Fresh bakery attracts foot traffic, but the sector needs a shakeup: IRI

By Kristine Sherred contact

- Last updated on GMT

Filled baked goods and seasonal products beyond Christmas and Easter continue to attract customers to the bakery department. Pic: Getty Images/gvictoria
Filled baked goods and seasonal products beyond Christmas and Easter continue to attract customers to the bakery department. Pic: Getty Images/gvictoria

Related tags: Bakery, Dessert, Grocery store, grocery delivery, Iri, Dairy, Consumer attitudes, fresh food, refrigerated snacks

Cake sales increased by $226m last year, but overall, the fresh department broadly must recommit to compete with the growing centerstore and CPG launches, says IRI.

Jonna Parker, principal at IRI's Fresh Center of Excellence, shared insight – with a pointed message for bakery – after the International Dairy, Deli and Bakery Association (IDDBA) show, held in early June in Orlando, Florida.

On a macro level, bakery is “one of the most interesting departments in the entire store,”​ said Parker.

Within the past year, for example, several retailers have adjusted how they package and code fresh bakery items, propelling an 11% jump in assortments. Yet sales have remained relatively stagnant, hovering just under a quarter of total store sales since 2015.

The deli, dairy and bakery sections (known as ‘fresh perimeter’ in IRI’s analysis) have lost growth share to the packaged aisles, where snack launches, in particular, have proliferated. Sales of salty snacks alone neared $25bn in 2018.

These shifts have caused sales of packaged baked goods to flatline. 

When – and why – do consumers walk through the bakery?

Parker said fresh bakery departments should strive to ‘break down barriers’ with other sections of the store.

“How do we get back to the importance of everyday purpose and function?”​ she asked, postulating that perhaps fresh baked goods, including desserts, have gone “too far to the everyday dinner party-type idea.”

Functional, everyday items like bread and bagels attract routine foot traffic and a reason to enter the bakery area.

“Assortments have grown a bit stale. We need to find new ways to shake up that area.”

She pointed to pretzel bread as an example, which was a big hit in fresh bakery. In looking for the follow-up, she asked, “What’s the dippable? What’s the snackable? What’s the function? The problem with instore bakery [is] we’ve trained the consumer to think of it as the bakery.”

Fresh bakery means bigger baskets

On average, Americans make 65 trips a year to the grocery store for a dairy, deli or bakery item, according to IRI’s loyalty card data, which provides ‘complete detail on random weight purchases’ (as opposed to generic category information). In fact, 61% of all baskets contain these items, which more than doubles average total transaction value.

Parker outlined three key factors to finding success in fresh bakery today.

First, products must nurture an experience, whether through promoting permissible indulgence or intriguing the senses.

Second, they must meet consumer expectations, which are increasingly rooted in results: “They’re very used to foods that give them energy, that meet certain dietary needs – food as medicine, as fulfillment,”​ said Parker.

Finally, products should be simple, which Parker uses as an all-encompassing term for healthy, natural and clean label. Consumers have “15 different ways they describe the word natural or limited ingredients,”​ she said.

Whereas brand names – both new and old – rule center store, ‘baked in house’ verbiage is winning the race in fresh bakery.

“Consumer don’t see brands in fresh bakery but rather products,”​ she said, noting a push toward positioning bakery as a convenient option. Breakfast, for instance, is one void she sees in product assortments: “We don’t see enough of it.”

Take-and-back dough… why not cookies?

Bakeries have gotten creative with cakes that ‘visually pop out of the case’ and those with surprising fillings or colors discovered only after cutting. Spirit-infused cakes have also been trending, said Parker, especially through partnerships with liquor brands like Jack Daniels, Bailey’s and Guinness.

Filled baked goods, such as a cookie featuring ‘really indulgent but interesting’ flavors, have also proven to be a hit with consumers, while seasonal focus beyond Christmas and Easter is still a winning strategy, according to IRI.

At the IDDBA show, Parker noticed one ‘unique unicorn’ of baked goods: frozen cookie dough pucks intended to be baked at home. She said a novelty like take-and-bake cookies could be "really interesting,"​ especially as delivery and click-and-collect services become more common.

The bakery department holds the allure of freshness and naturalness that today’s consumers demand. “If we were to just launch in the frozen space, it would get lost – frozen is such a battleground,”​ added Parker.

“Why couldn’t the customer bake them off? [It’s] very different from refrigerated cookie dough.”

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