Help bread revenue rise

The bread and bagels sector is not exactly rolling in dough. As more health- and flavor-conscious shoppers eschew long-time staples, traditionally active categories — including fresh breads, rolls and hot dog and hamburger buns — are experiencing flat or declining sales.

Indeed, the sluggish U.S. bread market is forecast to lag over the next several years, with sector revenues rising from $24.7 billion in 2014 to just $27 billion by 2019, reports global market researcher Mintel.

While bread has high household penetration, many consumers are limiting consumption because of health concerns, Mintel notes in its September 2014 “Bread and Bread Products — US” report. Many of those shoppers say they are avoiding breads that have excessive amounts of calories, carbohydrates and sugar.

A 2015 decline in unit sales of packaged bread, meanwhile, reflects growing consumer sentiment against processed foods, as well shoppers’ aversion to gluten, adds Euromonitor International, London, in its October 2015 “Baked Goods in the US” report.

“Although a very small percentage of Americans suffer from celiac disease (a gluten allergy), a growing number believe gluten to be fundamentally unhealthy and so avoid it,” Euromonitor states. “At the same time, many consumers are beginning to opt for unpackaged artisanal bread or ethnic varieties such as tortillas instead of packaged bread.”

Focus on health

Sales of unpackaged bread are on the upswing and impacting the packaged sector, Euromonitor notes. Fueling the activity is consumer perception that processed foods are less healthful regardless of the nutritional content; the lack of an ingredient list on most unpackaged foods leading consumers to make a positive assumption regarding the nutritional content; and the growth of bakeries and high-end grocery stores that sell unpackaged breads.

The development of fresh higher-quality breads also is resulting in greater shopper interest in newer alternatives. And gluten-free and organic breads, as well as breads with added grains, are becoming more attractive to many consumers.

“The healthier options used to taste like cardboard,” says Karen Toufayan, vice president of sales and marketing for Toufayan Bakeries, a Ridgefield, N.J.-based supplier of bagels and bakery products. “But the taste and texture are getting better. People want to eat healthier but they won’t compromise on taste. They will even pay more if they think they are getting their money’s worth.”

Shoppers, in general, are more aware of product ingredients, adds Sabine Veit, CEO of Bäckerhaus Veit Ltd., a Mississauga, Ontario-based producer of artisan breads, rolls and pretzels.

“Consumers are becoming more educated and are looking at selections with nutritional values, particularly for children and the elderly. The integrity of product labels [is] undergoing the biggest change as consumers seek more functional ingredients that provide a nutritional punch and are not just belly fillers.“

To make health benefits more evident, Veit suggests that retailers leverage in-store signage to spotlight products with attributes such as lower levels of sugar and salt.

Include appealing packaging

Retailers also could help bolster sales by adding to packages graphics that illustrate the use of the breads — for example, a hamburger on a bun with lettuce, tomato and cheese, Toufayan says.

“It will be much more appealing having meal photos than showing just a picture of a bun,” she states. “Investing in the photography will engage consumers. People are visually stimulated and impulse purchases are based on sight and perceptions of what the final product will taste like.”

While lively packaging designs that include messaging could drive activity, it is important that shoppers still are able view the food content, states Francois Joyet, president and founder of Maguire Bakeries, a Quebec City, Quebec-based supplier of breads and rolls.

“Retailers can put two or three bullet points on a bag, but having more can cause them to lose the consumer,” he notes.

Offer an on-trend selection

Offering the most relevant product selection, however, can be challenging as shopper buying behavior rapidly evolves.

“Often what currently is on trend is not what was hot a year ago,” Toufayan states.

Therefore, retailers should continually work to add excitement to the category and differentiate their products through unique flavors and seasonal selections such as maple and apple bagels, Joyet says.

“Consumers are looking for something new in everything they eat,” he states. “Our challenge as manufacturers is to get shoppers to flip to a product that is a little more expensive but delivers bang for the buck” Indeed, Joyet notes that “gone are the days” when retailers could sell bagels in six packs for 99 cents. Such products create neither shopper loyalty nor profitability.

“Retailers will lose shoppers who buy strictly by price, as those consumers will go from one store to another,” he states.

Instead, retailers should launch exclusive and high-quality offerings and extensively promote the products via in-store samplings, Joyet says.

“Consumers purchase with their eyes, nose and mouths,” he states. “If an item smells, looks and tastes good, it is a 100 percent sure win. There is no secret to it.”

Connect with suppliers

To develop the most appropriate store brand items, meanwhile, retailers must divulge their merchandising objectives to suppliers so the parties can design appropriate packaging and sales strategies, says Dave Harris, president of West Caldwell, N.J.-based Original Bagel Co.

“By spending just a little extra time together, retailers and manufacturers can generate tremendous results,” Harris notes. “We can offer ideas on packaging and flavors based on what was successful with other customers in similar situations. Every region and every retailer is different, so it is important to customize strategies.”

Harris notes, for instance, that specific bagels are popular in different parts of the United States. There is stronger demand in the South and Southwest, for instance, for jalapeño and other spicy flavors, he says.

Smaller-size bagels, meanwhile, are increasing in popularity across the United States as consumers seek to cut their caloric intakes, he notes.

In addition to targeting the right products to the right shopper bases, retailers also could help boost private label revenues by emphasizing the lower cost of store brands and spotlighting the relevant health attributes on packages, Harris says.

Yet, because it is crucial for retailers to consistently meet shopper demands, operators must keep a close watch on the shifting marketplace and be ready to respond.

“Many retailers look at the raw sales numbers and say they want a private label version of the popular products in the category,” Toufayan states. “But they also need to consider where the market is going and not just what it was yesterday. That includes recognizing the excitement coming from new products and categories and not just the old staples.”

Do leverage in-store signage to spotlight tasty, healthful bread options.

Don’t obscure the product with too much packaging.

Do offer unique flavors and seasonal selections such as maple and apple bagels.

Don’t cut suppliers out of packaging, sales strategy meetings.