Gluten-Free Still a Niche

WITH A GROWING NUMBER OF CUSTOMERS diagnosed with celiac disease a chronic condition in which wheat proteins damage the small intestine of those affected with the disorder sales of gluten-free baked goods have been on the rise for several years now. A Packaged Facts report in April 2009 indicated that the market for gluten-free products enjoyed a compound annual growth rate of 28% from 2004 through

WITH A GROWING NUMBER OF CUSTOMERS diagnosed with celiac disease — a chronic condition in which wheat proteins damage the small intestine of those affected with the disorder — sales of gluten-free baked goods have been on the rise for several years now. A Packaged Facts report in April 2009 indicated that the market for gluten-free products enjoyed a compound annual growth rate of 28% from 2004 through 2008, and estimated the total market size at $1.56 billion, according to the International Dairy-Deli-Bakery Association's 2010 “What's in Store” report.

But, other than a gluten-free “bakehouse” commissary established by Whole Foods Market in 2004, there have been few attempts for major food retailers to embrace this trend in their in-store bakeries.

The problem is, even as the category has built up sales in grocery departments, there's still not enough volume to make a profit with fresh-baked gluten-free products at most in-store bakeries, retailers agreed.

“There is a movement there, but it's just not enough,” said Steve Beaird, bakery director for Kowalski's Markets in St. Paul, Minn.

“We're like the other vendors. There's some gluten-free products that are available commercially that we do carry in our stores. As far as going after it in our bakery department, we have not.”

Beaird noted that the people who need gluten-free items tend to be very vocal, because they have a child or a spouse with a dietary restriction, or they themselves may be affected.

“If you're their primary store, they're going to ask you about it,” he said. “But there's only so much they're going to buy.”

Kowalski's has considered adding fresh-baked gluten-free products to its lineup every year for about the past four years, Beaird said, but they have always determined that it would be too difficult to keep product stocked and fresh without losing money. Instead, bakery department staff currently refer customers to nearby gluten-free independent bakeries in the Twin Cities area.

Tanney Staffenson, an advisor to Wilsonville, Ore.-based Lamb's Thriftway, agreed, noting that insufficient volume poses a big barrier to new product introductions in bakery departments.

“With bakery, you're not really making a profit until you sell the last couple of items,” Staffenson said. “We weren't looking at [gluten-free] like it had to be a profit center for us, but it has to make sense. We just couldn't get it where we had enough people buying it on a consistent basis to accomplish what we wanted to.”