While sales gains can be attributed in part to a greater number of in-stores offering the products, organic/natural and gluten-free showed the most growth among healthful bakery products posting sales gains this year.

More than half of operators offer reduced-trans or zero grams trans fat products, although the pressure in the media from consumer health advocates seems to have lessened in recent months. In-store bakeries are taking out the trans fats where they can as part of a broader, more healthful approach to their products. “People are looking for cleaner labels, ones they can read and understand,” Krueger says.

Whole wheat/whole grain products top the healthful product category in terms of the percentage of in-store operators selling the products (86%) and the percentage reporting sales gains (61%). Just as the commercial bakery aisle has shifted its allegiance from white bread to more whole grain varieties, in-store bakery operators too are meeting demand with specialty breads and rolls made with whole wheat, rye, oats and nontraditional grains, such as spelt.