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Bakery is back, the rising star of convenience

This article was originally published in C&I Retailing magazine, December 2016/January 2017 edition

fhp_2444The bakery category is on the rise in convenience, and it’s helping to transform the look and feel of stores across the country.

Along with the smell of fresh coffee, the aroma of freshly baked products is responsible for tempting more busy Australians to make convenience stores their favoured port of call for a hot drink and a quick and tasty snack.

In its latest State of the Industry report, the Australasian Association of Convenience Stores (AACS) said the channel has been locked in ever deeper competition with Australia’s vibrant food service operators and convenience orientated grocery stores.

“As petrol and convenience retailers elevate the quantity and quality of grab-and-go food and drink offerings, it will further intensify competition with the fast food/quick service restaurants (QSRs), and other more specialty cafés and eateries,” the rep said.

The report shows that the ‘On-the-Go Food’ category grew 13 per cent in 2015, and fresh cakes, hot pastry, and sandwiches are leading the charge. With convenience so high on the customer’s priority list, the channel is perfectly placed to reap the bakery rewards.

The problem that convenience has, however, is that it’s continually struggling to shake off the negative stereotypes that someconsumers still perceive of the channel’s hot food offer.

According to AACS: “Petrol and convenience retailing still needs to address shoppers’ perception of a limited and stodgy range.”

A ‘win-win’ outcome

The State of the Industry report notes that him! international research found that just one fifth of Australians think that convenience stores have enough healthy food options available for purchase.

“The continued growth of ‘On-the-Go Food’ suggests that, as C-Stores evolve their own food service offerings, shoppers become even more comfortable buying food in C-Stores,” the AACS report said, noting this was a “win-win” outcome.

Nonetheless, with grocery in-store baking options becoming more established and accessible, AACS argues that convenience needs to continue to broaden its food horizons and to take consumers on a ‘premiumisation journey’.

One of the convenience operations that has been most effective in seizing the moment was 7-Eleven, a core growth driver due to its partnership with Krispy Kreme and the strong sales growth it enjoyed with private label hot food items such as sausage rolls and beef pies.

AACS says 7-Eleven’s agreement with Krispy Kreme in late 2011 to supply fresh Krispy Kreme doughnuts daily to each of its stores has proven to do exactly as intended: ranging an iconic destination product/brand that shoppers actively seek out. Krispy Kreme has recorded double digit value growth for the past two years of between 20-30 per cent.

As mentioned earlier, the popularity and affordability of coffee in convenience has gone hand in hand with the growth of bakery.

A classic example was 7-Eleven’s ‘Be Coffee Clever’ marketing campaign which asked Australians to comparatively consider how much they could be saving by avoiding higher priced cafés and instead switching to the chain’s $1 coffee.

Other groups such as EzyMart have also grabbed the opportunity and worked hard to ‘leverage off the beverage’.

“We display freshly baked goods in our stores that contain coffee machines,” EzyMart national supply manager Troy Mak said.

“Customers are no longer entering convenience stores in search of manufactured goods with long shelf life… they are in search of fresh offerings and it is very important to offer baked goods in our stores as it complements many other categories.”

EzyMart said it has savoury and sweet sub-categories within bakery, with savoury items such as pies, sausage rolls and burgers currently outperforming the likes of muffins, doughnuts, and croissants.

The group said it identified a huge rise in the popularity of premium goods, and has partnered with artisan manufacturers which are able to provide fresh offerings to its stores. However, it says consumers are still learning about what is now on offer.

“Customers are still not used to seeing these types of items in stores, so it’s important to display them as close to the window/cashier as possible,” Mr Mak said. “We are looking to change the norm that is attributed to convenience stores… we are no longer a corner shop, but more so a condensed grocery store.”

As always, the customer is king and a detailed understanding of who is buying bakery goods in a store – and when – is critical to maximising the profits opportunity.

The bakery category is a broad one and while bread and rolls may be a consistent seller throughout the day, other items sell particularly well at particular times. On weekday mornings busy commuters may be tempted by a range of indulgent breakfast products such as croissants, Danish pastries and easy-to-hold sweet snacks.

By mid-morning convenience and impulse outlets may be able to capitalise on the growth in the coffee culture by selling a coffee and sweet pastry, muffin, doughnut or cookie as part of a takeaway deal. And by lunchtime, savoury pastries and sandwiches may be the most popular order of that part of the day.

Staying ahead of the curve

Clearly, shelves need to be well stocked during the busiest times such as before work, and then again for the morning tea and lunchtime rushes. Operators also need to ensure they have a good variety of bakery products, spanning both savoury and sweet lines.

A proven and effective way to build customer traffic and customer purchasing habits is to use promotional devices such as bundling bakery products with a coffee.

With greater emphasis now on quality and presentation, many convenience and impulse outlets are moving towards frozen/thawed bakery products, allowing better menu management with a quality product on shelf at all times and minimising wastage. The installation of freezer-to-oven (FTO) technology has enabled some operators to cook frozen product very quickly, and add to the sense of freshness and quality.

As well as offering that freshly baked aroma, buying in frozen product to bake in-store enables operators to cater for a whole host of tastes as retailers can vary the product offering by baking a small amount to suit each eating occasion throughout the day.

Bakers Maison, a specialist manufacturer of French-style breads, pastries and sweets, certainly says the quality and flexibility of its par-baked and frozen products can create the feel and aroma of a French bakery within minutes.

It says bread categories are continuing to grow at a good pace with increasing demand for larger loaves and sandwich-sized rolls, and sweeter breads like brioche and stone baked products. The company says it plans to introduce more than 15 new items in the coming year, centred on stone-baked bread.

“Customers are looking for more premium bakery products,” Bakers Maison Australia managing director Pascal Chanelière said.

“We feel that they are adjusting well to the new competitive landscape, moving to more upscale, quality-oriented products.”

In its ‘Cake and Pastry Manufacturing in Australia: Market Research Report’ released in August this year, market research company IbisWorld noted the same trend.

“The move towards artisanal and gourmet foods has increased competition from retail bakeries for the industry, threatening branded manufacturers in other parts of the baked goods sector,” it said. “In response, industry operators have been relying on innovative new products to stimulate demand.”

That need for innovation relates not only to bread, cakes and pastries, as leading pie manufacturers have responded to opportunities presented by changing consumer tastes and demands for premium products.

For example, Four’N Twenty recently released its latest Limited Edition pie – the Chicken Parma – across the convenience market, after having originally created it for the footy finals.

“New flavours are a great way of engaging with our customers and keeping them coming back to the pie warmer for more,” according to Patties Foods GM Marketing & Innovation, Stuart Smyth.

“It proved such a hit with footy fans at the MCG we are releasing the 175g Chicken Parma pie nationally to the convenience market as a Limited Edition.”

P & C (Pastry and Cakes)

For all the growth in the likes of doughnuts and pastries, AACS says the petrol and convenience channel will always be a destination for Hot Food To Go in the form of pies and sausage rolls as the channel enables shoppers to quickly ‘fuel up’ and ‘grab a feed’.

While the bakery and bread category may encompass a broad range of products, the basic fundamentals to maximising sales and profit remain the same. As with all food items, presentation and hygiene are paramount. So too is the location of the bakery display. Some items such as doughnuts – or even pies – can be considered impulse purchases, so locating them strategically near the point of sale can increase sales.

Capitalising on the rise in popularity of coffee and the enticing aroma by bundling it with a bakery item can lift basket size and perhaps tempt customers to make a return visit in subsequent days. Similarly, introducing promotions such as ‘buy two, get one free’ at certain times of the day can ensure all items are sold each day and also promote good will.

As convenience stores continue to evolve, there is no doubt that more and more busy customers are waking up and smelling the coffee (and the bakery) at their local C-Stores. Done well, the bakery category can turn a well-located store into a destination that will attract new customers, drive sales and increase profit.

* Convenience and Impulse Retailing would like to thank EzyMart, Bakers Maison, AACS, and Patties Foods for supplying information for this article.

AT A GLANCE

The rise in the ‘on the go’ snacking trend is great news for proactive convenience retailers seeking to maximise their bakery sales during these challenging economic times.

The development of freezer to oven (FTO) technology has enabled convenience and impulse operators to take bakery products directly from the freezer and bake.

The growing popularity and availability of quality coffee has been matched by the rise and rise of quality bakery products in convenience.

Using tactics such as bundling bakery products with a coffee offer and ‘two for one’ helps to build customer traffic and customer purchasing habits.

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