It's Time to Reinvent Bakery and Deli Departments
The in-store bakery remains a powerful supermarket destination. A recent study from Arlington, Va.-based FMI – The Food Industry Association has revealed that more than half of shoppers (53%) say that in-store bakery items are fresher and taste better than those in the commercial bakery aisle. A full 95% of shoppers eat a bakery item at least occasionally, and 63% eat a bakery item on a weekly basis.
Nearly two-thirds of shoppers (72%) say that they buy indulgent treats (such as doughnuts, cakes, cookies and pies) at the same store where they purchase their groceries. Futher, a majority of these purchases are impulse buys.
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“Consumers want to focus their daily diet on the best-tasting products, leading to a shift from center store packaged goods to in-store bakery items that are fresher and more indulgent,” says Brant Cash, managing director at New York-based global investment bank Harris Williams. “The confluence of these consumer themes bodes well for the premium baked goods sector.”
Supermarket retailers clearly have an opportunity to maximize their bakery departments. FMI’s research shows that shoppers want variety from their in-store bakery, including more cultural/ethnic options and a greater number of indulgent items, and they want these offerings to be fresh.
Artisanal Breads Gain Appeal
Supermarkets are raising their game in the bakery department with improved products and expanded variety. Research from Arnhem, Netherlands-based Innova Market Insights reveals that consumers are increasingly seeking unique bread experiences and view artisanal breads as an affordable everyday indulgence. This trend is fueling the popularity of traditional and artisanal varieties, and as a result, baguettes, ciabatta and naan bread are now widely available in supermarkets.
Lakeland, Fla.-based Publix Super Markets recently debuted Italian-inspired Tutto Pugliese bread, made exclusively from durum wheat semolina flour and certified sourdough flour, which are typically used to make pasta. The grocer’s bakers trained for months to produce the loaf, which has a higher hydration than other breads produced in the bakery and requires extra handling. Each loaf is shaped by hand, made daily and sold in paper bags.
For its part, The Kroger Co. recently revamped a number of its private label bakery offerings, including its Private Selection Signature Buttercream Cakes, Private Selection Cinnamon Rolls, Private Selection Cinnamon Crumb Cake, Fresh Baked Chocolate Chip Cookies and Private Selection Croissants. The Cincinnati-based retailer also added a Private Selection French Baguette to its lineup.
Global Flavors Attract Consumers
Adding new twists on old favorites creates novel flavor experiences that entice customers. “A churro doughnut isn’t that much different than a sugar cinnamon doughnut, but they can be from different cultural experiences,” notes Sarah Hickey, senior director of insights and market research for Jackson, Mich.-based Dawn Foods North America.
From mochi desserts influenced by Japan to Middle Eastern baklava, international flavors can provide new inspiration to traditional desserts. FMI research shows that two-thirds of shoppers want to see cultural or ethnic bakery items in-store, and more than half (58%) are already finding these products in grocery store bakery departments.
“Food retailers have an opportunity to expand the assortment of cultural and ethnic bakery items they offer and to consider seasonal options,” observes Rick Stein, FMI’s VP of fresh foods. “This could also be paired with weekly themed meals — Taco Tuesday with tortilla options, or Italian Thursday with an artisanal Italian loaf. This offers both meal ideation and convenience for shoppers and enhances the value of their shopping experience.”
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Meanwhile, Hickey urges retailers to think about layering in flavors like matcha or savory tahini to give nostalgic favorites an ingredient upgrade, or infusing pastries with unexpected fruit options.
New flavors are particularly important for seasonal products, which play a big role in driving incremental sales. A recent report from Dawn Foods notes that “operators can also expand beyond traditional seasons and holidays to celebrate quirky mini-holidays like ‘National Lemonade Day’ or ‘National Donut Day.’ Decorated baked goods, like a Pink Lemonade Old Fashioned Donut, are an easy way to participate in these single-day activations.”
Consumers Want Healthy Options
Consumers are also health conscious when it comes to bakery items. FMI’s 2023 “Power of In-Store Bakery” study revealed that two-thirds of shoppers paid attention to at least one nutrition-related claim when purchasing functional bakery items, with whole grains and fiber topping the list of callouts. Yet, while 54% of shoppers noticed calorie callouts at times in their in-store bakeries, only 21% of shoppers were influenced by them when making their bakery selections.
In addition, about one-third (33%) said that health, nutrition and better-for-you choices have a lot of impact on their choices of indulgent bakery items or desserts. “Consumers want to indulge themselves, but they are also more demanding in terms of product quality and their own health and wellness, driving greater emphasis on clean-label bakery products,” says Harris Williams’ Cash.
“Food retailers have the opportunity to highlight ingredients and functional bakery items by calling attention to whole grain, minimally processed ingredients, allergen-free and other attributes,” notes Stein. “One way to do this is to leverage MyPlate resources, which help make the Dietary Guidelines for Americans easy to understand. MyPlate recommends that at least half of the grains we eat should be whole grains, which is an easy message for shoppers to understand and can be called out in-store and online at the point of purchase.”
FMI’s research indicates that retailers can also win with shoppers by calling out products made with “real” ingredients, without artificial flavors and coloring, and by offering smaller portion sizes, lower-calorie alternatives, or other nutrient content claims such as reduced sugar or reduced fat.
Tech Solutions Can Help Build Business
According to industry experts, tapping into tech solutions can help elevate the bakery business. “There are many ways — most of them easy to adopt — for bakeries to leverage technology to help them create relationships with customers as well as improve their daily operations,” says Cathy Wisloski, manager of insights and customer experience at Dawn Foods. “One of the biggest areas of growth was in food delivery, and this can have positive implications for bakeries in 2024 if embraced and executed correctly.”
Since many baked goods, such as cookies and brownies, travel very well through delivery channels, Wisloski suggests that supermarkets can take a cue from restaurants that are capturing impulse sales of baked goods with “add to order” reminders on their platforms.
Harnessing technology to enable kiosk ordering is another way that supermarket retailers can do more with fewer staffers. FMI research shows that nearly half (49%) of shoppers prefer ordering specialty bakery items using technology at the in-store bakery, and 47% would use technology to design and order specialty bakery items.
“Shoppers are enticed by the convenience of utilizing technology for in-store bakery purchases,” adds Stein. “Food retailers can work to ensure a seamless ordering experience that offers similar detailed options — i.e., added decorations, flavor options, etc. — while meeting the shopper’s needs.”
Pizza Rules
Over in the deli department, pizza is becoming a powerhouse for retailers as they add variety to win a wide range of consumers to the category and to the foodservice/deli department overall.
Heather Stammler, product manager of fully topped pizza and flatbread at Buffalo, N.Y.-based Rich Products, describes pizza as a “standout in grocery over the past two years.” FMI’s 2023 “Power of Foodservice at Retail” report indicates that 84% of shoppers are most likely to purchase pizza/Italian fare from their grocery store deli departments, and more than half (55%) of shoppers are highly interested in featured days, including Pizza Friday.
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“Pizza in the foodservice at retail department is a great way to introduce shoppers to your foodservice offerings and entice them to try more,” affirms Stein. “It also plays to shoppers’ need for convenience and value.”
New flavors are one way to generate excitement in the category. Research from Chicago-based Technomic reveals that more than 70% of pizza operators are experimenting more with globally inspired pizzas and pizza ingredients than they were two years ago.
“Consumer demand for indulgent and authentic varieties of pizza is very high, especially among Gen Z and Millennial demographics, so retailers providing choices like Neapolitan, Sicilian, thin-crust, deep-dish and gluten-free are catering to customers’ unique tastes and driving them to the deli for a fresh pizza experience,” adds Stammler.
At Dom’s Kitchen & Market location in Chicago’s Lincoln Park neighborhood, customers can choose from a variety of Bonci Roman-style pizzas, including Potato & Mozzarella, Ricotta Zucchini, Sopressata, Spicy Eggplant, Sun Dried Tomato Arugula, and Mushroom Rosa. Slices are cut with scissors in rectangular pieces and weighed by the pound.
“Retailers who offer unique options in this category will see incremental sales opportunities,” says Stammler. “There is also demand for more single-serve handheld pizza options to take and bake at home.”
