ALEXANDRIA, VA. — Consumers have experienced plenty of change in the last two years, including a pandemic, record inflation and a shift towards working from home. As a result, their buying habits for baked foods, whether in foodservice, grocery stores or online, have changed as well.
At the 2022 NextGenBaker Leadership Forum, held April 28 in Alexandria, Va., JP Frossard of Rabobank explained the anticipated consumer trends for baked foods and how bakeries can best take action.
One of Mr. Frossard’s main points was that e-commerce is here to stay, despite foot traffic at brick-and-mortar grocery stores returning to pre-pandemic levels. IRI data shows that online sales of general food, which includes bakery and snack items, makes up 13.4% of online food and drink sales at $31.9 billion, according to the 52 weeks ending Feb. 20, 2022. And by the end of 2023, IRI predicts e-commerce to make up at least a third of total grocery sales. But there is still lots of room for the baking industry to grow in this space, Mr. Frossard noted.
“Only one in three [online food] purchases have a baked good,” he said. “Baked goods have a 100% penetration in households, so why is it only in one in three orders? The consumers are eating these products, they’re just not buying them online, and we need to understand why.”
One explanation Mr. Frossard offered is that buying baked foods online is a different experience from in-store. While grocery store shoppers are exposed to the tempting sights and smells of their favorite bakery items, this isn’t the case online.
To build these sales, Mr. Frossard recommended bakers communicate with online retailers to ensure their products are marketed as effectively as possible.
“Are the product pictures attractive enough? Can you send samples to consumers if they spend ‘X’ amount; so that if you buy cookies, I’m sending you doughnuts?” he asked. “We know with physical retailers how to market at the store; we need to do the same thing online.”
Whether online or in-store, Mr. Frossard noted that consumers today aren’t afraid to indulge with their baked foods, as sales of muffins, bagels and donuts have increased considerably.
“Indulgence was something we weren’t talking about before and a bit afraid to publicly speak about, but the pandemic has proved we still like to indulge,” Mr. Frossard explained. “This doesn’t mean we’re going to indulge all the time… the consumer understands that and can have a responsible relationship with sweet and baked goods.”
Bakers need a “dual innovation” approach with their products, Mr. Frossard said, capitalizing on consumer demand for health and wellness items in addition to indulgence and comfort.
But while many consumers want to buy more baked foods, skyrocketing inflation has put a dent in their pockets and forced them to spend more carefully. As a result, quick-service restaurant sales have increased, and specialty grocers have lost sales to regular and discount supermarkets, Mr. Frossard said.
Consumers today want the same level of value in their products without having to pay more, Mr. Frossard explained, a tall order for bakers grappling with high costs of their own, including record prices for key ingredients like grain and vegetable oil.
To accomplish this, Mr. Frossard acknowledged bakers have acted to simplify their portfolios and reduce their SKUs, focusing on what they do best.
He cited Bimbo SAB de CV, which this year sold its confectionary business to Mondelez, Deerfield, Ill.
“This makes a lot of sense. Bimbo is a bakery; their expertise is bakery. Mondelez is a snack company whose expertise is confectionaries. So why not?” Mr. Frossard said.
He highlighted that companies focusing on what they do best is a change from what they generally did pre-pandemic, when the strategy for most bakeries included diversifying their portfolios and exploring adjacent categories.
While recent events have altered consumers’ shopping habits and what they want from their baked foods, the last two years have shown the industry is more than up to the challenge.
“Bakery has proved it’s a resilient industry,” Mr. Frossard said. “It’s an industry that has to be efficient, and from one day to the other, one month to the other, we’ve managed to increase volume and managed to renew interest from consumers.”