There’s money to be made in the bakery category, so why are so many customers put off from buying bread at c-stores?

Out of stock, out of date, out of sight. Not the image that c-stores want to project in any department, but in a category as important as bakery, it’s one that needs to change. According to Warburtons senior category marketing manager Claire Simpson, bakery offers huge opportunities for c-store retailers: “What retailers have to bear in mind is that if a customer runs out of bread and milk it will prompt a shopping trip, unlike other categories. More trips prompt basket spend.”

According to Scott Clarke, head of category management at RHM Bakeries, maker of Hovis, bakery is the most popular c-store purchase after milk: “People always want fresh bread, and as such will need to restock more often than they visit the supermarket, which is why bakery is so popular in c-stores.”

The Federation of Bakers interim director Andrew Brown points out that while the market is flat in terms of volume, it is stable: “Bread’s been declining to some extent since the last world war but it’s a key part of our diet.” Allied commercial development leader Lawrence Trist says that new product development (NPD) is also helping to put the value back into the sector: “We’ve seen it relatively flat in market volume - but it’s a stable market with exceedingly high penetration. We’re seeing the value come back with innovation.” The figures back this view, showing a healthy growth in value. The bread sector alone is worth £380m, growing at 1.5% year on year, driven by brown bread at £64m with a growth of 8.3% year on year and seeded bread at £14m growing at 7.1%. Rolls are up 5.2% year on year at £54m and occasions is worth £69m and growing at 3.8%, driven mainly by crumpets (up 8.9%), fruit loaves (up 8.5%) and pancakes (up 7%) year on year (52 w/e June 11, 2005; source AC Nielsen/Warburtons).

Which would all be great news for the c-store retailer if only they could do something about consumer perceptions of the category as sold in their shops. According to Simpson: “There are a lot of issues stopping customers buying bread in independents.”

Warburtons recently conducted research into the category in c-stores and found some worrying misconceptions among shoppers who perceive bakery in c-stores as basic, badly stocked and often not fresh. Says Simpson: “There was a problem concerning perceptions of c-stores in terms of this category, which were sometimes poor, obviously depending on which shop they went into. Supermarkets and Tesco Express have set standards that consumers will expect from c-stores.

The range in c-stores was generally perceived to be good, but basic, and out of stocks were a major issue. There was also a problem with shoppers’ confidence that products in c-stores weren’t as fresh as in the supermarkets.”

The key to cracking the problem, says RHM, is availability so an important pitfall to avoid is out of stocks. According to the Warburtons research, a whopping 13% of respondents said they had failed to make their intended bread purchases in c-stores and almost 60% said that this was because the product was either out of stock, not stocked or they just couldn’t find it. Couple this with the fact that 53% reported that they would stop visiting the store entirely if the bakery product they wanted was consistently not stocked and you have a huge potential loss of sales. Warburtons’ Simpson says that out of stocks not only put shoppers off, but also reinforce customer perceptions that somehow the bread that is left is not fresh: “Nobody wants to buy the last loaf of bread. If you have the fixture full it’s a constant reinforcement of the perception of freshness.”

She says that retailers should also be aware of their peak times for bakery sales: “Make sure that the product is on shelf at the right time, especially during busy periods.”

Manufacturers say that c-stores should be making the most of sales opportunities by prominent brand blocking in the bakery fixture area to highlight the key bread sectors and make shopping the range even easier. As well as stocking the staples, says Simpson, c-stores should: “Stock a range of products without offering too much duplication. Offer crumpets and fruit loaf rather than three types of fruit loaf. Merchandise bread by type rather than brand - white, brown, granary. This helps if there’s an out of stock issue, as people can see an alternative. Also stock similar types of products together such as breakfast items.”

Farmhouse loaves should be higher up at eye level and morning goods, because the packs are smaller, also need to be higher.

Allied’s Trist says that retailers should also be aware that there is a trend towards trading up in bakery, and stock accordingly: “One of the key trends is premiumisation, whereby consumers are trading up to different types of product - such as gold products like Kingsmill Gold. An ageing population with disposable income and more refined palates coupled with the fact that people work harder means they want something luxurious.”

The Federation of Bakers interim director Andrew Brown agrees: “Consumers are certainly more adventurous and there is an increasingly wide range of products available.”

Cranks brand director Ben Johnson says that retailers shouldn’t be put off selling specialist breads, such as organic, but must be careful to match the offer to their customers: “Within c-stores it’s down to the local population and to the owner to understand what the customer wants. There are going to be certain places where organic will never sell, but others where it will do well. But you’ve got to be careful; you can’t take a quantum leap - if you’re not sure about it then just dip your toe in the water to see.”

The company, which recently launched an organic white and organic malthouse loaves, supplies Waitrose as well as small retailers, and Johnson says that retailers with a Waitrose down the road are in exactly the right catchment area to sell organic. “There’s going to be a demand there anyway and if the customer usually shops in Waitrose for organic bread but wants a top up they won’t want to settle for a non-organic loaf.” He says that by putting the organic alternative next to the non-organic market leader, retailers can drive sales. However, he stresses that c-stores should stock organic wholemeal before white, as this is more likely to gain sales.

Health is another theme which retailers can take advantage of. The collapse of Atkins and the rise of the GI diet have led to bread being back as part of a healthy balanced diet. Kingsmill launched its Wonder White with added calcium, fibre and vitamins earlier this year, complete with cartoon nutritional advice, and Warburtons has recently launched Healthy Inside. This 400g loaf has added pro-biotic and is the first of its kind in the UK according to the manufacturer, retailing at 75p. Andrew Brown says: “I think the way the food and health debate is going there’s probably going to be a swing in favour of bread.”

Point of sale, says Simpson, is also important: “A lot of people in our survey didn’t realise that the local c-store even sold bread - sometimes the bread was buried mid-store and was often not signposted. Position bread products in front where people can see them - this will increase customers’ confidence in the overall freshness of the store’s offer. Customers need to be constantly reminded that the shop sells bread.”
Managing director of bake off supplier Mantinga UK, which began trading in October 2004, points out that bringing bakery forward in-store - especially if retailers have a bake off fixture - can really drive footfall: “From our experience bakery is being brought forward so that the baking aroma is the first thing shoppers notice, and even drifts out into the street.”

He recommends anyone with bake off in-store to bake little and often to keep the aroma going and drive people to both the bake off and aisle bakery fixtures: “Retailers need to understand the use of aroma over display.”

Overall, manufacturers agree that the excellent opportunities for c-stores in the bakery category are there for the taking - retailers just have to use their loaves.

Paul Sheppard, Smile Local, Bath:

“We’re based on the outskirts of Bath and our sales are largely based on the student population who rent properties nearby.

“Our merchandising plan is given to us from our head office, but we have leeway to increase the facings of whatever sells best locally and adapt to the demand. Currently, our best-selling product is Braces’ medium sliced. We tend to do best in the evenings when the students come in for their beer and other groceries.”

Jane Moore, The Village Store, Cheswardine, Shropshire:

“We have a local baker called Chatwins of Nantwich that delivers freshly baked bread and cakes to us every morning. We wrap the loaves ourselves and sell them next to the branded items. Although overall we sell about half and half, many customers come in especially for the fresh produce. Our customers come from the village, the surrounding hamlets and we even get holidaymakers in from the local canal. We also have lots of farms in our area and people often buy the bread with the intention of freezing it for later use.”

The perennial problem of tea-time tantrums caused by children’s reluctance to eat their crusts may explain the excited reaction from the press at Hovis’ launch of the world’s first baked crustless loaf - Hovis Invisible Crust. While the loaf is currently receiving the kind of publicity that money can’t buy, parents seem to be getting genuinely excited by this bit of NPD.

This is probably explained by the fact that, according to TNS research from RHM Bread Bakeries, 35% of mothers remove the crust from children’s sandwiches, wasting 45% of the loaf. The new loaf, while more expensive at just under £1, represents value for money for families with fussy children. Available in 800g white (RRP 95p) and Best of Both (RRP 99p), the loaves contain the same ingredients as their crusted counterparts but are gently baked in specially designed tins to produce a full size loaf that is soft around the edges.