On the Rise 2009-08-31

MATTHEW ENIS

As the current recession has worn on, supermarkets have been resilient, with many retailers finding ways to benefit as shoppers head back to basics — saving money by dining out less and cooking more at home.

But, surprisingly, many retailers are also seeing growth in sales of sweet snacks such as cookies, cakes and doughnuts — all highly discretionary items.

In the latest 52 weeks ending June 27, dollar sales of doughnuts were up 10% vs. the same period a year earlier; cupcakes were up 11.5%; individual desserts were up 12.9%; and mini-cookies were up 22%, according to FreshFacts data generated by Nielsen and analyzed by The Perishables Group, West Dundee Ill.

“We believe the growth in individual-sized desserts, miniature bakery items and cupcake sales indicates consumers still want to indulge — in affordable luxuries — that provide both portion control and smaller price tags,” explained Sherry Frey, vice president, account services for the Perishables Group.

Price inflation has also played a role in these increases. Significant spikes in the prices of flour, dairy products and eggs last summer forced many product manufacturers and in-store bakeries to raise prices. And, Alan Hiebert, education information specialist for the International Dairy-Deli-Bakery Association, noted that while most of the data he has reviewed indicates that dollar sales are rising, volume sales of some items are flat or down.

“Commodity prices were going up and there was also an issue with distribution prices going up [in 2008],” said Hiebert. “There were a lot of distributors who were starting to charge a little more,” due to rising fuel costs, he added.

Regardless, rising dollar sales means that consumers are still shopping the category. And some retailers say that simple strategies like offering smaller portion sizes, sampling product and cross-merchandising product effectively have helped maintain and grow sales of many items, despite the difficult economy.

“Bakery sales for us are up. We're pushing 5%,” said John Chickery, bakery director for Riesbeck Food Markets, St. Clairsville, Ohio.

Chickery said he believes that the bakery and sweet snacks categories have grown during the recession partly because people view them as comfort foods. In the southeastern Ohio region where Riesbeck's operates, unemployment levels are not as bad as they are in other parts of the country, Chickery said. But he noted that during difficult times, people tend to seek out those traditional favorites.

“People are being laid off, or are talking about being laid off, so it's a stressful time. And, I do believe that people tend to drift toward comfort foods, and bakery [products] are comfort foods.”

Steve Beaird, bakery director for Kowalski's Markets, agreed, noting that “bakery sales seem to be holding on pretty well” at the St. Paul, Minn.-based company. At Kowalski's, bakery sales are up across the board, despite flat volume sales for many items in the category.

“Bakery is comfort food,” Beaird said. When shoppers are watching their budgets, “you go to the meat department, and people eat hamburger instead of steak. You're going to see a decrease in sales,” he said. “In the produce department, it's easy to put down the organic and go to a [conventional] item instead. In deli, you can do without fresh-cut meats or deli salads. But most people every week buy bread or buns, and occasion cakes still do well. But it's that little indulgence or little treat. It's comfort food.”

SWEET TOOTH

Sales of many bakery products — especially sweet snacks — still depend on impulse purchases, even as shoppers are watching their budgets more closely. But, Chickery argued that the shift toward consumers dining out less and eating at home more often can benefit categories that depend on those impulse sales as well.

“More and more people are shopping the supermarket again and buying product to take home and make a meal at home, rather than eating out,” he told SN. “That condition is true nationally and true for us too.

“And when you have more people walking through the door, you have more opportunities in the perimeter departments to make a sale. … Of course, it takes more than sheer numbers to make a sale. You have to entice the customer to make a purchase. Bakery is often not on the shopping list. They don't have it down like toilet paper or baggies or lunch meats. It's that extra item, so sampling products and making sure you have good, fresh product out there” is critical, he said.

And, Hiebert noted that effective cross-merchandising programs are a “perennial” suggestion from IDDBA to retailers looking to boost sales.

“In these kind of times, people are still going to buy staples — milk and things like that,” Hiebert said. “Maybe a good way to go would be to take bakery products and cross-merchandise them in the dairy department, where there are a lot of those staples. Put some chocolate-chip cookies out there — it's a natural combination.”

Also, echoing Chickery's comments about consumer traffic moving from restaurants to supermarkets, Hiebert noted that unless they are facing very serious financial stress, shoppers aren't going to completely change their shopping and eating habits overnight.

“Just because the economy lags a bit, people won't know overnight how to cook or what to cook or how to make a cake for a celebration,” Hiebert said. “And, they will go to a supermarket for that kind of stuff. People aren't going to skimp on things like birthday parties for their kids unless they're really in dire straits.”

JUST A TASTE

Yet, consumers are certainly shopping with an eye toward price and value. And, both Chickery and Beaird said that smaller portions have helped their stores generate impulse sales in this difficult economic climate.

“We've got pretty flat bakery sales to last year, and that's pretty good” considering the state of the economy, Beaird said. “But I don't see one [bakery] category doing better than the others. The trend that is doing well for us — that we've pushed a little more — is smaller portions. Half-pies or half-cakes or other smaller portions. We're not discounting price, but we are giving customers the option of buying a smaller size. That's done really well for us this year.”

Beaird said that he had employed the strategy with most of his central bakery's pies and cheesecakes, as well as other items, adding about 30 total SKUs of half-portions.

“You're only getting half sales, so you have to sell more of them, but you're probably picking up more impulse sales,” he said. “Someone is probably not going to buy a $12 apple pie on impulse, but if they're walking by and they see half of one for $5.99, they think, ‘That looks good, and it's $5.99.’ And we haven't had to discount it.”

Chickery said that he has seen similar purchasing habits at Riesbeck's lately.

“People still want to indulge and reward themselves, but maybe they don't want to buy a whole cake, so they buy by the serving or buy a half cake,” he said.

“We offer a 24-count pack of cookies, but to be honest with you, people are buying more dozen-count cookies, even though the 24-count may be a better value. I think people may be looking at their wallet and thinking, ‘I want to get something, but I think I don't want to spend that much. I can make a lesser purchase, but still indulge in a good baked item.’”

Similarly, cupcakes are still performing well, something that Chickery attributed to convenience as well as price.

“Here's an item that's pretty easy to consume,” he said. “You don't need a knife to cut it or a plate to put it on.”

Hiebert said the popularity of smaller portion sizes has been building for a couple of years now, and suggested that bakery departments continue to take advantage of the trend going forward. Smaller portions appeal not only to people who are watching their budget, but also to people who are watching their waistlines, and prefer smaller portions of full-flavor treats to regular portions of sugar-free or fat-free treats.

And, as the holiday season approaches, in-store bakeries might consider promoting smaller portions as a way for hosts to offer their guests variety at small gatherings like dinner parties.

Regardless, it's important to continue to differentiate from local competitors, and to stay focused on what customers want. Chickery noted that Riesbeck's has been able to increase doughnut sales during the recession, because the company continues to make its own doughnuts fresh — frying them twice per day — something that no one else in their market does.

“None of our competition fries doughnuts,” he said. “We still make them the old-fashioned way.”