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Wally Amos - Recipes for Life.

In-store bakeries report steady sales as consumers seek comfort food.

Affordable Indulgence

January 01, 2009 – by Carol Radice, GroceryHeadquarters.com

While many departments are feeling the pinch of a cutback in consumer spending, experts predict that the bakery will make it through the recession primarily unscathed. In fact, they believe if anything, sales will rise as consumers are drawn to comfort foods especially breads, muffins and cakes. While increases in commodity prices have cut into profits, the bakery department is still a strong performer for supermarkets.

Experts say that supermarkets need to ramp up their efforts if they want to remain leaders in in-store bakery, as competition from other retail outlets, including warehouse clubs, heats up. “Despite other classes of trade getting into bakery, supermarket bakery department sales have been going up for the last decade,” notes Alan Hiebert, an education information specialist with Madison, Wis.-based International Dairy-Deli-Bakery Association. “Sales rose to more than $10 billion in 2007 from around $9.5 billion the year before. At the same time, the bakery department’s contribution to total store sales went from 2% to 1.9%,” he says.

While he is bullish about the opportunity, Hiebert cautions in-store bakery managers not to put too much emphasis on trendy flavors or styles. Instead, he says, each store should look at its customer base to determine assortment. “In an environment where people are pinching pennies, supermarket bakeries can emphasize what makes them stand out—convenience and every day value,” he says. “An economic slowdown can lead to more hours on the job, which leads to less time to cook. The in-store bakery is in a good position to cross-merchandise breads and rolls, for example, with meals from the deli/foodservice department.”

Hiebert notes bakery items can be creatively cross-merchandised in just about any food department in the supermarket. “This year it will be important for bakeries to position themselves as convenient places to purchase everyday items at reasonable prices,” he says.

Industry officials agree that much of the both current and immediate future growth of bakery sales is clearly attributable to the number of people eating at home more. “Today’s consumer is attracted to comfort foods and bakery products fit that description,” says L. Elise Kaplan, marketing communications coordinator for Bakery Crafts, based in West Chester, Ohio. Kaplan notes smaller households, tighter budgets and older consumers are among those driving much of the business. “As budgets tighten, more people will be throwing birthday parties or holding special occasions in their home and bakery sales should see an uptick from this.”

Money may be tight, but consumers are not likely to forgo buying bakery items, especially when the option is viewed as healthy. Officials at Shirley, N.Y.-based Uncle Wally’s notes the interest and demand they are seeing from consumers looking for portable, ready to go and individual items. “Consumers are becoming more aware that breakfast is the most critical meal of the day and more are turning to muffins,” says Jerry Ceccio, the company’s vice president of sales and marketing.

Interest in eating muffins beyond breakfast is increasing as well. “As consumers look to eat healthier snacks and seek to control their portion sizes, they view muffins as a healthy, sensible snack choice,” Ceccio says. The company created a line of individually wrapped snack muffins to address this need.

Foot Traffic Advantage

According to the General Mills Consumer Insights team, today’s consumer sees the in-store bakery as their primary bakery, reserving trips to more traditional/stand-alone bakeries for special occasions. As Stacy Shaleen, consumer insights manager for General Mills Bakeries & Foodservice based in Minneapolis, notes, the in-store bakery offers one-stop shopping and good price points, benefits which are increasingly important to consumers.

“In-store bakeries can capitalize on this by stressing the freshness, quality and value of their bakery products,” says Shaleen. “As consumers forgo their morning cappuccino routine due to tightening budgets, in-store bakeries can remind them that they can still get their favorite baked goods at a fair price.”

With this in mind, Shaleen notes indulgence and right-size packaging will be key trends in 2009. “Consumers are looking for values, but still want to treat themselves. Indulgent products such as super gooey cinnamon rolls and gourmet cookies are the little treats people can still justify for themselves and to shower on others.”

She and others expect smaller quantity packages to be appealing as well. “Smaller counts translate to no waste. The lower out-of-pocket price and portion control are increasingly attractive,” she adds.

Since bakery traffic has remained steady over the past few years, retailers are challenged to experiment with new items so that the department doesn’t appear stale to frequent visitors.

“About half the shoppers visit the bakery on a regular basis, so the most important thing the bakery manager can do is offer products that the shopper sees as something they can’t or won’t prepare themselves and something they can’t get anywhere else,” notes Tara O’Donovan, marketing manager with Bake’n Joy based in North Andover, Mass.

O’Donovan says with more shoppers eating at home, dessert items and specialty breakfast items are seeing consistent growth, something she expects to continue in 2009, with a continuing interest in “healthier” options such as whole grains, trans fat free, fortified foods and baked goods containing super fruits like blueberries or pomegranate. “There seems to be consistent growth for muffins, individual desserts, cupcakes, croissants, dinner rolls, specialty cookies and decorated cakes,” she says. This tells me that shoppers are still ‘splurging’ for special events and to make up for the sense of being deprived of dinners out.”

Catherine Porter, marketing manager for Sara Lee In-Store Bakery, based in Downers Grove, Ill., also believes the in-store bakery is well positioned to compete. She says consumers have come to appreciate both the convenience and the bakery shop quality they can now find in their favorite grocery stores. And like Shaleen, Porter notes the trend of smaller sizes influencing sales this year. “In-store bakeries are in a position to take advantage of many key trends taking place today, particularly when it comes to portion control and the ability to size their products accordingly,” Porter says. “In the past, consumers would often not buy something if they felt most of it would go to waste. Introducing half pies and slice programs has helped make a dessert item appropriate for any night, not just for a special occasion or an indulgence at the holidays.

“Not only are portion control items smaller, their lower price points make it a lower barrier to entry and when prices are lower, consumers are more apt to sample a variety of items and try new things. This strategy not only also attracts new consumers to every day desserts, it helps establish that the quality of in-store bakery goods is just as good if not better than bakery shops,” says Porter.

She believes consumers may be tightening their belts this year, but freshness and quality are themes that will still resonate in 2009. “I think we’ll start to see more gourmet type offerings introduced this year,” she says.

Rising Interest in Breads

Consumers are eating more bread as carb-restricted diets fall out of favor, but looking for whole grains and other healthier options, experts note. “Today’s consumer is interested in nutrition and cares about what they put in their body,” says Michael Girkout, president of Alvarado Street Bakery, based in Petaluma, Calif. “They read labels and have an understanding of what is healthy and what is not, and this mindset is increasingly applied to bakery products. As detrimental as the Akins Diet was to bakery sales, it taught consumers how to read nutritional fact panels.”

Girkout says that making consumers aware organic bakery products will be a crucial element to further building sales in 2009.

“Incorporating organic products into traditional sets makes the most sense when marketing to traditional consumers,” says Girkout. Therefore, he notes, calling attention to organic products so that consumers are aware you carry these products should be your number one focus. “By shining a spotlight on organic bakery products retailers can generate additional demand because it shows consumers these products are special and important.”

As Girkout explains, his company makes flourless bread using sprouted grain, something that doesn’t compete with other products on the market. One of the unique attributes of sprouts is that it freezes well so the bread can be sold frozen which enables it to be shipped nationally and internationally without issue. “Our customers are looking for alternatives. Some have health issues such as diabetes and appreciate having options like our low glycemic index Diabetic Lifestyle bread because they can’t eat traditional offerings.

“We also make bread marketed to kids. Gateway bread was created to move kids gently away from what they are used to toward a whole grain bread free of oil and sugar,” he says. “As we move through 2009, the whole grain trend will stay in strong demand as people continue to emphasize healthier products in their diet. At the same time, consumers will be cautious about who they buy products from and remain attracted to authentic products and the companies that make them.”

Fiber-rich offerings are also gaining popularity. For example, Uncle Wally’s recently added Fiber One muffins to its lineup. “General Mills is having great success selling Fiber One Cereal and Chewy bars and we thought a Fiber One Muffin would be a great addition to this popular line of products,” says Ceccio. “We are now successfully selling these muffins in a four-pack clamshell to in-store bakeries throughout the Northeast.”

According to Ceccio, the Fiber One muffins have received success early on and word of mouth is building. A unique aspect of the product is that the freezer case muffins can be kept frozen and thawed overnight, heated in the microwave or kept in the refrigerator, with a shelf life of up to two weeks. “We’re looking to mirror this success and bring both products into supermarkets across the nation,” says Ceccio.

Since people are scaling back on serving size, look for cupcakes to continue to surge in popularity. “The interest that developed in early 2000s in cupcakes continues to grow and is anticipated to do so for the near future,” she notes. “Obviously a huge hit with kids cupcakes also hold wide appeal to people of all ages. These are not the cupcakes many of us remember as kids—they look more like single serving cakes..” Kaplan says she is also continuing to see cakes for two be popular with empty nesters or young couples without kids.