Higher ingredient and fuel costs have led to increased prices in the bread category, but consumer interest in artisan and whole grain breads has held steady
The bread category is on the rise. Record prices for wheat, along with high fuel costs, have forced significant inflationary price increases in the category. Fortunately, many retailers say that shoppers continue to be drawn to high-quality artisan and whole grain breads. Despite higher prices, bread remains an affordable staple for consumers, and retailers can take a variety of approaches to build interest in the higher-end breads as their shoppers search for products that offer both quality and value.
According to Mintel's June 2008 Bread report, the bread category grew to $18.5 billion in 2007, representing a 10% increase since 2002 in current prices — but a loss of 5% after adjusting for inflation.
Still, Mintel researchers expect the market to keep pace with inflation, predicting the bread category will reach $20.6 billion in sales by 2012, driven by factors including continued price increases, product innovation, and the growing trend toward more meals being eaten at home as consumers keep an eye on their household budgets in a difficult economy.
Currently, many retailers have been putting strategies in place in an attempt to offset rising prices at their in-store bakeries.
“Rising prices have significantly affected bakeries,” said Karen Peckham, education information specialist at the Madison, Wis.-based International Dairy-Deli-Bakery Association. “While holding off price increases as long as possible, it was inevitable that operators would eventually have to pass along their increased costs. Tactics have been implemented to ease the sticker shock for consumers, such as reducing the product count in packages and decreasing the size of products by a few ounces.”
According to Mintel, the average price per pound of bread increased 23% from 2002 to 2007, from $1.45 to $1.79, as manufacturers raised prices to offset rising input costs. The steepest increase occurred in 2007, when the average price for fresh bread climbed an average of 6.3% in the food, drug and mass channels. Consumer prices for cereal and bakery products are expected to increase 6% in 2008 and another 2% in 2009, according to the U.S. Department of Agriculture's Economic Research Service projections.
Some retailers say that shoppers are responding to higher prices by choosing less expensive breads. Bashas', Chandler, Ariz., has seen the artisan subcategory flatten lately.
“For the most part, it's a by-product of our tough economy,” said Paul Chapman, bakery director for Bashas'. “People are buying more value-oriented breads.”
But analysts expect national consumption of artisan and whole grain breads to grow, or at least remain steady, during the next few years.
“Consumers may be economizing in some areas, but when it comes to cutting back on premium goods, such as artisan baked breads, it is harder for them to ‘go backwards’ once they've begun integrating high-quality products into their lives,” said David Wright, senior associate at the Hartman Group, Bellevue, Wash.
Several retailers agreed. According to Barry Holinski, director of bakery/deli at Associated Food Stores, Salt Lake City, artisan bread sales are picking up.
“We are up double digits in this category over last year, and on pace to overcome that also,” Holinski told SN. “We are currently in the process of developing a totally new program as well as enhancing the programs we are currently doing. The new program will differentiate us.”
United Supermarkets, Lubbock, Texas, has an extensive selection of artisan breads, and has taken measures to ease the impact of rising prices on consumers.
“Because of the media's constant discussion about the economy, our guests are certainly aware of its impact on them,” said Tammy Kampsula, director of bakery at United.
“Raising retail prices is the last resort but, unfortunately, has had to be done. To offset the cost increases we have reduced our number of SKUs — deleting the slower-moving items to increase our turns — and reconfigured pack sizes. Our guests are still purchasing artisan breads because, I believe, they are a healthy choice.”
In order to maintain consumer interest in artisan and whole grain breads in light of rising prices, retailers can try a variety of merchandising, sampling and promotional ideas.
“Retailers hoping to cater to consumer desires for premium baked goods like artisan bread might consider offering targeted promotions to their heaviest buyers of premium goods, since these same shoppers may be finding it difficult to decide about whether or not to economize or continue to ‘invest’ in quality,” Wright said.
“Another idea would be to combine promotions around premium items that logically connect in the minds of consumers as high-quality experiences, such as artisan bread, imported cheese and wine.”
United Supermarkets cross-merchandises artisan breads in the wine and specialty cheese areas of the store, in addition to merchandising artisan rolls at the salad bar.
“We [also] have a Bay City Sourdough Soup Bowl that is merchandised with the foodservice hot soups, as well as on the soup aisle of the store,” Kampsula said.
“The bakery produces a focaccia bread from which foodservice makes sandwiches. Whole grain breads are included in the artisan bread selection. Our guests are looking for artisan multigrain breads, all-natural breads and organic more so than whole grain breads.”
Although offering artisan and whole grain breads in foodservice sandwich programs can be a great way to generate interest in the bakery's selection of artisan breads, Melissa Abbott, senior trendspotter and analyst at The Hartman Group, said retailers should be mindful of the types of bread they consider using in a sandwich program, and should ensure that they are appropriate choices in terms of texture and flavor.
“You've got hunks of bread that are very hearty that are meant to be torn and shared rather than cut into sandwich slices,” she noted. “And then there are the issues of the very rough crust in the roof of the mouth — we hear this all the time from consumers.”
Abbott also said that retailers have a few factors to consider if they choose to promote artisan breads with sampling programs. Notably, once bread is cut into cubes, it can dry out and taste stale within 15 minutes.
United has a built-in sampling area for artisan breads, which makes them committed to sampling daily, according to Kampsula. Any drying effect is countered by pairing breads with various olive oils at these sampling areas.
“This has created a destination for artisan bread purchases,” she noted.
Artisan and whole grain breads convey a sense of authenticity and comfort, industry experts agreed. Because of this, retailers should use the scent of bread baking to entice consumers and remind them not to forget to pick up fresh bread during their shopping trip.
“The main thing that we've noticed with retailers and consumers is that when consumers walk into a retailer, they notice the scent of the bread,” Abbott said.
“If you're at Kroger or Costco, you can still get artisan baked bread that's basically parbaked that's coming out of the oven. And it's the smell, the aroma that really draws the consumer in.”
Associated Food Stores tries to make sure the bread is as fresh as possible, Holinski said, by baking bread in the afternoon, rather than in the early morning.
“Most of the stores are doing their bakes on this in the late afternoon, when the customers are there, instead of in the morning and losing valuable hours of shelf life,” he explained.
Another way to convey authenticity is through signage and displays.
“Displays should be very homegrown-looking — chalkboard, chalk, beautiful handwriting — I would look at small bakeries around the country,” Abbott said.
“Le Pain Quotidien does a wonderful job that creates a community environment. Just looking at the signage of something like that and trying to reproduce that within the bakery department would be good. Something a little more rustic-feeling will add to consumers feeling like they're actually in an artisan bakery.”
In IDDBA's podcast, “Increasing Sales Using Whole Grains,” available for download at iddba.org, Cynthia Harriman, director of food and nutrition strategies for the Whole Grains Council, provides ideas for managers and associates to increase whole grain food sales in their stores.
“Too often, whole grains are off to the side like an afterthought,” she said in the presentation. “Create special displays that show your customers that you understand that good food can look good and taste good. Signage should emphasize the whole grain products that you sell and promote quality baking ingredients, like whole wheat flour or oat flour.”
Sales associates should also be knowledgeable and available to highlight the unique qualities of certain types of bread.
“It's important to have a person there who really cares about what they're doing, who is really heading up the program and has some baking experience that's beyond just needing someone here to bake this parbaked bread,” Abbott said. “It's almost like having a wine steward within a store.”