Maintaining full, attractive displays also is necessary to increase sales.

At the Pick ‘n Save supermarkets operated by Spiegelhoff’s Super Food Market Inc., bakery and other department managers are coached to become “merchants, not sellers.” “Because only 5 to 7 percent of store shoppers have bakery on their lists, bakery managers must think merchandising more than selling,” observes John Countey, bakery/deli specialist for the six-store independent based in Burlington, Wis., 30 miles southwest of Milwaukee.

In-store merchandising is critical to building bakery sales also because the bakery is limited to only a few items in weekly advertising circulars, which Spiegelhoff’s shares with other Pick ‘n Save franchisees, all of whom must offer each featured item. As a result, the company’s six bakery managers employ aggressive product displays, regularly scheduled product demonstrations and whatever-needs-to-be-done customer service to attract sales.

The approach is working, officials say, as reflected by the bakeries’ success at competing with Wal-Mart Supercenters, which opened in each of Spiegelhoff’s markets. While Wal-Mart has driven independents out of business across the country, Spiegelhoff’s not only has survived but has grown. In each of its stores, bakery sales, after taking an initial hit with a supercenter opening, bounced back to initial levels or have increased, officials say.

Five of the bakeries (the sixth is a cold spot) use a combination of production methods to offer 250 to 260 products daily, representing all traditional bakery foods categories. The company places great emphasis on its donuts and decorated cakes, which include photo image and wedding cakes. “You establish your bakery with your donuts and your cakes, and you establish your cakes with your wedding cakes,” Countey says. “You legitimize your operation if yours is a wedding cake bakery. If you offer wedding cakes, your bakery must be doing something right.”

A solid bakery program can drive a supermarket’s entire fresh image, according to Dave Spiegelhoff, co-owner and director of operations. “If you gain a reputation for fresh bakery, produce, deli or meat, one department will credit the others. Consumers relate to bakery because they view most products as one-day fresh, even if they have two- or even three-day shelf lives,” he says.

“Bakery is a key weapon, especially against Wal-Mart, who we compete very well against in quality and freshness. We bake every day; Wal-Mart doesn’t,” Spiegelhoff adds. “Little by little, consumers are figuring this out.”

Bakeries use frozen Danish dough to customize products for local tastes.

Beating the competition
During the last few years, Wal-Mart has opened a supercenter near each of Spiegelhoff’s stores. In each case, bakery sales took a hit.  Countey explains that the first week after a supercenter opening, bakery sales dropped 20 to 30 percent from year-earlier levels; within six weeks, sales improved, running less than 20 percent below the year-ago period, and after four to six months, each bakery’s sales stood at or above their year-earlier marks.

“For bakery, Wal-Mart is a competitor of convenience. Consumers go there for products other than bakery,” Countey says. “And, a Wal-Mart opening is event shopping. After a while, the appeal isn’t as strong, especially because our stores emphasize customer service, as well as cleanliness and neatness.”

Wal-Mart’s bakery pricing is more competitive, he continues, “but our better service and higher quality of decorating put us over the top. In fact, one of our stores fixes customers’ Wal-Mart cakes once or twice a month–at no charge. Those customers will buy their next cakes from us.”

In-store baking is relatively new to Spiegelhoff’s, which entered hot baking only 20 years ago. In 1914, Dave Spiegelhoff’s grandfather opened a small grocery store in Burlington, which was operated, later by his father, primarily as a meat market with limited grocery, produce and dairy lines. In 1977, his father moved into the supermarket arena by purchasing a franchise location and renaming the business.

He operated the supermarket until 1986, when he sold the store, purchased a Pick ‘n Save franchise and opened a larger location, which included a scratch-mix bakery. Dave signed on that year as director of operations and during the next couple of years was joined by a brother, Steve, and cousin, Tim, both of whom are owners.
Since 1986, the company purchased two supermarkets in Portage, Wis.; and constructed a store each in Walworth and Waterford, Wis. Remodels have kept the stores’ appearances fresh. Last year, Spiegelhoff’s acquired an independent supermarket in Kenosha, Wis.

To promote sales, the in-stores feature wedding cake displays, shown here with (from left) Dave Spiegelhoff, John Countey and Donna Martin.

Build cake sales
Countey joined the company in 2002, bringing 15 years’ bakery/deli experience earned at two independent operations and a large East Coast chain. His first major objective was to build cake sales to increase gross profit. Cakes then comprised about 12 percent of bakery sales, he recalls.

“Cakes have a 75 percent gross, while the rest of the department then averaged 50 percent gross,” he says, adding that the goal was to increase cake sales to 25 percent of bakery sales. He also wanted to increase the level of service.

“For example, one bakery had posted a notice informing customers that 48 hour’s notice was required for special-order cakes. A competitor down the street also had a 48-hour requirement. We learned that our bakeries could handle same-day orders. We pulled that notice and immediately gave our bakeries a two-day jump ahead of the competition.”

Bakery managers were told to do whatever was necessary to accommodate customers’ needs. “That included calling me or Donna (Martin, corporate cake specialist) or a store director–anyone who can write on a cake–to get the job done, Countey says. “We say, ‘yes,’ to customers, until we say, ‘no.’ And, I have heard only a couple of no’s.”

Some of the bakeries had photo imaging cake decorating systems but were not market ing photo cakes, he says. “Photo cakes can really increase sales and profit. So we installed systems in all bakeries and added software to make photo frame cakes and other fun things.”

Cake Specialist Martin estimated that the return for the two initial bakeries’ systems would come in six months, based on raising the photo cake surcharge from $5 to $8 and the two bakeries together selling five additional photo frame cakes per week. The bakeries promoted the cakes with posters and banners. After two months, the bakeries were averaging 12 additional photo cakes per week, Countey says.

To help distinguish the bakeries’ all-occasion decorated cakes from those of competitors, Spiegelhoff’s last fall introduced one-eighth sheet cakes on cake boards as “tail-gater” cakes for Green Bay Packers Sundays. “Competitors sell decorated quarter sheets in foil pans. We prefer selling all of our cakes on boards. The cakes are more moist, and the size is appealing,” he explains.

Countey says the bakeries have yet to achieve 25 percent of sales in cakes, averaging from 14 percent to 18 percent. “However, our bakeries are making money, and we’re confident we can reach 25 percent.”

Wedding cake sales, he adds, will help achieve that objective. Spiegelhoff’s surveyed its customer base to evaluate potential for wedding cake sales. “Consumers wanted wedding cakes, we offered them, but we didn’t promote them,” Countey says. “We have good decorators. Still, they needed more training.” The company’s primary cake ingredients supplier stepped in to provide training and to help enhance the wedding cake program.

Each bakery fries its own donuts, which are key to Pick ‘n Save’s product line.

Train sales staff
The first order of business was to ensure that sales staff take cake orders correctly. “We didn’t want inexperienced sales people taking wedding cake orders, but most often that’s the person who’s available when customers inquire,” he explains.

Martin and Countey created a three-page procedure in which a sales person uses the first page to take basic contact information and then informs the customer that a Spiegelhoff’s cake consultant will contact the customer within 48 hours to arrange a meeting. The sales person notifies Martin via telephone call or e-mail message, who then contacts the appropriate bakery manager to arrange the meeting.

Wedding cakes are priced at $2.75 to $3.25 per slice. Countey notes that customers recently have brought articles from bride’s magazines that encourage brides-to-be to save money by ordering only two-layer decorated cakes and filling remaining needs with full sheets. “We’ve lost some $1.25 to $2.50 per slice sales, but we also learned that a skilled sales consultant can identify which customers can be sold on buying more elaborate cakes,” he says.

Wedding cake sales are nearing expectations, Countey continues. “Our goal at the end of 2004 was to sell one wedding cake per week companywide. We’re currently producing about three per month. Still, that’s 36 cakes a year we weren’t selling and at a high dollar level.”

To market wedding cakes as well as other bakery products, Spiegelhoff’s must rely on in-store promotions because the company’s participation with fellow Pick ‘n Save franchisees in advertising circulars limits weekly features to a handful of bakery items. Countey is working with the other independents to use in-store promotions to sell better-quality pies. “I’m trying to convince them to sell a line of upscale pies next year and eliminate commodity pies,” he explains.

Last fall, the group advertised typical commodity pies for Thanksgiving and Christmas. “But, they agreed to run in-store tests with us, offering gourmet pies and demonstrating them every Saturday and sampling them (passively) during the week,” Countey says. (At press time, results had not been compiled.)  “In early 2006, we’ll discuss whether we want to promote commodity pies or the gourmet line.”

Maintaining full, attractive displays also is necessary to increase sales, he says, adding that bakery managers, particularly those in charge of lower-volume bakeries often are reluctant to keep displays full, fearing excessive staled product. The company’s goal for stales is 7 to 9 percent of sales. “If stales go down to 5 to 7 percent, the bakeries lose sales,” he says. If you’re proud of your product, you should display it in quantities that make customers say it looks good and must be worth buying.

“In bakeries pulling $8,000 per week, most managers would tighten their reins and not display full shelves. But, after they try a few things, they see that having more product gets more sales.”

As an example, Countey cites the bakeries’ promotion of tres leches cakes for Cinco de Mayo (May 5). Advertising acquainted customers with the cakes. Store banners, demonstrations and sampling and full displays supported the promotion. “Now each bakery offers tres leches cakes every day,” he says. “This shows how our bakery managers are becoming merchants, not just sellers.”

When Countey joined the company, production methods varied by each bakery’s skill levels. The Burlington store with the largest bakery was producing many items from scratch and mixes; other in-stores used mostly frozen dough. “We wanted to offer scratch items in the other stores, but the bakeries lacked the high skill levels necessary to do all of them,” he recalls.

Spiegelhoff’s moved toward more frozen raw product, supplemented with mixes for several items. “We figured that if we had to back away from scratch, we would emphasize five or six signature products, like our Danish kringle and coffeecakes made from frozen Danish slabs, and braided red and green holiday bread from a mix,” Countey says.

Cake donut profits
Certain products lend themselves to mix production, he continues, such as brownies, crème cakes and cake donuts. “Cake donuts, in particular, make sense because of their wide popularity and the high gross profit they return,” he says. “The bakeries had not emphasized cake donuts, but after store directors learned of their profitability, the bakeries gave them high priority.”

Taking advantage of mixes and frozen ingredients, the bakeries are pushing more production into the day, including baking brownies, cookies, pies and angel food cake. This occurs from 7 a.m. to 3 p.m. “Doing this gets more customers into the bakery,” notes Countey, who adds that day production will increase.

Such emphasis on service, quality and selection is part of the company’s plans to open a new store format this year, marking a new marketing strategy, Dave Spiegelhoff says. “We believe we have a fresh store concept that we can use to enter established Wal-Mart markets where Wal-Mart has knocked out three or so independent supermarkets.”

The concept with a new banner has a 25,000-sq.-ft. format with a high focus on bakery, produce, deli and meat–more than one-half of the store–and the remainder having convenience grocery products. These include the top 2,000 to 3,000 non-perishable items that a conventional supermarket carries.

“The store will become a destination for high quality perishables,” Spiegelhoff explains. “Customers would drive across town for the perishables and have the convenience of picking up frequently purchased non-perishable products.

“They won’t shop the bakery for donuts but rather for specialty breads and rolls, decorated cakes, pastries and desserts–the products that will make this concept work.”

Spiegelhoff says the company will continue to manage its conventional supermarkets, but its focus will be on this new concept. “While it will be much less expensive, it also will enable us to zero in on products that our customers want. The store will be a true independent and won’t be required to carry items as if it were tied into a wholesale grocery program.”

Spiegelhoff’s, not a wholesale grocer, will decide what to buy and where to buy for the store, including bakery, he says. “We won’t run it like a supermarket. Our business is going almost full circle to the days of my dad’s grocery store. We’ll provide the services, like home delivery and cutting meat. It’ll be doing business the way we did it years ago.”  

 Spiegelhoff’s…at a glance
Headquarters: Burlington, Wis.
Founded: 1914
Web site: www.spiegelhoffs.com
Management: Dave Spiegelhoff, co-owner and director of operations; Steve Spiegelhoff, co-owner and director of finance; Tim Spiegelhoff, co-owner and director of meat; Don Twist, manager of operations; John Countey, bakery/deli specialist; Donna Martin, cake specialist
Store name: Pick ‘n Save
Primary competitors: Wal-Mart, Sentry Foods
Market served: southeast and south central Wisconsin
Number of stores/bakeries: 6/6
Store/bakery sizes: 38,000 to 72,000 sq. ft./5,000 to 11,000 sq. ft.
Number of bakery employees: 5 to 13 per bakery
Product line: full line of 250 to 260 SKUs, including breads/rolls, donuts, cookies, pies, pastries, sweetgoods and cakes, including wedding cakes
Average weekly sales: $6,000 to $30,000 per bakery
Production methods: Mix–cake donuts, brownies, pudding and crème cakes; frozen raw–yeast-raised donuts, variety and white breads/rolls, pies, cookies, butter croissants, puff pastry, Danish, brownies; frozen par-baked–specialty breads/rolls, bagels; frozen baked–cake layers/rounds; cookies
Major equipment: vertical mixers, sheeter/moulder, semi-automatic rounder/divider, bread divider, roll-in proofer, rotary rack oven, revolving tray oven, donut proofer/fryer, computerized decorating machine, bread slicer, walk-in refrigerator/freezer
Plans: open fresh foods-oriented store this spring, a second this fall and a third by mid 2007
Bakery supply distributors: Roundy’s Warehouse, BakeMark, Lapari Foods, Sysco, Valley Bakers Supply


Spiegelhoff’s  . . . . .a sampling of prices
Donut     $0.56
Bagel     $0.50
Croissant, 21⁄2 ozs.     $0.99
Cranberry orange  muffin, 41⁄2  ozs.     $0.75
Cream puffs, 2 count     $1.98
Chocolate chip cookie,  1.5 ozs.     $0.33
Éclairs, 2 count     $1.98
Pecan kringle, 22 ozs.     $6.98
Lemon meringue pie,  27 ozs.     $6.98
Fudge-iced brownies, 18 ozs.     $3.68
Orange cappuccino cake, 8 ins.     $8.98
Decorated cake, single layer   
   8 ins.     $8.98
   1/8 sheet     $8.98
   1/4 sheet     $12.99
   1/2 sheet     $24.98
Baguette, 14 ozs.     $1.98
Caraway rye bread, 16 ozs.     $2.18
Sourdough boule, 16 ozs.     $3.48
Onion rye bread, 16 ozs.     $2.18
Dinner roll     $0.33