Sugar Bowl Bakery underscores higher margins for more premium bakery items

By Kristine Sherred

- Last updated on GMT

Sugar Bowl Bakery is hoping to gain a foothold as a higher margin, grab-and-go baked goods provider. (Photo courtesy of Sugar Bowl Bakery/SBB)
Sugar Bowl Bakery is hoping to gain a foothold as a higher margin, grab-and-go baked goods provider. (Photo courtesy of Sugar Bowl Bakery/SBB)

Related tags Bakery Bakery sector California Private label artisan convenience channel Premium brands Value added Baked goods Pastry

The San Francisco-based wholesale and private label bakery made a case for its madeleines and palmiers at the National Association of Convenience Stores (NACS) show last month – a first-time visit.

Sugar Bowl makes five styles of premium baked goods: palmiers, madeleines, brownies, duets (a madeleine-brownie hybrid) and apple fritters. They are sold to most major US retailers including Walmart, Kroger, Albertsons and Safeway – in most cases through private labels in the bakery department.

Like other categories of the packaged food industry – from snacks to kombucha – Sugar Bowl knows it can no longer ignore the convenience channel. According to NACS, foodservice now accounts for nearly a quarter of total sales.

The individually wrapped madeleines offer a real-butter alternative to common convenience store baked goods. (Photo courtesy of SBB)

“We’ve never been able to penetrate the c-store channel. We’re perceived to be too high cost because of our quality,”​ said Pete Thomsen, director of sales and strategy at Sugar Bowl. But stagnant foot traffic means that even c-stores must find a way to increase basket sales.

Thomsen noted the growing consumer inclination toward fewer, more functional calories: “As humans, we’re going to have to get a better return on those calories consumed. For us, in the indulgent category, what we find is that, ‘I want to be satisfied by eating one bite instead of 10,’ and that is the case with butter. Butter makes it better only for one simple reason: that you will be satisfied sooner.”

Sugar Bowl wants to combat the food industry’s decades-long ambition of cutting costs at the expense of quality and sometimes taste. The law of diminishing returns does not apply to value, posited Thomsen: “I can push value as hard as I want.”​ 

Butter adds value – and earns loyalty

Sugar Bowl was born after the five Ly brothers immigrated to the US in 1979, and in 1984 scrounged enough money to buy a coffee shop. There, they made pastries from scratch and sold them to other local businesses. Today, Sugar Bowl has 400 employees and two 60,000-square-foot, solar-powered facilities in California; its products reach about 70% of the market, according to Thomsen.

Ly Brothers SBB
The Ly brothers, founders of Sugar Bowl Bakery (Photo courtesy of SBB)

The Ly family always uses real butter rather than partially hydrogenated oils or other fill-ins often used by the standard convenient bakery products. That choice not only increases the value proposition for the retailer – who can take a higher margin for the more premium offering – but also for the consumer.

At NACS, Sugar Bowl debuted individually wrapped versions of its madeleines, brownie bites and duet bites, which are typically packaged by the dozen in plastic bakery containers.

The company hopes the single-serve madeleine, for instance, will offer consumers another choice when they want something sweet but not too dense – and when they only want one.

“It’s the idea of trial. If I can figure out how [to reach] someone who has a snack need in the next 30 seconds, this would be a great solution for them – but not if they can’t buy it,”​ said Thomsen, noting that Hostess Brands' classic crème-filled chocolate cake is often the only option.

Instead, products like Sugar Bowl's madeleines offer retailers “a reasonable path to this value creation,” ​he continued. “Instead of the occasions resulting in $0.10 of revenue, we have an occasion that results in $0.30, or $1 – wherever you want to play.”

Madeleines and palmiers: a surprise to attract repeat purchases

The madeleines are by far the bakery’s bestsellers, said Thomsen, followed by bite-sized brownies. But it’s the palmiers that he sees as having to jump the biggest hurdle with consumers.

Palmiers, sometimes known as a pig's ear or elephant ear, is a crunchy puffed pastry sprinkled with plenty of sugar. (Photo courtesy of SBB)

“How would you describe a palmier? Our challenge is to convince everybody that’s currently buying Hostess that there’s a better solution,”​ he told BakeryandSnacks. “Joy is when you are surprised by how good something is. It’s that inherent ‘it’s better than I expected’ nature of humans to tell other people about it.”

For in-store bakeries, Sugar Bowl hopes its products can attract consumers back to the department week after week – and, in Thomsen’s words, their friends, too.

“There are lots of people who go past the bakery; there’s not a lot of people who buy things in the bakery – and if they do, they buy it once,” ​he said. “Forty years ago, every bakery smelled like chocolate chip cookies. They don’t smell that way now.

“If you start off and you feel really good about selling a chocolate chip cookie, they return every other month. Our intention is to say: let’s try to fill in the gap. We’re not saying that they’re not going to continue to buy the chocolate chip cookie, but we believe that the consumer wants to have variety in their life. Instead of different flavored cookies, you bring in a madeleine – because then you add a fourth choice to their rotation, and that usually results in a higher turn.”

Bakeries remain an important part of people’s lives, said Thomsen, and finding the balance between everyday and special occasion is key to growing the sector.

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