Consumers these days want their sin in smaller packages.
So say retail bakery executives who discussed with SN their customers' growing interest in smaller cakes.
Downsized cakes are appealing to small families, two-person households and singles, said Ron Williams, director of bakery operations at O'Malia Food Markets, Carmel, Ind. "They don't want to waste money on a large cake," he told SN. "The second thing is that prices on the small snack cakes are very reasonable compared to $6.99 or $7.99 for a [full-sized] gourmet cake," he said.
Some retailers are adjusting
their bakery mixes to include smaller-sized cakes, such as 7-inch-round vs. 8-inch-round, and a variety of other downsized options: single-layer round; 8-inch by 8-inch square snack or picnic cakes; 4-, 5- and 6-inch-round double-layer baby cakes, and cupcake-size mini cakes. Also, one-eighth-sheet cakes are being carried in addition to quarter-, half- and full-sheet cakes. "Baby cakes," which are typically 5- or 6-inch-round double-layer cakes, are performing well for some retailers. Although Harp's Food Stores, Springdale, Ark., just introduced baby cakes within the last six months and is still in the process of getting the product into all of its 38 stores, the baby cake has already established itself as the fastest-growing cake size, said Dan Kallesen, director of bakery. The regular "dessert" baby cake sells for $4.99 and a decorated baby cake has a retail price of $5.99. Harp's plans to offer the baby cakes at their regular price most of the time, but when they become available in all of the stores and can be advertised, the first ad may feature them at a reduced price, Kallesen said. "The baby cake is cute, something of a novelty and it has a lot of eye appeal," he said. A potential promotion that is under consideration would offer a free baby cake for a baby's first birthday, via a newspaper coupon, Kallesen said. Thrifty Food Stores, Burlington, Wash., introduced 4-inch-round baby cakes two or three months ago, and sales have been "fantastic," said Donna Ward, bakery merchandiser. Thrifty operates bakeries in 17 of its 19 stores. The cakes are available in chocolate or white, and are decorated with a little rose and a border, she said. Ward said the initial sales success of the baby cakes was no surprise, but sales had been expected to taper off over time. Instead, sales have continued to grow, she said. "It seems consumers just like the idea that it is small. It could be consumers are more diet-conscious. Also, this size is just right for two people," Ward said. Price does not seem to be the reason behind the growth of these baby cakes because Thrifty has priced them at $3.49, which is 50 cents above the suggested retail, and sales are still fine, she said. "People are using them for gifts -- they take them as a hostess gift," she said, adding that she expected the diminutive items to do very well for Secretary's Day.
Thrifty plans to promote the baby cakes as a gift item, reminding consumers that its everyday retail price of $3.49 is comparable to the price of a higher-end greeting card, she said. A satellite display of baby cakes may be set up near the greeting card department. Pete DeRum, bakery director at Dierbergs Markets, a 15-unit chain based in Chesterfield, Mo., cautioned against deep-discounting smaller cakes. "It requires about the same amount of labor whether a cake is two-layer or one-layer. When you take a deep discount, you have to sell five times as many just to break even. Also, a price that is too low can have a negative connotation. People will think the quality is not there," DeRum said. The popularity of baby cakes can be traced to the more health-conscious consumer and those who want to eat smaller portions, said Ellen Bogage, communications director for the Retailer's Bakery Association, Laurel, Md. Cake and pastry sales in general are doing well. An increase of 2.9% in cake and pastry sales from all outlets was reported in 1994, compared with 1993, she said. In-store bakeries in supermarkets accounted for about 21% of the $2.9 billion total sales in 1994, she added. "That growth can be attributed to innovation and creativity in anticipating the changing needs of the consumer. One example of that is marketing the smaller cakes." However, there is a packaging issue with the 5- or 6-inch baby cakes because of their unusual size, she said, and many retailers feel they need a higher markup in order to justify producing them.
"I have seen baby cakes but they are not really being done in this market. You have to have specialized pans and it requires a different production run," said Williams of O'Malia. They can also take a lot of time to decorate, he added. "My guess is that the chains that carry them don't factor in the labor cost. Retailers may spend a lot of time and money to make beautiful displays of baby cakes in the case, but when you ask how the cakes are selling, you never get a straight answer," Williams said. Decorating a baby cake may actually require more labor because the edible images used on larger cakes are too big to fit on that size. That means more decorating must be done by hand, said Bogage of RBA. But Thrifty Food Stores has had no problem in adjusting production for the baby cakes, Ward said. "Gross margin is only about half as good on the baby cakes [vs. traditional-size layer cakes] because we buy the cakes and the packaging. We use our own icing and decorate them ourselves. So we are losing a little on the gross. If we had to put the labor into making them it would not be worth it, but we buy them ready-made," Ward said. "It takes nearly as much time to decorate a baby cake as an 8-inch cake. Then you have to put the two layers together," said Kallesen of Harp's. "You have to be careful because of the labor -- we had to price it accordingly."
Gross margins are about the same for all the cake sizes, he said. "We want to get our cakes in the customer's mouth any way we can. If the quality and service is there and they had a good shopping experience, they will come back when they have a special event and buy from us," Kallesen said. George Timms, bakery director at Minyard Food Stores, Coppell, Texas, said he is looking at getting into 5-inch baby cakes but "won't jump too fast." He is trying to determine the impact that preparation of the smaller size cakes will have on the chain's bakery production and labor.
"We have to determine if it is worth the additional cost of production. We may just test it on our own, using certain stores as test stores to see how they do. The 5-inch-round cake would be just an everyday cake, not a decorated cake for special occasions. We might have chocolate and Italian cream. It would be a two-layer dessert cake," Timms said. Other retailers have introduced one-eighth-sheet cakes, decorated as individual cakes. Fiesta Mart, Houston, which operates 27 bakeries, introduced one-eighth-sheet cakes in some of its stores about a year ago, said Ray Craig, bakery merchandiser. The one-eighth-sheet is a single-layer quarter-sheet cut in half. The cake is decorated, then covered with a plastic dome. Each is decorated as an individual cake, iced on all sides, he said. "We call it a case cake. We don't do specialized decoration, maybe just a few roses. The regular retail price is $5.99," Craig said. Because it serves a largely Hispanic customer base, and many of its customers tend to have larger-size families, Fiesta Mart expects to do more business in larger-size cakes, he said. "We looked at one store where we are making a lot of these little cakes. That size should not work in that market, they should be doing half-sheet cakes, but that store is probably our highest volume decorated cake store. We don't sell big numbers of the eighth-of-a-sheet cakes, but some people like to pick them up, for a single person or a small household -- they should each yield nine nice squares or 12 small servings," Craig said.
The price point makes it an attractive option to a customer looking for a lower priced decorated cake, he added. As for the labor cost on smaller cakes, Craig told SN, "Our decorators are pretty efficient, pretty fast. Certain things are consistent in any size cake. You can knock off a lot more little cakes in the same amount of time as one large one. If we analyze it, our labor percentage on the small cakes will be a little higher, but there is enough gross margin to make it up." Minyard Food Stores also offers an eighth-of-a-sheet cake, decorated as an individual cake, for $5.99, according to Timms, and although sales have been strong, it is not so much because of price. "Customers are looking for the amount they want to serve. They don't want to have waste," Timms said. Harp's sells eighth-, quarter-, half- and full-sheet single-layer decorated cakes. The eighths are selling well, but day in and day out, the quarter-sheet is the top seller, Kallesen said. Dierbergs' DeRum said eighths have never been much of a success.
"They take as much labor [as the larger sizes] and we are just taking in less. We bake our cakes in full sheets, then cut them into quarter or half-sheet size as the customer orders and ice them all around," DeRum said. A chain of more than 30 stores based in the Rocky Mountain region is selling the equivalent of one-sixteenth of a full-sheet cake, calling it "cake for two," said the bakery director, who asked not to be identified. "We cut a quarter-sheet cake into eight pieces, which are fully iced and decorated and sold individually from the service case," he explained. Each piece sells for $2.49.
"Generally we decorate it with borders on the top and bottom and a rose. We have been doing this for many years, but it does not sell very well. We sell a lot more decorated quarter-sheet cakes, which are priced at $8.99. That is our best seller."
Part of the success of the quarters can be attributed to the chain's initial decision to reduce the price. "That has worked out very well for us. We promoted the lower price with extensive advertising at the time, but haven't had to do anything else. The sales are still there two years later," he said. O'Malia Food Markets has tried selling small decorated cakes made out of cupcakes and calling them "mini cakes," but they have been temporarily discontinued because of a shortage of cake decorators, Williams said. The mini cakes sold for $2.99 each and were a high-profit item, he said. A number of retailers have tried half cakes and cake slices as another way to address consumer demand for smaller portions. Fiesta Mart sells cake by the slice at its coffee bar, which is associated with the bakery, Craig said. "We sell European cakes by the slice or regular cakes from the bakery. We don't sell them prepackaged. They are served on a plate with a fork," he said. Minyard recently purchased single-slice containers to use for cake, pie and cheesecake sold by the slice. A few of the chain's upscale stores have long offered gourmet cakes and cheesecake by the slice from the service counter, Timms said.
"There are a few customers who just want the one slice. We are just doing this to satisfy them," Timms said. Minyard makes a 15% better gross margin on slices of cake vs. whole cakes. Slices enable the chain to satisfy customers who want a smaller portion without having to produce individual items that are too small, Timms said. Dierbergs is also jumping on the bandwagon, according to DeRum. "We are experimenting right now with selling slices from our European pastry shop."
Harp's has tried selling selected cake varieties, such as German chocolate or red velvet, by the slice from the service counter. The slices are priced at $1.99, and "results have been fairly positive," Kallesen said. Fiesta Mart, Dierbergs Markets, Minyard Food Stores and O'Malia Food Markets are among the retailers who have tried to sell half cakes but discontinued them due to lack of sales. "We have played with the idea of half cakes over the years, but we have never been real successful with them. Once you cut the cake and show the raw edge, it doesn't look that pretty," said Craig of Fiesta Mart. "There are more downsides than upsides in offering half cakes," said Williams of O'Malia. "The downside is you have to have special packaging. Cake by its nature stays moist when sealed in icing. Slicing the cake in half reduces the shelf life and quality."
If you try to ice the exposed portion of a half cake to prevent it from drying out, there is the issue of crumbs that result from trying to ice an exposed cake layer that has not crusted over, said Tim Kean, deli, bakery and seafood merchandiser at Pay Less Supermarkets, Anderson, Ind., an eight-store independent. "We don't sell half cakes. We have tried, but they have never been successful," said Timms of Minyard. One bakery director of a Midwest chain with more than 50 stores reported success in selling half cakes.
"The cakes are old-fashioned, high-profile, like the old-time Bundt cakes. We cut them in half and display them in half domes," he said. They sell for $3.49 to $3.99, with flavors that include lemon crunch and pina colada.