ATLANTA — As challenges abound for the rapidly changing baking industry, there are clear pathways for growth. Despite inflation, supply chain disruption and a labor crisis, consumers are steadfast in their demand, especially for bakery.
“While we’re dealing with record inflation, we also have consumers who are tired of shopping but also not always able to afford to eat out,” said Anne-Marie Roerink, president of 210 Analytics.
Roerink co-presented with Jonna Parker, senior VP for IRI Fresh, to outline bakery trends during the International Dairy-Deli-Bakery Association (IDDBA)’s IDDBA 2022 conference, held June 5-7.
In looking at the demand, Parker noted that sales for total food and beverage, which encompasses all fresh departments including dairy, deli and bakery, is up 7% over 2021, and that’s after skyrocketing grocery sales in 2020 and 2021. While that increase is more about price points — unit sales remain relatively flat from those same years — it tells quite a story on consumers’ willingness to spend despite rising prices.
What’s important to note is how they’re spending those dollars. IRI conducted a consumer survey in May, and while 93% of respondents reported noticing the change in food prices, more than three-quarters (78%) of them indicated they were changing — not stopping — their behavior.
That not only means shoppers are actively seeking out deals, but it also could indicate potential new opportunities for retailers and bakery producers.
“There’s a tremendous focus on this idea of price,” Roerink said. “That means a lot of people are trying to cut back on restaurant spending, but this is also a time when they’ve already been cooking a lot of home and are simply tired of it. So, anything you can do to help consumers bring that restaurant quality and experience into their home is going to create a good opportunity.”
In the pocket between foodservice reopening and prices rising, people rekindled a relationship with in-home dining experiences. And dining at home also expands into entertaining, leading to people recreating high-end experiences for their family and friends.
“It’s not about getting a quarter sheet cake like back in the day,” Parker said. “And the part of foodservice that’s really missing from the daily repertoire is that element of high-end dining. People want to use new skills and recreate restaurant quality.”
While not everyone has that skill level, the concept of customizable meal kits is a great way to help consumers get there, especially with ready-to-cook or ready-to-eat meals that offer great taste and even a bit of indulgence.
“People want to use new skills and recreate restaurant quality.” —Jonna Parker | senior VP | IRI Fresh
People may be creating more food experiences at home, but many of them are also heading back to working at the office. Parker pointed out cues from some foodservice operators that could be incorporated at the retailer level as well to draw in consumers and cross-promote related items and departments, including fresh bakery and packaged baked goods. She suggested creating bundles with a fixed price point that include morning coffee and a breakfast item like a pastry or breakfast burrito.
In looking back at the consumer behavior, Parker also pointed out that it didn’t necessarily mean they were immediately going the cheaper route. For many, the higher price points simply mean more intentionality behind the purchase.
“They’re not necessarily switching brands,” Parker said. “When you look at the fresh departments, they might realize that a banana is cheaper than an apple, or they might opt for a half-sandwich instead of a whole sandwich.”
She also emphasized the increasing propensity for people to change up their retailer choices in search of the best deal. It might mean hitting multiple outlets, and in some cases, it means that people are shifting their perception of what constitutes a grocer.
“If traditional grocers don’t see outlets like Walmart, Costco or Aldi as their competition, consumers absolutely do,” she said.
That’s critical to recognize because it’s not an easy behavioral shift to make, according to Roerink.
“Switching stores is one of the very last things that people do,” she said. “So, seeing that kind of behavior in the marketplace already means that people have learned something from The Great Recession when they had a variety of money-saving strategies. We’re seeing them happening early now, with people getting creative in how they look for deals.”
When they look, it’s not just about the deal itself, especially as they vet various retailers. It’s about accessibility and convenience. For example, QR codes are bridging the gap between printed and digital marketing materials such as weekly circulars. Retailers like Hy-Vee are taking advantage of QR codes for shoppers to access deals on signage almost the minute they step out of the car.
Cross-promoting throughout departments can provide that customizable experience for shoppers, especially for creating those higher-end at-home experiences with items like brunch boards and charcuterie.
Hybrid meals are also gaining ground for customization as well. While many people can prepare the main entrée on their own, they need help with ready-to-eat or ready-to-cook sides, appetizers and desserts. Just offering interesting bread pairings or sweets can bring a consumer those customized solutions that are also convenient.
These pockets of growth can help continue that momentum despite seemingly overwhelming challenges for food manufacturers and retailers. When consumers are still willing to spend, albeit in different ways and for different purposes, the business will still be a success.
