The year dawned with limited expectations in the in-store bakery market, but at its close, many operators are reaping the benefits of adjusting the price, size and quality of their bakery products.
To help offset the impact of the recession, Tyler, Texas-based Brookshire Grocery Co.'s bakeries have focused on the company's store brands program. This has involved adding product lines, such as premium par-baked artisan breads and a line of fully baked everyday cookies, according to John Rose, bakery category manager.
The bakeries merchandise both categories adjacent to their national brand counterparts at slightly lower retails. “In both cases, our store brand products far outpace the national brands in customer acceptance,” he said. As a result, the company advertises its house brand bread almost exclusively.
At United Supermarkets, Lubbock, Texas, “our first half was phenomenal — 10 percent growth over a year earlier,” said Tammy Kampsula, business director, bakery. Customer counts increased slightly, she adds, with the net effect indicating “guests are putting more in their baskets.”
Kampsula attributes much of the growth to spring events that spark cake sales. But beginning in June, sales slowed to a crawl, up 2.5% from a year earlier, mainly a result of higher-than-normal summer temperatures, she said, adding that sales picked up in late September with cooler weather.
To address the recession's effects, Kampsula and her crew asked themselves how they could reduce SKUs and build bigger displays in an effort to increase sales and reduce shrink, while maintaining retails. The answer included revisiting merchandising products with longer shelf lives and possibly displaying products in different locations. “Good examples are pound cakes and everyday cookies, which, compared with gourmet cookies, can be merchandised in large displays,” she said.
Save Mart Supermarkets' Jarett Peppard, director of deli/bakery/foodservice, observes that consumers have adjusted their shopping patterns to the economic conditions, including paying more attention to advertised or featured items.
“Through this difficult time, we have strategically invested in product quality to provide greater value to customers,” he said, “that is, good-quality product at a fair price.” The process began during the second and third quarters of 2008 when Save Mart, based in Modesto, Calif., reformulated nearly every bakery category, improving product quality in each, he said.
For example, the in-stores turned to baking cookies after having purchased 90% of SKUs fully baked. They now bake 82% from premium frozen dough. In addition, Save Mart revised its merchandising to allocate proper space for this key category, he said.
After two years, cookie sales have grown a compounded 52% and account for 17% of bakery sales, he adds. Another result: “Our bakeries have become destinations for cookies. This tells us that customers far prefer fresh-baked product.”
The operators interviewed say smaller cake portions, including slices, play greater roles in their strategies to offset the effects of the slow economy.
United Supermarkets bakeries continue to offer eight-inch double-layer all occasion cakes. However, Kampsula reduced the SKUs to the top-selling three or four varieties and launched a single-layer cake program. “Price/value perception is at the forefront,” she said. “Guests still have a cake to take home, and a single layer satisfies their need. Sales of double layers haven't dropped, but single-layer cake volume is growing.”
In addition, the in-stores have four-inch squares and slices packaged in four counts. And while quarter sheet custom-decorated cakes remain strong, sales of half sheet cakes have grown more quickly.
As part of Save Mart's bakery overhaul, Peppard upgraded cakes, beginning with reformulating the frozen layers to improve cell structure and moisture. He also introduced true buttercream icing and revamped cake designs to ensure they are current. This included identifying three cake categories: children, all-occasion dessert and specialty dessert cakes. Decorated cakes comprise more than 30% of bakery sales.
When considering challenges in 2011, in-store operators march out the usual suspects: facing volatile commodities prices, improving productivity and attracting more store customers' business.
A component to achieve this is to ensure bakeries offer products that consumers in their respective markets want, as independent retail bakers do. But “neighborhood marketing for large chain operators is impossible,” Save Mart's Peppard observes. “Neighborhood merchandising is possible.” To that end, each Save Mart store focuses on the available products for which it sees demand, he said. Artisan bread is a good example.
Peppard and his team identified 26 of the company's 228 stores with bakeries as targets for artisan bread. Next, they established a merchandising theme in each store with the goal of developing artisan bread into a destination category. “This type of merchandising will be critical to the bakeries' growth,” he notes.
Similarly, during the last two years, Schnuck Markets, and Hy-Vee Food Stores have installed long-fermentation, no-proofing artisan bread programs in targeted markets.
Rose of Brookshire Grocery said artisan bread is one bakery category that can appeal to younger consumers, and creating products and events that resonate with these consumers is increasingly important. Communicating with them, however, brings new challenges.
“Given their propensity to be ‘early adopters’ of digital media devices and the accompanying media avenues associated with them, we want to be ‘neighbors’ in that community,” Rose said.
Younger consumers seemingly live connected to iPads and BlackBerrys, he continues, “So, we asked ourselves, ‘What else can we do to appeal to them?’” One answer: Brookshire obtained an Apple app, which it plans to take into various areas, such as bakery.
While implementing creative marketing and merchandising strategies to draw new customers, these and other innovative in-store bakery operators still will need to execute the day-to-day tactics necessary to build and maintain bases of loyal customers. United Supermarkets' Kampsula encapsulates concerns expressed by her counterparts.
“I don't see 2011 getting any easier for us. Consumers are staying home more, and they are more cautious about spending their dollars,” she said. “Look at cookies. Sales of our traditional cookies continue to be really strong; while gourmet cookie sales are good, they're not as buoyant. Guests have a perception they're getting more for their money.
“I would like to believe the economy will improve, but it's tough out there. We will have to watch everything that we do very carefully.”
This story originally appeared in the December issue of Modern Baking, a Penton Publication.