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| Supervalu, C.E.O. Jeff Noddle shown here at the grand opening of Sunflower Market in Indianapolis, emerged as the largest in-store operator in 2006. |
Supervalu moved into the top spot as the largest supermarket in-store bakery operator in 2006 with its acquisition of Albertson’s this year. With more than 2,300 instore bakeries, the company operates bakeries under a number of banners, including Albertson’s former regional acquisitions, such as Shaw’s, Jewel Foods and Star Markets.
While this mega deal captured most the headlines this year, the Top 50’s internal investments in remodels and new concepts, and the success of quality-focused chains emerged as the more pertinent news for the in-store baking industry.
"We’re seeing a shift towards more quality products because the customers want it," says Jeff Ireland, a broker for in-store bakeries in the Southeast.
In a survey of 94,000 shoppers, Consumer Reports ranked Wegman’s, Publix, Raley’s and Harris Teeter as the top conventional supermarkets. "Our top-ranked conventional supermarkets generally scored high for service; meat, produce and baked goods; and cleanliness, but those stores did not have the lowest prices," Consumer Reports stated.
So the jury is out...price is not the consumer’s primary motivator when shopping for food, and quality bakeries are important to them. Many companies among Modern Baking’s Top 50 largest in-store bakery chains have keyed into this by focusing more heavily on their fresh departments, even creating entirely new formats operated under different banners and store designs. Some independents, such as Indianapolis-based Marsh Supermarkets are struggling to compete against the national chains and supercenters. Others, such as Greensboro, N.C.-based The Fresh Market are thriving on it.
Growth through acquisition
Most acquisitions among the Top 50 were small in comparison to Supervalu’s deal. The moves reflect the challenges regional independent chains face in this increasingly competitive marketplace where consumers can purchase groceries from so many other sources other than traditional supermarkets. Indianapolis-based Marsh Supermarkets announced a merger agreement to be acquired by MSH Supermarket Holding Corp. The company shuttered 12 supermarkets that operated primarily under its Lo-Bill banner this fall.
Fresh Brands, Sheboygan, Wis., was acquired by Chicagobased Certified Grocers Midwest. Another Wisconsin-based chain, Roundy’s Supermarkets, continues its search for a buyer after its acquisition by investment firm Willis Stein and Partners in 2002.
Chains selling off stores piece meal accounted for much of the movement among the Top 50. Tops Markets, for example, began selling or closing 46 locations in northeast Ohio. Pittsburgh, Pa.-based Giant Eagle purchased 18 of those stores. Albertson’s also recently closed about 100 stores and sold 132 stores in northern California and Nevada to Modesto, Calif.-based Save Mart Supermarkets, doubling hte company’s in-store bakery numbers.
The majority of investments in 2006 did not go towards acquisitions. Instead, companies focused internally on remodels and upgrading stores to new formats. Safeway invested $1.6 billion this year towards converting its stores to its new "lifestyle" format. Lifestyle stores’ in-store bakeries are part of Safeway’s fresh department remodels featuring faux wood floors, dark wood shelving and subdued lighting. The bakery product line also has greater emphasis on dessert cakes, muffins and artisan breads. Food Lion remodeled 26 stores in Virginia, Maryland and West Virginia this year and is beginning to remodel 20 of its Myrtle Beach-area stores in 2007. The remodeled stores
provide a better presentation of products in its fresh departments, including a bigger selection, a new design and layout and new lighting and product fixtures.
"We have worked hard to make our stores more attractive and provide an enhanced shopping experience," said Gaelo de la Fuenta, Food Lion regional vice president of retail operations in a company released statement. "We have paid special attention to our fresh departments–produce, meats and deli/bakery. The new, more inviting interior design signifies our commitment to offer the freshest produce, the best quality meats and an expanded selection in the deli and bakery," he added.
Focus on perishables
A newcomer to Modern Baking’s Top 50 list this year is The Fresh Market, Greensboro, N.C. With 57 stores, the independent chain has been growing at a fast clip in recent years and plans to open 10 to 12 new stores annually. The company calls itself a "retail specialty grocer focusing on high-quality, reasonably-priced perishables." All stores feature in-store bakeries, which tout their pie program (15 varieties baked fresh daily) as a primary draw.
The Fresh Market is not to be confused with the number of other chains that introduced new concepts this year boasting greater focus on fresh foods or European-style open market designs. Giant Eagle launched a new upscale concept called Market District, Big Y debuted its first Fresh Acres store, and Penn Traffic announced plans to continue developing its "Fresh Market" format that stresses fresh products and service. Most of the new concepts include in-store bakeries, and Giant Eagle’s Market District in-store bakery promotes "traditional scratch baking methods featuring a hearth oven from France."
Even Pathmark, which changed its pricing policies to EDLP two years ago, unveiled a new store prototype with a heavy focus on perishables and specifically its bakery/deli department. "The store perimeter is key in developing customer loyalty," said Pathmark’s co-president and chief marketing officer, Ken Martindale.
A&P also announced a new strategy to regroup under three distinctive formats: gourmet, discount Food Basics and perishables-intensive "fresh markets." By 2008, the company projects to have converted 170 stores, all with in-store bakeries, to its fresh market format.
Sourcing locally for niche products
From fresh to organic, a number of chains among the Top 50 pushed natural, more healthful foods as their focus this year. Based on the successful performance of its 98,000-sq.-ft. prototype in Camp Hill, Pa., Giant Food Stores plans to open another store in Harrisburg, Pa. with an emphasis on health and wellness that includes an on-site nutritionist. Hannaford Bros. Supermarmets, Scarborough, Maine, among other chains, continue to open new stores with organic and natural foods departments, including organic and locally-grown produce available in season. The in-store bakeries, however, are challenged to take on the organic claim because of higher ingredient and production costs for organic lines of baked products.
If supermarkets go organic in their bakeries, they most often source finished products from local or regional retail or specialty wholesale bakeries. Such is the case with SuperValu’s Sunflower Markets, which opened two new stores this year even under the added demands of the Albertson’s acquisition. Sunflower Market bakeries offer products from Red Hen Bakery, Chicago and French Meadow Bakery, Minneapolis.
While Sunflower Markets and other growing chains, such as Trader Joes, do not have full-service in-store bakery departments, they are finding success with their baked products by sourcing locally and providing top-quality products. The Top 50 in-store chains can offer a cut above in bakery with truly fresh-baked products and a higher level of customer service. "You have to focus on some signature items you want to make exceptionally well and invest your labor there," says Ron Danko bakery consultant and former bakery director of Wegman’s Food Markets.
By focusing on their perishables departments, the Top 50 are attempting to differentiate themselves from the glut of grocery sellers. In-store bakeries, with their direct customer contact and ability to customize products, present golden opportunities for supermarket companies to truly develop their fresh focus.
| The Top 50 in-store bakeries Supervalu jumps to top spot | ||||||
| Rank | Chain | Headquarters | Total bakeries | Total U.S. stores | New bakeries in 2005 | Primary production methods |
| 1 | Supervalu w/Albertson’s stores | Eden Prairie, MN | 2,332 | 3,917 | 10 | Bake-off |
| 2 | Kroger Co. | Cincinnati, OH | 2,210 | 2,515 | 10 | Thaw-sell/bake off |
| 3 | Wal-Mart Supercenters* | Bentonville, AR | 2,026 | 2,026 | 238 | Bake-off |
| 4 | Safeway Inc. | Pleasanton, CA | 1,434 | 1,801 | 1 | Bake-off |
| 5 | Food Lion | Salisbury, NC | 1,179 | 1,228 | 0 | Bake-off/thaw-sell |
| 6 | Publix Super Markets | Lakeland, FL | 874 | 874 | 20 | Bake-off |
| 7 | Sam’s Club | Bentonville, AR | 567 | 567 | 17 | Bake-off |
| 8 | Winn-Dixie Stores | Jacksonville, FL | 522 | 522 | 0 | Bake-off/mix |
| 9 | Costco Wholesale | Issaquah, WA | 412 | 412 | 30 | Bake-off |
| 10 | Stop & Shop Supermarkets | Quincy, MA | 350 | 363 | 0 | Bake-off/mix |
| 10 | Great Atlantic & Pacific Tea | Montvale, NJ | 350 | 407 | 0 | Mix/scratch |
| 11 | Bi-Lo/Bruno’s | Mauldin, SC | 282 | 292 | 0 | Bake-off |
| 12 | Hy-Vee Food Stores | West Des Moines, IA | 222 | 222 | 10 | Bake-off/mix |
| 13 | Giant Eagle | Pittsburgh, PA | 214 | 214 | 0 | Bake-off/mix |
| 14 | H.E. Butt Grocery | San Antonio, TX | 208 | 301 | 0 | Bake-off |
| 15 | Ingles Markets | Black Mountain, NC | 196 | 198 | 0 | Mix/bake off |
| 16 | Whole Foods Market | Austin, TX | 181 | 181 | 20 | Bake-off |
| 17 | Meijer | Grand Rapids, MI | 171 | 171 | 5 | Bake-off |
| 18 | Giant Food | Landover, MD | 167 | 191 | 0 | Bake-off |
| 19 | BJ’s Wholesale Club | Natick, MA | 159 | 159 | 5 | Bake-off/thaw-sell |
| 20 | SuperTarget | Minneapolis, MN | 158 | 158 | 22 | Bake-off |
| 20 | Weis Markets | Sunbury, PA | 158 | 158 | 0 | Bake-off/mix |
| 21 | Hannaford Bros. | Scarborough, ME | 147 | 147 | 5 | Bake-off |
| 22 | Harris Teeter | Matthews, NC | 144 | 144 | 4 | Bake-off |
| 23 | Bashas’ | Chandler, AZ | 141 | 155 | 10 | Bake-off |
| 24 | Raley’s | Sacramento, CA | 138 | 138 | 3 | Thaw-sell/bake off |
| 25 | Roundy’s | Pewauki, WI | 135 | 135 | 10 | Bake-off/mix |
| Rank | Chain | Headquarters | Total bakeries | Total U.S. stores | New bakeries in 2005 | Primary production methods |
| 26 | Southern Family Markets | Birmingham, AL | 132 | 180 | 0 | Bake-off |
| 27 | Pathmark Supermarkets | Woodbridge, NJ | 131 | 141 | 0 | Bake-off/mix |
| 28 | Top’s Markets | Williamsville, NY | 120 | 124 | 0 | Bake-off |
| 29 | Save Mart Supermarkets | Modesto, CA | 114 | 124 | 6 | Bake-off |
| 30 | Wild Oats Markets | Boulder, CO | 113 | 113 | 13 | Bake-off |
| 31 | Penn Traffic | Syracuse, NY | 111 | 111 | 0 | Bake-off |
| 32 | Price Chopper Supermarkets | Schenectady, NY | 110 | 110 | 4 | Bake-off |
| 33 | Kash n’ Karry/Sweetbay | Tampa, FL | 104 | 104 | 0 | Bake-off |
| 34 | Giant Food Stores | Carlisle, PA | 103 | 103 | 3 | Mix/bake off |
| 35 | Schnuck Markets | St. Louis, MO | 102 | 102 | 2 | Bake-off |
| 36 | Marsh Supermarkets | Indianapolis, IN | 85 | 114 | 3 | Bake-off |
| 37 | Lowe’s Food Stores | Winston Salem, MA | 80 | 110 | 0 | Bake-off |
| 38 | Stater Bros. | Colton, CA | 78 | 162 | 0 | Bake-off |
| 39 | Nash Finch | Minneapolis, MN | 76 | 76 | 0 | Mix/bake off |
| 40 | Fresh Brands | Sheboygan, WI | 75 | 94 | 0 | Bake-Off |
| 41 | K-VA-T Food Stores | Abingdon, VA | 74 | 96 | 0 | Bake-off |
| 42 | Wegman Food Markets | Rochester, NY | 71 | 71 | 2 | Bake-off/mix |
| 43 | Spartan Stores | Byron Center, MI | 68 | 68 | 0 | Bake-off |
| 44 | Piggly Wiggly Carolinas | Charleston, SC | 60 | 117 | 1 | Bake-off/mix |
| 45 | Brookshire Brothers | Lufkin, TX | 57 | 73 | 0 | Bake-off |
| 46 | Super Kmart Centers | Troy, MI | 55 | 55 | 0 | Bake-off |
| 47 | Big Y Foods | Springfield, MA | 54 | 54 | 0 | Bake-off/mix |
| 48 | Ball’s Foods Price Chopper | Kansas City, KS | 50 | 50 | 1 | Bake-Off |
| 49 | Minyard Food Stores | Coppell, TX | 48 | 66 | 0 | Bake-off |
| 50 | The Fresh Market | Greensboro, NC | 47 | 47 | 0 | Bake-off |
| 17,195 | 20,061 | 455 | ||||
*includes Wal-Mart Neighborhood Market units Source: Modern Baking estimates and actual data
