Daily Bread

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Daily Bread

By Meg Major, EnsembleIQ - 07/03/2014

In-store bakeries are raking in the dough ? relatively speaking ? when it comes to breads and rolls, which were found to be the commanding best-sellers in a department that remains an essential ingredient in a supermarket?s overall fresh portfolio, according to the latest findings of Progressive Grocer?s 2014 Retail Bakery Review.

Nabbing the first and fifth slots, respectively, on our annual in-store bakery survey?s top seller leaderboard, breads and rolls flank a trio of inherently sweet stalwarts ? cakes, cookies and doughnuts ? which collectively position the department as a frequent destination for shoppers in search of higher-quality options to enhance their sandwiches, burgers and family feasts.

Among the key highlights of PG?s exclusive ?state of the in-store bakery? study ? data for which is accumulated from the direct input of supermarket bakery executives responding to our annual survey ? the vast majority of panelists (67.4 percent) reported that in-store bakery sales had generated increases during the 12-month measuring period. More evidence that the average supermarket bakery is keeping pace with consumer preferences these days is the negligible 5.9 percent of survey panelists who reported declining category sales in the past year, alongside 29.4 percent whose comparable bakery sales remained unchanged.

When asked about the same-store bakery sales outlook for the next three fiscal operating quarters, respondents expect no radical changes, although the gap widened a tad among the 8.1 percent who predict a decrease, likely attributable to uncertainty regarding escalating ingredient costs and related purchase patterns. By the same token, however, a near-identical two percentage points were added to the positive side of the ledger among 70.6 percent of PG?s 2014 bakery survey participants forecasting increases for the coming year. Meanwhile, 21.3 percent anticipate no changes in either direction.

Although comparable bakery department profits dipped five points to 53.3 percent among this year?s panelists, the tempo appears to have stabilized among the 33.4 percent reporting no changes. Yet 13.3 percent reported downward year-to-year margins, on par with last year?s tally, which can be interpreted as somewhat decent news when considering that in PG?s annual bakery study two years ago, 22 percent of bakery panelists reported profit declines.

Accordingly, with the ongoing success of bakery cafés and more shoppers on the hunt for quick, convenient, premium breakfast options, the in-store bakery is ideally situated to profit from the shifts. Moreover, with more consumers primed for smaller-portioned products, more wholesome ingredients and ?free-from? items, supermarket bakeries have ample opportunities to win more sales and gain greater returns.

Cakes remain king as the most popular and profitable performer in terms of both dollar and volume contributions, and are accordingly crucial for retailers to focus on. Equally critical are rolls and breads, which are showing steady gains as a result of the popularity of at-home sandwiches made with higher-quality breads and different varieties of rolls. Cookies are another regular go-to item in the in-store bakery, buoyed by their appeal as a small indulgence for grown-ups, a special treat for kids, and tasty options for celebrations and gatherings. Doughnuts and pies also remain solid bakery contributors among this year?s retail bakery panelists, who affirm that grocery shoppers are actively partaking ? at least occasionally ? in sweet bakery treats.

With nearly 80 percent of annual Retail Bakery Review participants offering at least a few signature items, 75 percent of which are estimated to be baked in-house, crusty and artisan breads, brownies, decorated cakes, cookies, and gourmet pies led the pack. Specialty sweet goods unique to the local/regional marketplace also made a strong showing in the signature product bakery lineup, as did store-made specialty cakes offering freshness and quality ingredients.

Wedding cakes are also helping in-store bakeries shine as a centerpiece of their stores? total offerings and services to complete a couple?s big day.

With a roughly 60?40 split between PG?s 2014 Retail Bakery Review panelists who respectively do/don?t employ category management, the practice promises further opportunities for retail bakeries to achieve improved results from managing and running specific categories as their own businesses to achieve defined sales, profits, merchandising and shopper targets. To be sure, in light of the bakery department?s differentiation clout not only around the store perimeter, but also across the whole store, assembling a strong portfolio of bakery categories, including destination/signature, occasional/seasonal, convenience/impulse, and routine, can provide reliable guidance on pricing, promotions, space allocation and assortment throughout the year.

When asked to pinpoint the most problematic aspects facing the in-store bakery department, 2014 Retail Bakery Review panelists said that attracting more shoppers to the bakery was their top concern, followed next by two persistent hot buttons: recruiting effective employees and labor costs.

Of particular note, employee training leapfrogged to the fourth rung from No. 8 last year, while concerns about ingredient cost eased on the worry list this year, as the fifth-ranked issue. Additionally, reflecting the national higher consumer confidence levels logged of late, this year?s bakery study revealed that concerns about the local/national economy fell from the top-ranked issue last year to sixth place this year.

The companion chart depicts the remaining chief operational nuisances currently facing supermarket bakery execs.

When asked what best describes their respective in-store bakeries, 42.5 percent of respondents considered the department to be an integral ingredient in supporting the total store?s brand and offerings, while 26.8 percent view their bakeries as destination departments to draw customers in with reliable everyday items, signature specialties and smaller-portioned goodies. These favorable findings are contrasted by the one-third of panelists ? 33.5 percent ? who take a dimmer view of their in-store bakeries as a requisite component of a one-stop-shopping format, along with the 13.4 percent who use it merely for basics/necessities.

Breads and Rolls: The roll category drove dollar and volume growth for the bread and roll supercategory, increasing 5.0 percent and 2.2 percent, respectively.

Breakfast Bakery: Doughnuts, the top-selling breakfast bakery category, drove average dollar growth for the supercategory, boosted in part by a 3.5 percent increase in average retail price. A 4.7 percent increase in average retail price helped drive sweet goods? average dollar sales down 1.3 percent, compared with the previous year.

Desserts: Cakes and cookies, the two top-selling dessert categories, both posted steady or decreased dollar and volume sales during the latest 52 weeks. Cakes experienced slight decreases in dollar and volume sales, while cookie dollar and volume sales remained steady compared with the previous year. Brownies and dessert bars posted the most significant dessert growth, up 5.2 percent and 6.2 percent, respectively, in average dollar and volume sales.