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In-Store Bakery Sales Reached $13.8 Billion in 2018

FMI report finds the category is a top driver for store trips, emotional connections with consumers
Photograph: Shutterstock

Bakery is one of the biggest drivers of in-store grocery trips, bringing shoppers to the store nearly once a week, according to the inaugural Power of Bakery report by the American Bakers Association (ABA) and Food Marketing Institute (FMI).

Total bread and baked goods sales rose 1.5% in 2018, surpassing $59 billion—split between the fresh bakery department and items located in the grocery, frozen and dairy departments—while in-store bakery grew 2.2% year over year to $13.8 billion in sales, fueled by desserts, sweet goods and cookies, according to the report. Center store bakery sales are more evenly balanced among functional items, such as bread, buns and rolls, and indulgent items, including doughnuts, cakes and cookies.

Despite strong sales, the report—unveiled at the ABA Convention in Naples, Fla.—also points out that opportunities still exist for retailers to increase consumption frequency and household penetration across individual categories.

The Power of Brand Differentiation

Common throughout grocery perimeter departments, bakery shoppers have a dual-store strategy in which they purchase center store groceries in one store and bakery items in another, the report found. Channel switching is highest for special-occasion items, such as birthday cakes or cupcakes, and lowest for functional items.

While 74% of shoppers typically purchase functional items at their primary store, the report found that conversion is much lower for indulgent items/desserts (63%) and special-occasion items (40%), which reveals the need for retailers to position themselves as a well-known bakery destination with strong brand differentiation and a favorable quality/price image to harness more of the bakery dollar. 

“Indulgence is a clear sales driver in fresh bakery, claiming 76% of the total department sales, and the analysis highlights the important of segmenting audiences to better align innovation, merchandising and marketing,” said FMI VP of Fresh Foods Rick Stein in a statement. “For instance, given that millennials are nearly twice as likely to exclusively shop the in-store 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 Power of Emotion

Whole grain and multigrain are the most sought-after ingredients, driven by baby boomers, while millennials are found to pay more attention to carbs, protein and gluten. Yet while it’s important to meet consumers’ needs in functional attributes, health and well-being and transparency, the report found that emotion is a key driver in sales—particularly impulse sales. The report also found that top-of-mind “bakery” word associations are dominated by positive terms that convey emotion, such as “yummy,” “tasty” or “love.”

“There are so few categories in the store that can leverage emotion and nostalgia in their sales strategies,” Anne-Marie Roerink, principal and founder of 210 Analytics, told WGB. “The very first question in the survey was the first thing people think about when they hear the word 'bakery.' Not one person mentioned calories or carbs or sugar, but instead the top-of-mind associations were dominated by positive and emotional responses.” One woman stated that her first association is the memory of going to the bakery with her grandma on Sunday mornings to purchase cupcakes, Roerink said.

“It is this kind of memory of drives an impulse sales when seeing eye-catching displays and it is this kind of memory [that] bakery departments need to try and re-create every day,” she said.

The Power of Personalization

More than three-quarters of shoppers want the ability to personalize their purchases, though this does not necessarily mean items must be made from scratch to shoppers’ personal preferences. In fact, 42% of shoppers surveyed said they prefer prepackaged 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,” said ABA president and CEO Robb MacKie in a statement. “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.”

What’s more, the report found that “fresh” is the universal winner of production-related claims that matter to consumers, mentioned by 7 in 10 shoppers overall and nearly 8 in 10 boomers, while “fresh” and “baked today” are the two most popular production-related claims out of the 12 options listed in the survey. When asked to define freshness, particularly as it relates to functional bakery items, shoppers first point to the date and time.

To view the full Power of Bakery report, click here.

Power of Bakery Infographic

Graphic courtesy of FMI

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