Grocery instore bakeries generated $13.8 billion in sales in 2018, according to a new report.
The Power of Bakery, a collaboration between the American Bakers Association and the Food Marketing Institute and sponsored by Corbion, also found that total bread and baked goods sales topped $59 billion last year, split between the fresh bakery department and items located in the grocery, frozen and dairy departments.
Instore sales are dominated by desserts, sweet goods and cookies, whereas center-store sales are more evenly balanced between functional and indulgent items, according to the report. Bakery is one of the biggest drivers for instore trips, bringing shoppers to the store nearly once a week, yet opportunities exist for retailers to increase consumption frequency and household penetration across individual categories.
Indulgence and the Power of Emotion Rule in Bakery
As witnessed in many of the grocery perimeter departments, significant numbers of shoppers have a dual-store strategy, in which they purchase center-store groceries in one store and bakery items in another. Channel switching is highest for special occasion items, such as birthday cakes/cupcakes, and lowest for functional items. Stand-alone bakery specialty stores take a majority share of the switchers across all three categories. Thirty-seven percent of shoppers typically purchase indulgent bakery items at a place other than their primary store. Being a top-of-mind bakery destination is important to capture the category’s many trips among primary and secondary shoppers.
“Indulgence is a clear sales driver in fresh bakery, claiming 76% of the total department sales, and the analysis highlights the importance of segmenting audiences to better align innovation, merchandising and marketing,” says Rick Stein, FMI’s vice president of fresh foods. “For instance, given that millennials are nearly twice as likely to exclusively shop the instore bakery as boomers, at 30% versus 17%, carrying and highlighting desirable product attributes and claims may help drive sales and loyalty depending upon your store’s demographic.”
The survey also shared that top-of-mind “bakery” word associations are dominated by positive terms that convey emotion, such as “yummy” or even “love.” While it remains important to meet consumers’ desires for functional attributes, the data shows there is power in satisfying a customer’s emotion to drive sales.
Rising to the Occasion for the Shopper
Shoppers’ view on the importance of having someone to help with questions or purchases highly depends on the type of item purchased. More than three-quarters of shoppers want the ability to personalize, but this does not necessarily mean items need to be made from scratch to shoppers’ personal preferences. In fact, the greatest share, at 42%, prefer pre-packaged items but with the ability to personalize. While most shoppers believe scratch baking delivers superior quality, 57% are indifferent to their store using partially-prepared/baked ingredients.
“Consumers are clearly looking for healthy ingredients to drive their dietary habits and bakers will need to leverage their products’ positive health attributes,” says Robb MacKie president and CEO of the American Bakers Association. “However, bakers and retailers need to connect with consumers, give them opportunities to smell, touch and taste their products. That is what drives the emotional connection to the category, regardless of product segment.”