Many in-store bakery officials would probably like a mulligan or do-over of the past two years. While the recession may be technically over, customer spending hasn't been quick to bounce back. In 2008, the last time Modern Baking conducted its Supermarket Bakery Research, the world was a slightly different place. The economic downturn (it wasn't yet called a recession) was in the early stages, and consumer confidence hadn't yet tanked (many of us were still trying to spend our way out of a recession as the federal government told us to), but in-store bakeries were being hit by soaring commodities prices and rising fuel costs.

Now in 2010, commodities and fuel seem back on an even keel, but consumers have felt the full effects of the recession, and due mostly to high unemployment rates, they have yet to return to their pre-recession spending habits. “I think the consumer definitely traded down in 2009,” says John Chickery, bakery director, Riesbeck's Food Markets, St. Clairsville, Ohio. “In 2010, they traded down even more. Everyone I talk to is telling me the same story — sales are lagging, profit structures are down or losing growth. We're one of the few companies with bakery sales that are up.”

But it is not all doom and gloom. Bakery, although an indulgence, is often thought of as a recession-proof product because it is an affordable indulgence that many don't give up completely. And some glimmers of hope are beginning to show.

“We're starting to see some recovery,” says Kevin McFadden, bakery director, Schnucks Markets, St. Louis. “It's not been quick, but we're starting to see some areas bounce back, like the higher-end items. It's not all the way back, but we're seeing some strength coming back into our outer areas.”

Average ticket declines

In 2008, the average bakery sale per customer was almost $4, a significant increase over previous survey results. That number has dropped to $3.50 in 2010, about where spending was in 2004, according to Modern Baking's 2010 Supermarket Bakery Research. Overall in-store bakery sales have increased over 2008 levels, but much of that can be attributed to the increase in retail prices that occurred in 2008 as a result of increased commodities prices. The bakery shopper at Roche Bros., Wellesley, Mass., is spending less on average, but the company is seeing higher customer counts, reports David Hay, bakery merchandiser/trainer for Roche Bros. “People are coming in more often, but they're looking for specials and bargains,” he says.

“I think there's still a lot of people unemployed, and there's still not rampant discretionary spending going on,” McFadden adds. “The retails went up, so you got your additional sales, but your items aren't going up because the customer isn't making that extra purchase, that impulse buy.”

In-store bakery officials remain optimistic, but maybe not as much as they were in the past. More than half expect sales to remain stable this year, according to the survey, with one-third predicting increased sales. This reflects the current economic reality. To give some perspective, 64 percent of those surveyed in 2006 and 50 percent in 2008 predicted per customer sales to increase.

The percentage of store shoppers who also shop the bakery dropped to less than 22 percent in 2010, down from almost 30 percent in 2008. “It's hard to get a new customer; it's much easier to get the customer we do have to buy more. If we can sell them one more item it gives us an opportunity to move ahead,” Chickery says. In order to do this, Riesbeck's has implemented some changes in marketing and merchandising.

For its weekend product promotions, Chickery has increased the display size and instituted more sampling, which is seeing positive results. “We are doing more sampling than we've ever done and I stress ‘let the customers eat it.’ You're going to throw it away anyway, so let the people eat it,” he adds.

The company also has increased the value of some of its coupons. After seeing half and full sheet cake sales decline in 2009 despite a $3-off coupon during the graduation season, Chickery increased the coupon value to $4-off this year. The additional dollar off led to 110 more customers redeeming the coupon than did last year. “That $1 made a difference. If you take that 110 times $43, that's a lot of money, and it didn't hurt the profit margin that much.”

Cakes sales struggle

Seeing an increase in cake sales at all is a bonus according to the survey results. Decorated cake and all-occasion cake sales are down across the board. Both categories have seen a more than 2 percent drop in sales since 2008. However, another segment of the category, upscale dessert cakes, seems to be prospering. This may be due to the popularity of smaller cake sizes with lower price points that many in-stores offer, which makes it easier for customers to justify purchasing a dessert. Smaller portions seems to be what customers want, Hay adds.

White bread and rolls also saw an increase in percentage of sales, while other bread categories have declined slightly. “It's because of the economic conditions. People are looking for something a little less pricey, and certainly white breads offer that versus whole grains,” Chickery says. “Whole grains, no matter where you are in the country, are pretty high priced compared to white bread. You're going to pay $2.79 to $2.89 for a loaf of white bread, but you're going to pay $4 plus for whole grain bread.”

Schnucks is seeing something a little different in its market. It's not the traditional white bread sales that McFadden is seeing increase, rather value-added white breads, such as the white whole wheat breads or breads supplemented with omega-3s. Artisan breads also are seeing a bounce at Schnucks.

“You're really going to see that have some impact as people are looking for white bread that gives them more than the white bread of the '50s and '60s,” McFadden adds. On the commercial side, which comes under the control of the in-store bakery department at Schnucks, McFadden is actually seeing steep discounting on price for white bread, with some promotions offering two loaves for $3.

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