Rise and Sell

How to knead out opportunity in bakery snacks.

Abbie Westra, Director, Editorial, CSP

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Two months ago, Rutter’s Farm Stores jumped on the cupcake bandwagon. The treats—in peanut butter cup, Oreo cup and red velvet— are sourced from a New York bakery that supplies restaurants. At 6.5 ounces, they’re huge. Larger than ideal.

“I was a little concerned about breaking $2 on a snack or dessert,” says Jerry Weiner, vice president of foodservice for the York, Pa.-based chain, which is selling the cupcakes (pictured at left) for $2.59 a pop. “I knew the product quality was there, but I didn’t know if in this market customers would equate the value to the dollar.”

In a perfect world, Weiner would get the cupcakes closer to 4.5 ounces. But the manufacturer couldn’t budge, and Weiner was confident of the product’s quality, so he moved forward.

So far, according to sales, size doesn’t matter. “We blew them out in the test stores,” says Weiner. “I don’t know how long they’re going to last in terms of being the next new thing, but the products available now are pretty good, and I think [retailers] can take advantage of it for however long it lasts.”

Tracking consumer trends is a solid way to find new opportunities in the bakery-snack category. Specialty items are moving through the retail spectrum faster than ever. According to research firm Mintel, Chicago, the specialtyfoods market has experienced 19% growth since 2009; baked goods (think cupcakes, flatbreads) is the No. 5 category within the total market. You say your customers aren’t ready for 6.5-ounce red velvet cupcakes? Try other strategies for staying competitive:

  • Be Day-Part-Driven: Break bakery occasions down by day-part, especially morning and late afternoon, to find bundling and promotional opportunities.
  • Have a Strong Value Proposition: Trends come and go, but best practices within the foundational set drive the category.
  • Seek Shopper Insights and Demographic Opportunities: Understand purchase decision influencers, and look to overindex bakery shoppers such as Hispanics and women.

Trend-Driven Competition

Staying up on bakery trends has implications beyond just being the cool store on the block: You have competition nipping at your heels.

Sharon Simmonds, director of marketing for Horizon Food Group, San Diego, increasingly hears from retailers that they want items that help them compete with Starbucks, Dunkin’ Donuts, Panera and other coffeehouse, doughnut shop and bakery chains.

“Innovative flavors and products are trickling down to the c-store environment from coffee and fast-food chains who are successfully stepping outside their boxes with items like specialty coffees, cupcakes and cake pops,” she says. Jeff Blalock, vice president and director of convenience sales for Flowers Bakeries, is likewise finding consumers searching for indulgence, “especially so in a down general economy,” he says. Flowers products are sold through its directstore delivery (DSD) network under the Tastykake and Blue Bird brands, and nationally via warehouse distribution under the Mrs. Freshley’s brand.

Larry Bullis concurs. “We’re always exploring,” says Bullis, director of merchandising and marketing for the Wills Group (Dash In), La Plata, Md. “The customer is going to tell us if we’re doing the right thing or not, and we’re going to constantly put new items in.”

 Bullis works with a number of brokerage firms that are perpetually showing him new packaged bakery items. Some do quite well, such as whoopie pies.

“We just blew them out of the door, but they peaked, leveled off and kind of came back down,” Bullis says.

The trend toward bite-sized indulgences is one that might fit well in a c-store. “Rich foods like cake pops and two-bite brownies would work very well in c-stores because they are singleserving and also premium. But because they are small, the price point is more palatable,” says David Browne, senior analyst for Mintel.

Bullis has found success with Goodies on the Go, a plastic to-go cup filled with doughnut holes. They come frozen from McLane and are available in chocolate, sour cream, cherry and traditional flavors. “They’ve been selling extremely well,” he says.

Delivering on Day-Parts

Just as Starbucks and others are instigating consumer demand for quality, they’re also driving bakery competition in the morning.

“Look at the coffee business, where 10 years ago people discovered Starbucks and all the c-stores upgraded their coffee program,” says Bill Skeens, president of Prairie City Bakery, Vernon Hills, Ill. To keep that a.m. customer, the bakery quality must go up with the coffee quality.

“People want to make one stop in the morning, and when they do they want to have a great coffee and a great pastry.”

Bundling coffee with pastry items and placing auxiliary racks near the coffee counter can help drive those sales. “Right now, less than 20% of coffee is leaving with a pastry. If they just bundled products together, it would be up to 40%,” says Skeens.

Bullis places cookies at the checkout to increase impulse purchases. “The p.m. customers seem to gravitate to those cookies. They must be needing that energy boost for the evening,” he says.

At lunch, placing bakery items near sandwiches, salads and other sides helps encourage customers to build a complete meal with a bakery item as a dessert.

As consumers shop by day-part, and sweet snacks are often an impulse item, bundling is key to instigating bakery sales, says Kelly Fulford, category development manager for General Mills Convenience, Minneapolis. Fulford further recommends keeping all sweet snacks together, including treat bars, confection and packaged bakery, warehouse and DSD items. “Purchase drivers are most similar to cookies and packaged bakery, and consumers want them shelved near each other,” she says.

Creating a Value Proposition

Despite the trendy whoopie pies, the top sellers at Dash In stores come from the 3 feet of products from Cloverhill Bakery— all value-priced at 99 cents.

“All of those are top sellers. We just introduced [the product section] about 2 months ago, and it’s already jumped up to No. 1,” says Bullis. “This is a great value proposition for our customers.”

On the fresh-baked side, Bullis keeps his Krispy Kreme doughnuts under the $1 price point as well. For success with this program, he advises retailers to keep a close watch on what sells each day of the week, and to never run out of stock on top sellers. “We want to write off top sellers every day,” he says.

Rising commodity and fuel costs have made house-baked muffins and cookies a strong addition to Rutter’s bakery arsenal. About seven months ago, Weiner brought in a preportioned muffin batter that can be baked off in the stores’ TurboChef ovens. Cookies, also baked in the TurboChef, do very well, too. The cookies sell for three for 99 cents; the 4.5-ounce muffins go for $1.59, delivering good margins along the way, Weiner says.

Shopper Breakdown

Bakery-snack shoppers are purists. They’re looking to one thing: to satisfy a sweet craving. And these cravings, says General Mills’ Fulford, are quite lucrative, overindexing trip spend for immediate-consumption items.

Examining when and how those cravings manifest offers insights into sales opportunities. Liz O’Hara, senior consumer insights associate for General Mills, points to three core purchase decision influencers: time of day, brands and need states. (See sidebar on p. 115.)

The bakery category also opens up opportunities for courting the female shopper. “Although males are still the prime c-store shopper, the sweet-craving trip shows an opportunity to reach an incremental target, as it skews female,” says O’Hara.

Mintel numbers reveal a similar opportunity. In a recent report studying consumer attitudes toward c-stores, the firm found that 29% of c-store foodand- drink shoppers purchase fresh bakery items.

“It obviously wasn’t nearly as high as some of the other categories, but it overindexed more toward women than men. That’s an opportunity for c-stores if they’re looking to woo more women,” says Mintel’s Browne.

The Hispanic shopper is also an important one to consider when building bakery sets. Authentic Hispanic pastries— which tend to be less sweet than their American counterparts—are doing well at Bullis’ stores. He sources many of his Hispanic items from Bon Appetit bakery; about 20% of his packaged bakery sales come from Hispanic products.

“The Hispanic consumer is a prime consumer not only because they come from larger households, but they also view these products as more likely to be made from scratch; they equate that with better quality, and that’s important to them,” says Browne.

Sweet Satisfaction

Sweet snacks have a very pure role in the c-store store: to satisfy a craving. When and why those cravings occur can help build sales across different subcategories and day-parts. Here’s a list of purchase-decision influencers from General Mills Convenience:

  1. Time of Day: This “sweet” craving occurs across all times of day. Packaged bakery items such as doughnuts and muffins are purchased most frequently in the morning, while classics such as sponge cakes, cupcakes and treat bars are purchased across all day-parts.
  2. Brands: Brand trust is an important purchase decision driver for sweet products.
  3. Need States: Packaged bakery items fall into various product segments based on how and why consumers are shopping for sweet items:
  • Sweet Breakfast Craving (select packaged bakery— doughnuts, muffins, etc.): Predominantly purchased in the morning to satisfy hunger, usually by younger shoppers.
  • Packaged Bakery Classics (branded cupcakes, etc.): Packaged bakery products with strong nostalgic ties. Purchases occur across day-parts and are more emotionally driven than other packaged bakery products.
  • Sugar Fix (nonchocolate candy).
  • Sweet Hunger Satisfaction (treat bars, cookies, king size, sweets with nuts): Sweet snack used for satiety, typically as afternoon snack to take edge off hunger until next meal, or energy to keep going.
  • Chocolate Indulgence (chocolate candy, cookies, sweet bars): Highly driven by emotion. Sugar fix, satiety and energy are less prominent. Commonality is that most products contain chocolate. 

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