In a tough business environment, investing in the future is difficult and may even seem impossible at times. Implementing new strategies often takes a back seat to keeping up with day-to-day business, but planning for the future becomes even more critical under this pressure situation. Many supermarket chains among Modern Baking's Top 50 largest in-store bakery operators understand this and are tailoring stores for growing niches, such as Hispanic, natural/organic and urban markets. Most chains also are using new technology to track bakery sales and understand their customers better.

Nationally, in-store bakery departments are holding their own in this economy and are even benefitting from more shoppers looking to supermarkets for help preparing meals at home. Cost-conscious grocery store habits consumers developed during the recession this year are destined to have a long-term impact on national shopping behavior, according to research results from a survey released in August by Precima, a Toronto-based retail analytics firm.

The survey asked consumers to identify shopping practices they would continue or drop if the economy improves. Eighty-two percent of U.S. consumers said they intend to continue cooking at home instead of eating out, 80 percent plan to keep using coupons as much as possible, and 78 percent will continue to make fewer trips to the store.

In-store bakery operators are reporting similar customer shopping patterns in the perimeter departments, including more foot traffic and increased price sensitivity.

“It seems like people are moving into the grocery store away from restaurants,” says John Rose, bakery category manager, Brookshire Grocery Co., Tyler, Texas. “They're looking for grab-'n'-go meals, the deli is seeing a lift, and our bakeries are seeing increased foot traffic.”

He says the sales increase in bakery is not enormous, but the in-stores are selling more items for everyday home consumption. Several categories — breads and rolls, cakes and cookies — are getting a boost from that trend. While consumers may have less money to spend, they are still just as time crunched, and in-store bakeries provide the convenience of fresh-baked products located where they are already shopping for gorceries.

Ken Downey, director of sales and merchandising, King's Super Markets agrees that more customers may be shopping supermarkets, but they are also focusing more on price. The Parsippany, N.Y.-based supermarket chain introduced a three-for-$10 line of desserts and a $9.99 line of layer cakes in its 25 in-store bakeries early this year, which proved extremely successful, he says.

“People are definitely eating more at home, but they're trading down. Instead of a $20 fresh fruit tart, they might bring home a $5 pie,” Downey says. By offering smaller portion sizes and single-serve desserts, in-store bakeries can provide customers good quality products at lower price points. The smaller items often have higher profit margins for in-store bakeries as well, a welcome bonus in any economy.

Merger activity slow

Mergers and acquisitions were few this year among the Top 50, but several key deals occurred among small and mid-sized chains. Houchens Industries, Bowling Green, Ky., acquired Buehler Foods, Jasper, Ind. Buehler's Buy Low stores will continue to operate under that name, and the additional in-store bakeries puts Houchens at number 37 among the Top 50, with 92 bakeries. The company operates in-store bakeries under several banners, including Houchens Market, IGA and Piggly Wiggly.

The Grocers Supply Co. boosted its presence among Hispanic consumers in the Texas market by agreeing to purchase the Carnival Food Stores brand and 37 stores from Minyard Food Stores, Coppell, Texas. Grocers Supply owns Fiesta Mart, a supermarket chain of 50 stores serving Latino communities in the Houston, Dallas-Fort Worth and Austin markets.

“The upcoming acquisition is a validation of our concept and the success of the Carnival brand,” said Minyard President and C.E.O. Micheal Byars in a company statement. “It proves what we've said all along about the growing power and influence of Hispanics in North Texas. Grocers Supply's acquisition almost four years ago of Fiesta and, now, of our Carnival brand shows they understand the changing demographics of Texas and the attractiveness of this segment.”

Minyard invested heavily in its Carnival supermarkets with an extensive redesign, which highlighted its perimeter departments. Open production and service is the focal point of the departments, including panaderia, pasteleria (pastries), tortillaria (tortilla), salichicheria (deli), cocina (kitchen), carniceria (meat), pescaderia (fish) and fruteria (fruit bar).

“Though other operators might consider bakery tertiary, we learned that the panaderia is a critical element for the Hispanic consumer. That's why we've put such a strong focus on baking and made our bakeries service bakeries,” Poal Heilmann, Minyard senior vice president-marketing, told Modern Baking editors in January last year during a store visit.

Whole Foods Market's acquisition of Wild Oats has been finalized, making Whole Foods the undisputed king of the natural foods niche. Here too, in-store bakeries have been key components of Whole Foods' fresh image and ability to target consumers seeking bakery products made with more natural ingredients. Whole Foods now ranks 14th among the largest in-store bakery chains.