2018 Category Guide: Bakery

This is part of Supermarket News’ 2018 Category Guide to fresh and center store categories.

The in-store bakery continues to be a destination stop, with $13.8 billion in sales in the 52 weeks ending June 30, a 2.4% rise over the previous 52-week period.

How important is a fresh bakery to a supermarket? Aldi thinks it is very important, launching a test of in-store bakeries this year in an effort to keep up with its newest rival here in the U.S., Lidl. The new Aldi bakery appears to be configured in a similar way to those at Lidl, the German retailer that made its debut in the U.S. last year with a larger store format that includes in-store bakeries.

Like the bakeries at Lidl, the Aldi bakeries feature self-service cases that are stocked from behind, where items such as breads, doughnuts and pretzels are baked in-store, according to Brick Meets Click.

“It was only a matter of time before Aldi would match Lidl’s in-store bakery concept on the East Coast,” noted Bill Bishop, chief architect at Brick Meets Click.

The bakery is one of the store departments where retailers are finding innovative ways to improve business while focusing on consumers’ growing demands for convenience and freshness. According to trade association IDDBA, the key trends impacting in-store bakeries in 2018 are: growing interest in mini, single-serve and smaller-sized varieties of baked goods; products that appeal to the health and wellness shopper; and the important role of transparency and clean labeling in shopper buying decisions.

Another key trend in the bakery, according to Sarah Schmansky, VP of Nielsen Fresh, is the emergence of the department as an everyday destination rather than simply a destination for special occasions. As consumers increasingly gravitate toward fresh-prepared and minimally processed products, Schmansky noted, the bakery presents opportunities for retailers to offer items such as fresh-baked bread loaves, baguettes and rolls as an alternative to processed, packed items on the shelves.

“What we have found is that retailers that are winning across the entire perimeter, as well as the entire store, are leveraging bakery in a little bit of a different way,” Schmansky said. “They are making the bakery department more of an everyday occasion, rather than a special one. Those best-in-class retailers are really driving that home with consumers — ‘You don’t have to go to the commercial bread aisle. We have bakery bread that you can use for your sandwiches or your toast in the morning.’”

That decision-making process extends to the sweet snack and dessert customer as well, added Matt Lally, associate director, Nielsen's Fresh Growth & Strategy Team. “For example, unit sales of packaged cookies/crackers declined 1% while sales of in-store bakery cookies increased 4%,” said Lally. “Why does this matter?  At the heart of it, shoppers make a conscious choice of whether to walk into the in-store bakery or packaged cookies aisle to satisfy that sweet craving.”

*Total U.S. All outlets combined, plus convenience stores — includes grocery stores, drugstores, mass merchandisers, convenience stores, select dollar stores, select warehouse clubs and military commissaries (DeCA).