BAKERY: SWEET PROFITS

Kaitlen Exum

The in-store bakery, once viewed as a convenient "extra" for customers, has grown into a vital, viable profit-maker, responsible for contributing to a retailer's image and reputation. More than anything, the ISB has become a standard by which consumers can measure a supermarket's approach to freshness and quality.

"The early bakeries were installed with an eye toward adding convenience for the shopper and creating more business," said Carol Christison, executive director of the International Dairy-Deli-Bakery Association, Madison, Wis. The objective was to rely on the novelty and convenience of these minimally stocked departments to increase store traffic. Although a supermarket with an in-store bakery may have held a slight edge over its competitors, these operations were far from the norm. Bakery items weren't even mentioned in SN's Perishables section until 1958.

By the 1960s, however, there was a lively debate over the usefulness of in-store bakeries. Due to the expense of installing and staffing the departments, many supermarkets were hesitant, though others took the costly plunge. The required outlay and uncertain returns were not the only deterrents. In the September 12, 1966, issue of SN, industry experts cited the biggest obstacle to operating a successful in-store bakery as a lack of skilled help. Products were originally baked from scratch, so employing a competent all-around baker, as well as assistants and salespeople, was a necessity. While baking from mixes soon became popular, even this labor-saving tactic required the services of a skilled professional.

Growing consumer interest in the ISB increased sales, and increased profit pressures on retailers, who became more interested in solving the labor problem. One early option involved centralizing production. Some supermarket chains opened external bakeries that shipped retail products to their stores. Baked goods were then either simply displayed, or decorated and displayed, thus eliminating the need for a baker on the premises.

Paul Supplee, director of bakery operations at Lunds/Byerly's, Edina, Minn., said of the concept, "You don't make any money if you're making your cake from the ground up at each store in 20 locations, because it takes so many people. But if you make the cake at a central facility and then ship it and decorate it at the store, you've gained enormous efficiency."

However, shipping ready-made products was only feasible if the retail locations were few enough and close enough to the central bakery so that the baked goods didn't loose their freshness before reaching the shelves. More options were needed and, thanks to improvements in manufacturing and and new advances in product formulation, thaw-and-sell products became a new and effective alternative.

Along with thaw-and-sell, parbaked products were also being developed. Bake-off items were a significant addition to the in-store bakery because they required only a minimum of final baking and, therefore, did not require the presence of a skilled baker.

Even better, they clearly conveyed the image of freshness. These last few minutes of baking produced enticing aromas and a hot-from-the-oven image. Moreover, customers could actually see the baked goods emerging from the ovens, thus completing the picture of freshness. This perception has been and still is an extremely important factor in consumers' purchases.

"Today's bakeries are usually in full view of the customer and offer all-day baking to take advantage of the great smells and visual excitement that trigger impulse purchases," explained Christison. Supplee agreed, saying, "The fresher the bakery looks, the better the customer feels about the store as a whole."

Regardless of the improved quality of thaw-and-sell and parbaked items, these products alone have not made the in-store bakery the widespread, profit-making presence it is today. "Some chains think that the thaw-and-serve items will solve their problems, but if they don't directly address labor, they haven't solved anything," said certified master baker Darrell Mickschl, bakery manager of Jerry's Foods, Edina, Minn.

"If you're buying a lot of thaw-and-serve items, you obviously have to use less labor to do that. And if you don't, the profit margins go out the door." Similarly, with the current trend toward self-service, overstaffing bakery departments has been a hazard, he said.

Supermarkets have reduced costs by incorporating parbaked and thaw-and-serve items and by downsizing staff; however, the object of the in-store bakery isn't just to cut costs, but to turn a profit as well. Currently, an assortment of methods are used to attract customers to the bakery department, ISB veterans told SN.

"It's the extras that stores have that set them apart," said Mickschl. His list includes exclusive, signature items that draw customers to particular stores. Likewise, artisan breads are incredibly popular, as are certain brand-name products, like Krispy Kreme doughnuts that are delivered fresh daily to some bakery operations.

In addition to the actual baked goods, other factors increase consumer interest. "In the last few years, [supermarkets have] started to put bakeries in the front of the store," said Supplee. This not only makes the bakery department more noticeable and accessible for impulse shopping, but it also "enhances the freshness of the store as a whole." Similarly, the fresh-meals tactic of cross merchandising baked goods and deli items has been largely effective, he said.

Through the decades, the ISB has become a staple supermarket attribute. The department did and continues to adapt to trends, survive a lack of qualified staff and employ new technologies. Even in today's tenuous economy, the in-store bakery has a firm hold on the customer's wallet and sweet tooth. Supplee offered his advice for the future: "Just make sure you shift your main focus in the bakery to products that are more sought-after during harder economic times. People are watching their money more closely, so you've got to make sure you offer the basics. They're not expensive items, [but they remind] them of their childhood. It's not a good time to try to change people's eating habits."

Ultimately, he suggested the maxim based on 50 years of trial and error, and ultimately, progress: "It's got to be fresh, you've got to have it warm, and it's got to be theater."