The Proof Is In The Profits

8/1/2012

In-store bakeries are hitting their stride with more reliable everyday items, higher-quality gourmet products and more aggressive seasonal support.

Armed with an improved grasp of what today's consumers are routinely — and occasionally — seeking from the average in-store bakery department, retail bakery executives are tabulating healthier margins and more consistent overall performance, according to findings of Progressive Grocer's 2012 Bakery Operations Review.

While the average in-store bakery department posted acceptable sales during the 12-month measuring period, there were some interesting shifts detected in the collective responses tallied for this year's annual bakery study that are elaborated on further in the following pages.

First, let's take a closer look at the bakery sales change recorded in the past 12 months (ending March 2012), which found 60.4 percent of panelists reporting an overall increase versus a larger 68.2 percent last year. However, the gap between those reporting decreased bakery sales closed by three points (10.5 percent this year versus 13.6 percent in 2011) and was even more significant among the 11 percent who told us their bakery sales stayed roughly the same from the previous measuring period, good for a 4.6 percent net change.

The overall profit picture is even more encouraging, due largely to more supermarket bakeries offering easier points of entry with reliable everyday items; more authentic, higher-ticket gourmet products; and more aggressive support for seasonal specialties and smaller-portion goodies, to name a few. The results are certainly panning out well from the profit perspective, which are up six points to 52.4 percent from 45.2 percent last year. Even better, comparable profits were down for a smaller percentage of respondents in this year's bakery study (22 percent versus 33.2 percent), while profits remained on par from last year to this for 25.6 percents of panelists versus 21.6 last year.

Findings for this year's annual "state of the in-store bakery" survey was distributed in the second quarter of 2012 to supermarket bakery executives, who were asked to share feedback on various aspects of their bakery operations, inclusive of comparable sales and profit benchmarks, leading departmental challenges and opportunities, and fastest-selling items, among others.

Spotlight analysis of PG's 2012 Bakery Operations Review data unfolds on the following pages, as illustrated on the corresponding charts that feature general synopses of the most influential category trends reported by retail survey panelists for each.

While cakes continue to command the top spot on the profit-generator leader board, paced next by cookies on the second rung, doughnuts — which were cited as the third most profitable in-store category — were identified in this year's study as the single most popular bakery category with consumers, followed next by specialty breads. It thus stands to reason that while doughnuts and specialty bread programs are more labor-intensive and operationally demanding, the payoff comes with enhanced customer perception, and in turn, healthier margins, for bakery category that resonate strongly with repeat patrons.

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