Hot and fresh. That’s what continues to drive impulse sales of breads and rolls in supermarket in-store bakeries. Despite the reported decline in the number of mainstream restaurants offering bread baskets, chefs at upscale establishments know there’s no better way to start a meal than with a basket of warm bread.

For in-store bakeries, par-baked products — as well as an increasing amount of frozen fully baked items that simply need to be slacked out — also provide an easy way to offer consumers fresh bread and rolls with little labor and in a matter of minutes.

“It’s difficult to find talented bakers at the hourly wages that supermarkets want to pay, so that’s making par-baked a viable format,” said Jerry Smiley, president and founder of Strategic Growth Partners, a Roselle, IL-based consultant firm to the baking industry.

These kinds of frozen products also allow niche, specialty and artisan bakeries such as Toronto-based ACE Bakery to spread their wings and serve customers regionally, nationally and even internationally.

“The marketplace has embraced ACE Bakery’s par-baked breads as they provide enhanced quality, inventory control and a better theater for their retail operations,” noted Lee Andrews, ACE Bakery’s president. “There continues to be a demand for new and innovative varieties.”

For ACE Bakery, hot bread programs and the expansion of its “Breads of the World” platform lay the foundation for new growth opportunities. “ACE Bakery continues to focus on execution at the store level and providing core varieties that highlight different, high-quality ingredients such as fresh herbs, Kalamata olives or sweet cocktail tomatoes,” Mr. Andrews explained.

Shifting market dynamics

During the past few years, however, several factors have been driving sales and changing the way specialty bakeries do business in this highly competitive segment of the bread category.

“In the retail sector, it’s about achieving price points and adjusting your product size to achieve your goals,” noted Marc Essenfeld, CEO of Tribeca Oven, Carlstadt, NJ.

Tribeca Oven recently rolled out free-form versions of its classic artisan products. Unlike its labor-intensive, hand-formed artisan breads, the free-form breads are made on the company’s new high-speed artisan bread line. These loaves have the same all-natural ingredients, with a more rustic look that allows in-store bakeries to sell them at a more attractive price point. The company recently rolled out a line of the loaves at a 600-store supermarket in the Northeast, according to Mr. Essenfeld.

Additionally, retailers are looking for seasonal and limited-time offerings such as a roasted garlic, pumpkin, apple spice, super-seeded or even chocolate varieties to lure consumers into the in-store bakery. “For us, baguettes and ciabatta are always the big drivers,” Mr. Essenfeld said. “However, whole grain products have become a higher percentage of our mix than they previously were, and that’s the way the new world is going.”

Take-and-bake breads have become increasingly popular as well. “We bake them 80% to 90% and put the products in individually bags, then freeze them,” Mr. Essenfeld noted. “They’re put in the in-store bakery, sold and baked at home.”

In a “call to action,” Bakery de France, Rockville, MD, invited consumers to turn their home kitchens into bakeries with its “Be the Baker” program, said Nadine Salameh, executive vice-president. The program encourages consumers to bake-off the company’s all-natural, 95%-baked demi-baguettes and its signature Diamond Artisan Rolls in Roasted Garlic, Cranberry Golden Raisin and Black and Green Olive varieties.

Overall, Mr. Smiley contended, take-and-bake products also allow consumers to serve a potentially fresher product because this approach reduces the number of times the product goes into the oven. “If an in-store bakery bakes par-baked bread on site, while bread is warm at the store, it’s going to be cold by the time you get it home,” he said. “Now, to reheat it at home, the consumer is going to have to put it through a third bake to warm it up. Think about it. Are you better slacking off the bread and letting the consumer bake it off at home? Probably. Besides, how many times can you bake a product?”

Invading the menu

Among restaurants, the growth for par-baked specialty breads remains strong among upscale establishments.

Mr. Essenfeld acknowledged that sales of bread to ­accompany the dine-in restaurant meal may not be as robust as in the past, but he insisted the decline in bread basket offerings is exaggerated. “Instead of putting a half baguette on a table, they’re putting a third of one [into a basket] and letting their customers ask their waiters to replenish it if they want more,” he explained. “Or, instead of having seven varieties of bread and rolls in that basket, they’ll have three varieties.”

Likewise, restaurateurs are incorporating a greater variety of breads and rolls into their menus, according to Mr. Andrews. “Chefs are always driving trends in the food world, and they are continuing to enhance their menus with quality bakery products,” he said.

Often, it’s as simple as offering a pretzel roll or enhancing the value of a sandwich with brioche, Mr. Smiley noted, citing two of the hottest product trends in the foodservice and in-store bakery arenas. “It’s amazing how many things are made with brioche,” he said. “They’re using brioche to make French toast. They’re using it to make Monte Cristo sandwiches. They’re even using it as a base for desserts.”

Sandwiches continue to proliferate on menus, not only at lunch but also at breakfast and dinner as part of the main meal or as an appetizer, observed Scott Kolinski, president of Lisle, IL-based Lantmännen Unibake USA. “In-store bakeries remain a big focus for us, but we are discovering a lot of activity at sandwich-making operations that are looking to upgrade their product offerings,” he said.

Some supermarket deli operators also seek to capture a greater share of the lunchtime crowd by offering subs, salads and other light meals to help their stores compete against quick-service restaurants (QSRs) such as Subway, Quiznos, Jimmy Johns and Panera Bread, according to Mintel in a December 2011report titled “The Deli Consumer.”

In the process, Mintel noted, in-store delis can provide grocers with a point of differentiation that can help them stand out in an increasingly crowded marketplace, and there’s huge potential for growth.

Mintel reported that 40% of deli shoppers indicated they never buy made-to-order at a deli, which means supermarkets need to be more aggressive in courting the lunch crowd. In addition to supermarket “frequent sandwich buyer” programs, delis should offer a cash discount on groceries with a predetermined number of deli sandwich purchases. “This type of promotion is something that cannot be matched by specialty sandwich shops, ultimately favoring traditional supermarkets,” Mintel concluded.

Many bakers also have discovered that convenience stores provide potential for growth, especially for fully baked frozen products. “We’ve seen a desire to have higher quality products instead of going with a Kaiser roll,” Mr. Essenfeld said. “We have seen C-stores adding a ciabatta roll or a French demi baguette into their sandwich programs.”

While QSR sales continue to grow, Mr. Smiley argued C-stores are capturing an increasing share of the quick-serve market. “There are a couple of reasons why,” he said. “First, C-stores have great locations almost on every corner. Second, it’s not a separate trip. If you are on your way home from work to stop for gas, and this C-store offers good food, you may pick up some food to take home. Without a doubt, the quality of food that you’re seeing at C-stores is much better.”

In many ways, C-stores are such an established market for Lantmännen that Mr. Kolinski just sees them as another natural growth vehicle for the company. “Convenience stores are a key area for us but not considered an emerging channel,” he said.

C-stores are not the only hot market for par-baked and fully baked frozen breads and rolls. At ACE Bakery, Mr. Andrews mentioned schools and airports as developing avenues for specialty bakeries. “Consumers within these channels demand quality, and operators are responding by improving their menus and grab-and-go concepts,” he said.

Hurdles for par-baked

Serving the par-baked market is not without its challenges. For Tribeca Oven, Mr. Essenfeld said, educating consumers about natural, clean-label and quality products remains a priority. The bakery relies on natural starters and a long fermentation process to make its breads and rolls. “For us being producers of premium, all-natural and clean-label products, how do we get that message out to our customers and to consumers about what is really a clean label and what is not?” he said. “I see that as one of our biggest obstacles.”

Distribution costs are another issue for mid-sized companies like Lantmännen Unibake USA, which currently operates only one bakery out of St. Petersburg, FL. “Logistics costs are really uncontrollable, but due to the nature of the product, they become an important element in the overall cost of producing and selling par-baked breads,” Mr. Kolinski said.

Earlier this year, ACE Bakery officially opened up a par-baked bread and roll bakery in Gaffney, SC, to serve its US customer base. “Geographic expansion is one of the greatest challenges and opportunities for ACE Bakery,” Mr. Andrews said.

Down the line, big-time competition may further bolster this segment of the bread category. Allen Shiver, president and CEO of Thomasville, GA-based Flowers Foods, the nation’s No. 2 baking company, views supplying the supermarket in-store bakery/deli with par-baked products as an opportunity for future growth.

“Par-baked breads have always had a place in the total product line, and that is one area that we will continue to watch,” Mr. Shiver told analysts at a Barclays Back-to-School conference in September.

“Par-baked is an important part of the category,” he added. “At some point down the road, we may choose to play in a bigger way, but we don’t play in that segment today.”

Rather, he said, Flowers’ main focus is still on boosting its position in the packaged bread aisle as it expands geographically. For the time being, that’s good news for the dozens of specialty and regional producers of par-baked baguettes and artisan breads and rolls.