Coffee Driving Bakery Sales

To capture a greater share of the breakfast business, retailers are developing fresh bakery programs extensive enough to make their products destination-worthy in the morning and throughout the day.

By Marilyn Odesser-Torpey, Associate Editor.

Few, if any, local supermarkets or mom-and-pops in the Iowa, Minnesota or Wisconsin market areas where Kwik Trip has its 358 stores can beat the chain’s all-day-every-day fresh bakery selection. According to Paul Servais, Kwik Trip’s foodservice zone leader, the stores move an average of 700 fresh bakery product units per store per day.

From the company’s La Crosse, Wis. commissary comes about 50 SKUs of made-from-scratch items, including breads, buns, savory and sweet rolls, yeast pastries, bagels, doughnuts, muffins, cookies, muffins and bars. And customers are not likely to get tired of the varieties available in single and multi-packs when they can choose from among six kinds of old-fashioned cake doughnuts, seven kinds of cookies, eight types of muffins and five flavors of bagels. A research and development department in the commissary also keeps a constant flow of new products coming.

Servais pointed out that the bakery category is growing so much that the company has continually increased the size of its commissary over the past five years and doubled it over the past two. It is also now in the middle of a multi-million-dollar capacity expansion to accommodate additional stores and sales in existing ones. In addition to the products themselves, the company cross-promotes baked goods with its gourmet coffee program to boost incremental sales.

York, Pa.-based Rutter’s Farm Stores offers a wide assortment of fresh bakery products, including five kinds sub rolls, two types of ciabatta, seven-to-eight varieties of muffins and biscuits, as well as multiple types of slider and dinner rolls, cookies and other pastries baked on-site at the chain’s 41 stores with kiosks.

“Our mantra is fresh and anything that can portray our products in this light visually and through aromas only emphasizes that focus,” said Jerry Weiner, Rutter’s vice president of foodservice. “That’s why we bake and keep our cases and other displays filled and fresh all day.”

Wide Appeal
Servais attributes much of the day-part-spanning sales of bakery products to the grazing habits of the Millennial generation. People who work early or late shifts also want a fresh selection at various times of the day or evening.

Retailers should also consider making smaller-portion fresh bakery products to satisfy all-day snackers, said David Morris, managing consultant of Kaleidoscope Research Consulting, and author of Packaged Facts’ syndicated supermarket and convenience store foodservice studies. Many of Morris’ findings come from Packaged Facts’ July 2012 “Prepared and Ready-to-Eat Foods at Retail” report.
Morris noted that smaller size bakery goods are also one way to deliver more health-conscious snacking options for consumers (a particularly attractive way to market to women) without reconfiguring product formulas.

“Even if the products are not low fat, customers will appreciate the fact that they can satisfy their sweet tooth with a mini portion without feeling guilty,” Morris said. “The availability of these products will blow quick-service restaurants, which are another major bakery product competitor, and many supermarkets out of the water.”

From a profitability standpoint, Morris pointed out that these smaller products will yield a higher profit margin by enabling retailers to charge a higher price per ounce. Both Kwik Trip and Rutter’s also increased the profit potential of their bakery category by offering a number of products in multi-packs as well as single-serve, and by merchandising them throughout their stores.

Three-packs of cookies have been selling so well at Rutter’s that Weiner said the chain is getting ready to introduce six-packs. It is also going to begin packaging muffins in multiples, and he expects them to be as popular as the cookies.

Supporting Products
To help boost its coffee sales, Kwik Trip also markets multi-packs of its cookies, muffins, doughnuts and other bakery items around the coffee counter. The stores sell about equal amounts of single-serve and multiple-pack fresh bakery products, Servais said.

“We’re finding that morning customers are grabbing six-packs of doughnuts and 12-packs of cookies to take to the office,” Servais said. “Multi-packs of cookies are also gaining in popularity during afternoon drive time when customers are heading home to their families.”

The company also does a brisk business throughout the day on its pre-packaged Kwikery brand breads and buns, which helps drive coffee sales as well.

“We want customers to see us as the go-to destination for all kinds of fresh bakery products,” Servais said.

To make its offerings even more tempting, Kwik Trip keeps its fresh bakery product prices right in tune with those charged by grocery stores and less than those at mom-and-pop stores, he noted.

Promotional prices for packaged products, such as offering four cookies for $1 and a half-dozen of its signature Glazers Donuts for $2.99 also drive sales, Servais said. Kwik Trip advertises these promotions on its Website, on reader boards outside of the stores as well as on in-store signage.

“We also do a lot of pre-promotion to make sure that people are aware well ahead of time what will be on sale this coming weekend,” Servais said.

Window signs, banners and other outdoor advertising are important to maximizing shopper awareness of fresh items, according to Morris.

He explained that his research suggested that shoppers who rush in to pick up a beverage or other non-food items do not always notice in-store signs for fresh foodservice offerings, even when these signs are right at the register.

Focus on Fresh
While customers know they can find fresh bakery items in the pastry case, both Servais and Weiner agreed that surprising them with displays strategically placed in other appropriate, high traffic areas of the stores also helps to boost impulse sales.

At Kwik Trip, for example, bakery products are displayed in up to four different places, including the front counter and a table that is heaped with the current promoted items.

Rutter’s places cookies in the deli area and on a door tray in front of the cooler milk window as well as at checkout. Muffins are also set to make their presence known throughout the stores, Weiner said.

All of Kwik Trip’s bakery items are baked at the company’s central commissary. The packaged breads and buns and Glazers Donuts are baked there and delivered to the stores daily.

Packaged cookies, doughnuts, cinnamon rolls and muffins are delivered flash-frozen for the stores to thaw as needed.

Rutter’s, meanwhile, uses proof-and-bake dough for its breads, drop-and-bake dough for its cookies, pre-formed biscuits, and muffin batter that comes raw in a cup. The products are baked off in the stores in a Turbo Chef oven.

But, said Morris, not all convenience stores have the capabilities or staff to bake throughout the day. To help them to validate the freshness of their foodservice offerings, they can warm selected items, thereby releasing their aromas throughout the stores.

“This plays not only to the freshness of the bakery products, but to the foodservice platform holistically,” Morris noted. “Just make sure that promise of freshness is backed up by all of the foodservice products in the fresh case and everywhere else in the stores.”

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Brewing a Coffee Strategy

Coffee continues to be a top beverage choice with 60% of consumers saying they routinely drink regular hot coffee, according to Mintel’s recent Market Intelligence Report on Coffee & Tea.

According to the 2012 Smucker Foodservice coffee survey, when drinking coffee away from home, eight in 10 consumers think it’s important that an establishment serves a brand that they like. While national chains like Starbucks, Dunkin’ Donuts and even McDonald’s have earned praise for their coffee programs, convenience stores are earning high marks for their coffee strategies.

Convenience stores, which are gaining notoriety for marketing concepts like coffee freshness guarantees, tend to be a coffee destination with 86% of convenience store coffee purchases being planned. Consumers of coffee and other dispensed beverages are high frequency buyers who represent 68% more visits than the average convenience store customer, according to NPD’s Convenience Store Monitor.

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