Consumers appear to have a perpetual sweet tooth — a tendency currently proving to be a bonanza for supermarket in-store bakeries.
Despite seeing higher inflationary prices as well as being low on the health and wellness scales, baked goods sales are on the upswing. And with 64% of shoppers saying it’s important to budget for an occasional baked treat, and 80% saying it’s important to do so for celebrating special occasions, activity is likely to remain solid.
But to consistently maintain and grow category revenues, it is essential that retailers do not compromise on quality or selection.
“Bakery department shoppers are seeking high-quality fresh items, which is why in-store produced products represent the majority of our overall assortment,” said Bennett Morgan, senior vice president and chief merchandising officer for SpartanNash Co., a Byron Center, Mich.-based grocery wholesaler and operator of 10 retail banners. “Ensuring customers have a variety of choices at compelling price points is key to offering solutions for shoppers’ sweet cravings and entertaining needs.”
Shopper visits to SpartanNash bakeries are on the rise, with many customers seeking classic treats like donuts, cookies, cakes, and breakfast sweets.
“Inflation has created an environment where impulse purchases are more prevalent than ever,” Morgan said, adding that impulse purchasing is particularly strong when merchandisers situate fresh product displays in high traffic areas outside of the bakery.
At Giant Eagle outlets, robust growth is also occurring in categories like bagel, brownie, small-size cakes, and artisan bread, according to Tammy Kampsula, senior director of bakery for the Pittsburgh-based chain of more than 470 stores in western Pennsylvania, north central Ohio, northern West Virginia, Maryland, and Indiana.
Giant Eagle bakery operators are working to keep interest by regularly refreshing the cases and shelves with new products or package sizes.
“There is a holiday or some type of event almost every month that we tie into,” which includes using consistent color schemes on assorted products, an action that “refreshes the look every holiday or season,” Kampsula said.
Other initiatives involve cross-merchandising bakery selections with relevant deli and prepared food items and offering smaller portion sizes for consumers who want to limit their indulgence, Kampsula said, adding that it also is important to recognize “when something is not a home run” and quickly pull the item from the shelves.
Keeping in-store bakery vibrant is crucial as the department often attracts a store’s most valued customers, according to the Power of In-Store Bakery 2022 report, published by the Arlington, Va.-based FMI—The Food Industry Association. That includes affluent and younger consumers and shoppers from larger households who spend more on groceries weekly.
“Household penetration for in-store bakery remains high with purchase frequency and size up,” according to the report.
To further boost bakery activity, it is important for retailers to keep pace with evolving shopper behaviors, which frequently relate to price.
Fifty-six percent of consumers, for instance, said they have made changes when buying baked items in stores, with 27% noting that they are looking for sales specials more often, according to the Life Through the Lens of Bakery 2022 report, published by the Washington, D.C.-based American Bakers Association.
In addition, 18% of consumers said they are more frequently searching for coupons; 18% are buying fewer items; 16% are switching from purchasing bakery goods to baking the selections themselves; and 15% are buying cheaper brands or items — data based on a July 2022 ABA survey of 1,555 consumers.
And healthy baked goods aren’t totally off the table either. Some 45% of consumers want baked treats that are more nutritious or better-for-you, which includes items with natural ingredients and low or no sugar, the survey found.
Fifty percent of consumers, meanwhile, indicated that “freshly baked” or “baked daily” are important.
Products that meet shoppers’ demand for novelty will further enable in-store bakeries to standout in a crowded and competitive sector. SpartanNash, for instance, is working to strengthen its assortments by revamping a cake decoration program, which includes developing proprietary icing formulas and creating a signature cake program, Morgan said.
He added that the company’s recently launched chocolate dipped peanut butter cookies are outperforming expectations.
SpartanNash is also supporting a premium donut program that offers a wide variety of unconventional flavors “for customers looking for indulgence,” Morgan said.
The retailer determines the specific bakery items to offer in each store by examining customer transaction data, he said.
“Beyond that, we recognize that some items, such as pies, cakes, breads, donuts, pastries and cookies, are always going to be popular,” Morgan said. “In those categories, we focus on providing the highest quality, freshest product while having fun with trends and seasonal themes.”
While in-store bakeries are becoming increasingly active and attractive, maintaining an efficient operation can be arduous. Morgan said SpartanNash is dealing with a host of operational issues, including the greater cost of raw ingredients, worker shortages and spotty stock outages.
“Ensuring there is consistent merchandising knowledge and execution across a variety of different customers and stores remains a challenge,” he added. “Training high-quality merchandising practices to new associates is paramount to designing a store that is appealing and helpful to guests and uniquely caters to the needs of the larger community.”