Bake to the Future

AT A GLANCE

• The major promotion format currently driving bread sales in the convenience channel is the bread and milk value combo.


• The bread sales mix has changed quite significantly in the last five years with mainstream bread products (those bundled into multi-buy promotions) growing from 75% to 85% of channel bakery sales.


• Packaged bread should be stocked in an easily visible location. Its location should be highlighted with effective point of sale materials.


• Outlets should also keep an eye on all marketing campaigns and ensure that they profit from the advertising exposure by stocking supported products in store.

Combo deals help packaged bread to rise again

The supermarket price wars have presented a huge challenge for convenience and impulse outlets struggling to maintain sales of key products such as bread and milk. As the cornerstone of many stores’ profitability, it seems unthinkable that these staple items will no longer be able to draw in-a-hurry top-up customers through the C&I outlet door. While some other categories may command a higher margin, packaged bread offers one of the highest gross margin returns on investment because of its daily stock turns. It is simply one of those wonderful every day products that people are prepared to pay a premium for, in order to get it conveniently. In convenience, bread is more of a destination item than an impulse item and, as one of the key reasons a shopper enters a store, it also creates the foot traffic for other impulse purchases to occur. Whatever the challenges, the importance of keeping bread selling well and attracting customers into store, can scarcely be overstated. But how can C&I operators compete when supermarket bread is being sold at as little as $1.00 a loaf, and milk is being sold for $1.00 a litre? The National Baking Industry Association (NBIA) says an independent baker cannot realistically be expected to produce a quality loaf of bread for less than $1.50.

Joining forces with other products has already proved to be an effective response for many C&I outlets; the major promotion format currently driving bread sales in the convenience channel is the bread and milk value combo. Retailers have been offering consumers a few options with these deals, such as offering a loaf of bread and a two-litre milk carton, or two of either product at a discounted price. While this combo was originally introduced to lure grocery shoppers back into the channel with a well priced offer, it has successfully driven increased volume in the category. On the flip side however, while sales of fresh packaged bakery products have been increasing in volume, they have also been declining in value as customers trade down into price fighter offers, and retailers focus on multi-buy bread and milk promotions. It leaves C&I outlets facing an interesting conundrum. While the huge increase in promotions (up 44% last year over 2009) is good news for shoppers in the short term, and a focus on value in the channel is generally a good thing, it is not without knock-on effects.

The most recent Australian Association of Convenience Stores (AACS) report says it is important to bear in mind the significant impact the widespread use of promotional merchandising is having on the margins of both retailers and suppliers… and the possible long term consequences. The report says that convenience stores only account for 3% of overall food retailing trips per month. So it is vital that the channel remains both competitive and viable. The bread sales mix has changed quite significantly in the last five years with mainstream bread products (those bundled into multi buy promotions) growing from 75% to 85% of channel bakery sales. Some retailers offer a private label loaf for these promotions but, for retailers that don’t have a private label, companies such as George Weston Foods Limited can help. Its Gold Max branded product is a good quality loaf of bread that it says can compete with private labels. The packaged bread landscape is dominated by two major players. As well as Gold Max, George Weston Foods is responsible for quality bread brands such as Bürgen and Abbott’s Village Bakery. It also boasts Tip Top, the largest bakery brand in Australia. Tip Top’s mainstream bread brand, Sunblest, is also its leading brand through the convenience channel with scan sales of $2.7M. For its part, Goodman Fielder boast brands such as Wonder White, Mighty Soft, Helga’s, Freya’s and Lawson’s.

Emerging Solutions

As they face the many trading challenges, C&I outlet operators can draw some encouragement from the fact that consumers are generally tending towards smaller, more frequent shopping trips ... and this suits convenience. The channel remains, and should long remain, extremely important to overall bread sales. With around 5000 sites, it has a more diverse trading footprint than any other channel, which presents significant opportunities for new and innovative bread product solutions. While consumers may purchase bread from a mix of retail channels, as a fresh product that needs to be purchased every few days, convenience will always remain a key source of consumers’ 'top up' shopping. In the future, the channel may also grow in importance as its in-store bread offer improves to compete with retail bakeries and fresh bread franchises. With the health and wellness trend still very much alive and kicking, the customer is demanding more quality bread offerings. The economic outlook may still be uncertain but the increasing demand for artisan style premium breads among consumers is unmistakeable. Happily, the growing popularity of grain and wholemeal breads presents an opportunity for C&I outlets.

First and foremost, they result in a bigger spend and therefore attract a bigger spending customer. In simple terms: premium in-store bakery and artisan lines can grow margins, establish a point of difference from retail competitors, and entice a different shopper through the door. George Weston Foods says weekly sales volumes generally follow the fuel price cycle with the marketing mix more heavily weighted towards mainstream products during the week, and premium and snacking lines on the weekend.
As with all categories, the secret to maximising sales and profit lies in knowing your customer and knowing your store. In regional and suburban areas, C&I outlet packaged bread purchases are typically made by the household’s main grocery buyer, or by their partner purchasing bread as an emergency or top-up shop in the evening after work. In metropolitan areas, there are larger numbers of Single Income No Kids consumers (SINKs), Double Income No Kids consumers (DINKs), and empty nesters purchasing from C&I outlets. These shoppers generally make up a greater proportion of the local demographic and are more willing to pay convenience and impulse outlet price premiums for products.

Effective Strategies

So, how can operators ensure they are maximising the packaged bread sales potential to these customers? There are a number of steps that can be taken. It almost goes without saying that packaged bread should be stocked in an easily visible location and its location should be highlighted with effective point of sale materials. In the past, it has been traditional for C&I outlets to stock bread at the back of the store with very little shelf space available to it. Bread sales can be lifted by simply positioning the product in a better location in the store, and making sure the product has enough shelf space.

It is crucial also that the right product flow is on shelf. Customers will tend to search for the cheaper bread, so keeping higher margin lines at impulse or eye level can result in a bigger spend. While selecting the right range is crucial, so too is ensuring that adequate stock is on shelf. Bread is a staple food item, and that is the reason why many customers come into the store and will soon leave again if the product is not available. It is especially important too to put out sufficient supplies during peak sales times.

While space is often at a premium in C&I outlets, maintaining a relevant range is crucial and it is important to stock major brands with the broadest appeal. Outlets can work out the right product mix for them by looking at other categories such as fuel. For example, if they are selling more premium fuel they should perhaps focus on premium bread brands. Ranging should be kept fairly lean with only the top brands in each segment on shelf. Outlets should also keep an eye on all marketing campaigns and ensure that they profit from the advertising exposure by stocking supported products in store. Taking advantage of any suitable product launches can also be highly valuable. The best way for outlets to ensure they are doing all they can to grow sales is to talk to their bread distributor or area manager about possible additional strategies. As specialists, these professionals tend to live and breathe bread and so have plenty of simple tips, ideas, and point of sales solutions that can help increase bread sales.

A combination of effective strategies led by – but not restricted to – combo deals and two-for one offers is ensuring that this most staple of products is retaining its importance to C&I outlets. Although loaves may be sold for as little as $1.00 in other channels, bread will always be something that some consumers on some occasions will be prepared to pay a premium for, in order to obtain it quickly and reliably. Supermarket price war or no supermarket price war, packaged bread in convenience is not yet toast.

* C&I Retailing would like to thank George Weston Foods for supplying information for this article.

Total Packaged Bread
Top 15 SKUs represent 70.3% of total Value.

Product	Manufacturer	Brand
Wonder White 7 Vitamin Sandwich 700g	Goodman Fielder	Wonder White
Helga's Wholemeal Trad 750g	Goodman Fielder	Helga's
Tip TOP Sunblest White 650g	George Weston Foods	Tip TOP Sunblest
Buttercup White S/W 650g	Goodman Fielder	Buttercup
Wonder White Hifibre Plus S/W 700g	Goodman Fielder	Wonder White
Tip TOP Up Omega White S/W 700g	George Weston Foods	Tip TOP Up
Helga's Mgrn&Oat 850g	Goodman Fielder	Helga's
Mighty Soft White S/W 650g	Goodman Fielder	Mighty Soft
Gold Max White 700g	George Weston Foods	Gold Max
Lawsons Traditional Homestd Seed & Grain 800g	Goodman Fielder	Lawsons Traditional
Tip TOP 9 Grain Medium 700g	George Weston Foods	Tip TOP 9 Grain
Wonder White 7 Vitamin White Toast 700g	Goodman Fielder	Wonder White
Tip TOP Sunblest Thick 650g	George Weston Foods	Tip TOP Sunblest
Helga's White Trad 750g	Goodman Fielder	Helga's
Abbotts Village Bakery Wholemeal Farmhouse 750g	George Weston Foods	Abbotts Village Bky

Represents the values for the MAT to 03/04/2011. Private Label and Housebrands have been excluded. Source: Aztec Synovate.