While wheat may be making a strong comeback, so far in 2024 the sales of food made with the grain haven’t been stellar.
The U.S. Department of Agriculture is predicting that the amount of wheat used in food this year will be the lowest it’s been in a half decade. Similarly, in the fourth quarter millers produced the least amount of flour during that time span in 10 years.
According to data from consumer intelligence company NIQ, cookie and cracker unit sales were down 3.4% year over year in February and grocery-aisle bread sales dropped 2%.
But overall, bakery is holding its own within grocery and certain products, including specialty bread, are carrying the category.
Bread continues to be a top five performer in the bakery section, and artisan and sliced bread lead the way, according to Noah Smith, grocery merchandiser, PCC Community Markets.
PCC Community Markets is based in Seattle, Wash., where there is a strong bread scene attributable to a couple of factors: The state of Washington grows a ton of wheat (it was the third most wheat producing U.S. state in 2023) and a research institute called Breadlab — a collaboration between wheat growers, mills, and Washington State University — is in its backyard.
“We’ve seen increases every year [for bread],” said Smith. “The trend that we are seeing is our customers are leaning a little bit further into that artisan segment.”
Rick Stein, vice president of fresh foods for FMI — The Food Industry Association, agreed. He said bread is holding its own, even in a post-pandemic world.
“We’ve seen breads and rolls continue to do really well,” he said. “There are a lot of customers that still are eating at home and using commercial bread.
“The other thing that we’ve seen is that the bakery department, especially in what we call functional items like sliced bread and rolls, there is a lot of health and well-being messaging going on.”
Shoppers know that they need whole grains and bread in their diet and there is no longer a fear of all the carbohydrates, Stein added. The quality of bread also has been on the rise, hence the uptick in artisan bread sales.
Baking in the data
According to data released by Chicago-based marketing research firm Circana, bakery dollar sales were $3.7 billion in February, a 0.5% increase year over year, but unit sales continue to be down — 0.9% vs. February 2023.
Center store bakery, however, outperformed perimeter bakery in February in terms of dollars (0.9% increase year over year vs. a 0.1% decrease). However, perimeter performed better in terms of units (loss of 0.6% year over year vs. a loss of 1.1%).
There are also some sub-categories that saw strong unit sales. In February, croissants (10.1% increase in units year over year), muffins (4.3% increase), doughnuts (3% increase), bagels/bialys (0.2%), and buns and rolls (0.2%) were the main drivers in center store bakery. Perimeter saw steady performance in specialty desserts (6.4% increase in units year over year), breads (4.3%), muffins (2.2%), buns and rolls (0.5%), and cookies (0.1%).
On the downside, year-over-year unit sales of center store flatbreads and snack cakes dropped 9.3% and 7.6%, respectively, while pies (-5.5%) and pastry, danish, and coffee cakes (-4.3%) dipped in perimeter.
The market experts Supermarket News spoke with touted how perimeter bakery has been outperforming center store, and breads are playing a huge role.
Melissa Altobelli, SVP, Client Insights, Dairy and Bakery Vertical from Circana, said that perimeter breads showed the highest unit sales growth during quarter one. In fact, units were up 6.6% year over year primarily due to store brands.
“Breads growing or being the biggest growth driver during quarter one is different than what we saw in 2023,” she said. “It’s sandwich breads.”
A surprise purchase in the bread family are tortillas, which are not classified in the bakery section because they are found in the bread aisle. Altobelli said tortillas were up 2% in unit sales in 2023 and are seeing purchase life thanks to the low carb and zero carb diet trends.
“I also think the multifunctionality of tortillas continues to win with consumers that are budget constrained,” she said. “There is really a lot you can do with them.”
One of the primary factors fueling success in perimeter bakery is the move to eat more meals at home. Altobelli said many shoppers are trying to replicate restaurant-style dishes at home and perimeter is where shoppers are going to find high-quality, premium items.
Variety has also been king. Doughnuts is one item that has moved particularly well over the last few months and stores are offering more variety packs rather than smaller sizes.
Single-serve desserts are also still performing well, as are specialty desserts. Single-serve desserts began emerging during the pandemic and produced solid results in 2023, and shoppers are still purchasing them within bakery.
What’s the plan?
Grocers continue to use tried-and-true marketing methods in the bakery area, but Stein said the biggest change is the messaging around both health and, conversely, indulgence.
“From that standpoint I’ve seen a little bit of change in the department decors and their point-of-sale messaging,” he said.
Cross-merchandising on the store floor also continues to be an effective strategy.
Whitney Atkins, vice president of Marketing for the International Dairy Deli Bakery Association (IDDBA), said grocers need to stay ahead of flavor trends and need to offer varieties, whether it’s a number of different types of individually boxed items like cakes or different types of doughnuts in a 12-pack.
Capitalizing on special occasions and nostalgia also continue to be strongholds for retailers.
Bakery continues to be a dependable category for retailers, which have been capitalizing on shoppers’ need for specialty, premium, private label bread in the perimeter section. Inflation continues to boost dollar sales, but unit sales continue to make a slow, gradual comeback.
