THOUGHT LEADERSHIP

Understanding the Opportunities in Bakery, in Six Charts

FINDING GROWTH BY CAPTURING KEY ATTRIBUTES AND AUDIENCES IS ESSENTIAL IN A SLOW-GROWTH ENVIRONMENT
 

Even though CPG sales for the year are stagnant, with volume nearly flat and dollar sales mostly driven by rising prices, total edible in grocery crept up almost 2 percent this year, to a sizeable $640 billion in sales. Combined bakery — center-store and fresh bakery — racked up $32 billion in sales, though only reflecting 0.9 percent growth. Why has bakery lagged behind the food sector as a whole and well behind top-performing frozen and refrigerated sectors? And importantly, how can bakery brands and retailers turn the tide?

Bakery Dollar Sales Trends Lag Other Edibles Sectors

 

Let’s explore and seek to understand opportunities in center-store bakery, where trends have been inconsistent during recent years. The bakery aisle was relatively strong between 2014 and 2016, when dollar sales growth rates were about 2.2 percent annually (compared to 1.8 percent average annual growth within the food and beverage sector as a whole).

However, in 2017 a shift occurred where dollar sales fell and slipped lower than the food/beverage average. Currently, bakery growth is ticking up but this increase is slower than overall edibles growth and driven primarily by price. For CPGs and retailers who want to move the needle in this space, finding growth by identifying key sectors, capturing key attributes and identifying audiences is essential.
 

PRODUCTS THAT DO FIND THE SWEET - OR SAVORY - SPOT IN THE BAKERY AISLE

 

Similar to many other areas of the store, center-store bakery items span a broad performance spectrum. Bagels and pastry/doughnuts have experienced above-average growth this year, for instance, while English muffins and fresh bread/rolls lag. Understanding what’s driving the variable performances of products in this sector is critical to strategic growth from the product development point through to marketing programs, activity at the shelf and overall assortment.

Bakery Aisle by Category Dollar Growth
L52 Dollar Sales, % Chg vs. YA and CAGR 2014-2017  


 

 

ATTRIBUTES THAT ATTRACT CONSUMER SPENDING


Consumers pay more attention to product attributes today than ever before — they want to enjoy food and the experience of eating. And bakery is no exception. Consumers care what’s in products and how those ingredients will affect their health and wellness goals.

Functional ingredients have become more common in grocery aisles, with value-added ingredients providing benefits that support overall health. Ingredients that inspire consumers to enjoy food and beverages they want while feeling good about putting them in their bodies have earned consumer loyalty. For example, products that will help ward off and/or manage chronic issues and improve heart health or digestion have garnered a lot of attention and report substantial growth.

And while consumers want certain ingredients in, there are many they want out! “Free-from” foods that do not contain gluten, lactose or dairy, for example, are in favor, as are lower-sugar items and/or products sweetened with natural sources of sweetener, such as honey, agave or stevia.

High-protein items, too, have spurred consumers to spend, as well as innovative products that inspire with new, alternative ingredients — kombucha! Consumers also want more of what they value across their diets — whole grains, fruits and vegetables, and fiber. And all of this has to fit into the “snackification” trend where consumers eat on the go and seek portable products that still offer great value through taste, function and nutritional impact.

 

IMPACT BAKERY PERFORMANCE WITH BADGES

When consumers shop, they actively seek badges of honor — badges that boast positive attributes that today’s shoppers demand when making choices at the shelf. Packages that communicate less sugar, 100 percent natural, organic and more make a difference at the register — these trends translate to dollar sales.

In bakery, less-sugar foods grew 6.9 percent during the past year, and protein and organic foods saw growth of 16.4 percent and 35.2 percent, respectively. And “free-from” trends really make an impact — non-GMO foods grew more than 53 percent for the year!
 

Bakery Aisle: Sales by Product Attribute
$ Billions and % Chg. vs. Year Ago

WHO MOVES THE NEEDLE


When building the bakery aisle with products boasting benefits, taste and value — in other words, moving beyond price — understanding the audience is imperative. And in today’s environment, millennials are a must-win market — they bring influence, power and the potential to move the needle to spur some meaningful growth.

Millennials are a huge influencer for all of CPG, including bakery!

Millennials account for about one-quarter of all CPG shoppers today, and they account for about one-third of CPG spending. Currently between the ages of 20 and 37, they are entering the phase of life when they set up their own households, build families and develop lifelong habits, and their spending on CPG products is expected to reach about $240 billion by 2022.
 

Millennials Pay for What Matters

Millennials are having a huge impact on product trends, and they’re smart, demanding, influential shoppers who want to save money where they can but who will spend to get more. Across categories, millennials show they will pay for what matters to them; thus the key to capturing them — and keeping them — is to deliver products that inspire them to spend. Products that are solutions by delivering on their expectations in performance and value will move the needle with this savvy consumer group. And their behaviors translate across categories when benefits-based marketing generates connections, activation and profitable sales.
 


Despite the slow-growth environment, smart strategies will engage shoppers with the right products, in the right space and at the right time. Explore these webinars to gain direction and inspiration, and to learn more about bakery and snack growth opportunities:

Snack and Bakery 2018

Dairy, Deli, Bakery Trends

 

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