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Bakeries. From 2002 through 2004, the baking industry appeared to be losing ground. Today, it appears to be on the rebound. One recent study has indicated that in-store bakeries grew by just over 1% percent in 2006.
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From 2002 through 2004, the baking industry appeared to be losing ground. Today, it appearsto be on the rebound. • One recent study has indicated that in-store bakeries grew byjust over 1% percent in 2006. • Categorically speaking, the baking industry is comprised of several product segments. These include breads, cakes, cookies, crackers, cereals and nutritional bars. Manufacturers tend to specialize in one or more of these segments.
According to BakingBusiness.com, bread and cake shipments totaled more than $23 billion in 2006. • Today, there are 2,250 bread and cakemanufacturing companies located in the U.S. • In the cookies and cracker segment,shipments totaled over $10 billion last year. • Bakery snack food is an even largersegment in terms of the value of itsshipments, even though there arefewer manufacturers.
There are several differenttypes of retail establishments within the bakery industry. These include retail in-store bakeries, specialty bakeries and retail standalone bakeries. • Retail in-store bakeries are defined as those located within larger retail establishment such as a grocery store, mass merchandiser or wholesale club store. They offer an assortment of bakery products such as breads, cakes, pies, bagels, cookies, donuts, and muffins.
An in-store bakery typically staffs counter space and bakes their products on-site. In 2006, annual in-store bakery sales were about $20 billion. While this is nearly a 6% increase over the previous year, operators have concerns over costs such as labor, ingredients and fuel.
Specialty bakeries are key players in theindustry and a significant portion of the$38.4 billion specialty foods market. • Stores such as Cinnamon Sam'sand Cinnabon are typically locatedin shopping malls, airports,college universities and retailstores. They carry their ownbranded products that arebaked on site. • These specialtybakeries are one ofthe fastest growingsectors in the U.S.
When looking at in store sales, the two top products contributing to sales are cakes and bread. • Due to a decline in the popularity of the low-carbohydrate dietand an increase in whole grains, bread is making a comeback. • Consumers are passing on bagels, pies and donuts offered atin-store bakeries. This is most likely due to the perceived or realized quality of the product. • Cookies are also seeing high growth. This is probably dueto consumers who feel they deserve a little spoilingor a pick-me-up.
After several years of expansion, a lull is developing in the areaof in-store bakeries. Theslowed growth in this areais attributed primarily torapid maturity of thecategory, as well ascompetition from other typesof bakeries and products. • Long-term success in this category is contingent upon the development of innovative products that are of high-quality and meet the changing consumer demands.
The holistic view of the industry depicts a much more favorable picture. Analysts expect that the continued growth in the Hispanic population will help to fuel the industry as more ethnic products are developed to serve the demands of this demographic. • Consumers are beginning to demand healthier, more nutritional food choices. By using whole grains and limiting trans fats, bakeries can comply with more palatable options. • With growth comes stability in the area of industry employment, which is expected to grow at an average rate through 2014.
American consumers are well aware that a diet rich in fiber and whole grains canhelp stave off cardiovascular disease,high cholesterol and diabetes. • The U.S. market for wholegrain products is thelargest in the world.It’s estimated to beworth about$5.6 billion.
Many American companies are beginning toincrease their offering of whole-grain products,as well as those fortified with vitamins. • Barbara's Bakery, started in Northern California in1971, has been developing all-natural and organicproducts for 36 years. It is one of the foundingmembers of the Whole Grain Council and works topromote the health benefits of whole grains.
Given the company's history and mission, it is wellpoised to take advantage of the forecasted growth inthe baked, whole-grain snacks market, which isexpected to reach $21 billion by 2010. • In 2004, Con Agra Food produced wholegrainflour using a special winter wheat with apatent-pending, new technology to achievea finely milled product. Ultragrain,as it is was named, has a similartexture to refined flourproducts and providesbakeries withthe ability tooffer healthierbread choices.
For decades, American children have been enjoying their peanut butter and jelly and balogna on white bread. Mothers, however, would prefer that they eat whole wheat bread. • About 40% of the nation's bread consumptionis white. Today, whole grain white bread hashit the grocery store shelves.It offers a combination ofwhole grain and enrichedwhite flour as its foundation. • Sara Lee Corporation andInterstate Baking Companyhave both developedtheir own white breads.
An increased whole grain intake has been shown to provide a benefit of up to 40% reduction in cholesterol. • Additionally, as noted by the Food Navigator - USA, people who regularly eat wholegrain foods can have a 20 to 40% lower risk of heart disease and stroke. • Armed with these specifics, the U.S. government has modified its dietary guidelines to include three portions of whole grains into daily diets. • There is a wealth of opportunity in the baking industry for any baker or baking company that can develop, manufacture and market new products that address the deficiencies in today's American diet.
Recent additions to the bakery industry include wholegrain products, fewer transfats and technology. • For Stephen Pazyra, baked goods represent more than just food and nourishment. They also represent the comfort and familiarity of home. • In 2002, Pazyra started 1-800-Bakery, Inc. with the purpose of bringing the customer experience online.
Pazyra started out by offering products from La Patisserie. Once customers began requesting products thatLa Patisserie did not bake, Pazyra realized that there wasreal potential in expanding his product offering beyondhis own kitchen. • 1-800-Bakery.com is an excellent example of how the world of ecommerce is changing every industry. • Today, 1-800-Bakery.com is a sizeable network of about 20 bakeries across the country.
To ensure that the products arrive fresh at the consumer's home, each bakery sends the products directly to the consumer rather than through a distribution center. • Keeping track of orders has been one of the greatest challenges facing the business. Products often have to be temporarily removed or made unavailable in order to ensure the partner bakeries are not overwhelmed with orders.
1-800-Bakery strives to maintain the personal feel of a local, neighborhood bakery - just online. All customer service issues are handled personally. • Following each order, the customer is sent a handwritten email asking how they liked their ordered products. Pazyra says this aids the company in learning about any errors, and to put in place measures ensuring thaterrors are not repeated. The emails also add a personal touch to what can seem an impersonal service.
In terms of business success, 1-800-Bakery seems to have a corner on the market. In its first year, they generated about $52,000 in sales. • Over the past four years, the business has really grown through word-of-mouth advertising. In 2006, figures reached $800,000. • The company plans to continue to expanding beyond its current partnerships. They’re looking to include about 50 bakery products by the end of 2007.
In 2002, Hispanics became the largest ethnic group in the United States. Since that time, this demographic group has continued to grow and is expected to account for about 25% of the U.S. population by the year 2050. • Recognizing the potential with a group of that size, marketing departments have begun focusing much of their effort on developing campaigns and products that appeal to them. • For the bakery industry, the growing Hispanic population represents untapped potential. Paying attention to this group could translate into significant overall growth.
Several manufacturers are modifying their business in order to accommodate the Hispanics' taste buds. By giving this demographic a little taste from their homeland in the form of food and tradition, baking companies can expect their sales to rise like the yeast in their cakes. • Prime Choice Foods, Con Agra and La Tortilla Factory are a few of the baked goods manufacturers that have begun targeting the Hispanic demographic. • In 2003, Flowers Food Specialty became the first wholesale baker to offer Hispanic cakes produced in the U.S. • Since then, Flowers has continued to develop different products to accommodate the Hispanic taste of home. In 2005, they added a croissant-like product to its offering.
What most companies focusing on the Hispanic market have found is that the packaging is as important as the product. Hispanics need to be able to relate to the product and the packaging is the first thing to catch their eye. • Without authentic, recognizable packaging, the product may never be bought or tasted. Brighter colors and improved product photography have replaced the previous, more conservative packaging.
After packaging, the most important item is taste. The taste of the product must be authentic with ingredients that are recognizable, household items. • The shape of the product is also key. Like other consumers, Hispanic consumers recognize certain shapes from back home. A round shape is identified as a concha, while the c-shape of a croissant is identified as a curenito.
Companies that offer healthy bakery products that support the new dietary guidelines published by the U.S. government should include the new food pyramid in their advertisements. It will make it that much easier for consumers to choose healthier products. • Children influence a large portion of a family’s spending decisions. Advertising efforts for baked goods manufacturers should be targeted at a younger demographic that is greatly influenced by its peers. • Bakeries located in areas where there is an influx of Hispanics should begin to incorporate authentic Hispanic products into their daily offerings and develop advertisements using traditional Hispanic colors and verbiage. This will attract local, repeat customers from the Hispanic demographic.
Companies that offer healthy bakery products that support the new dietary guidelines published by the U.S. government should include the new food pyramid in their advertisements. It will make it that much easier for consumers to choose healthier products. • Children influence a large portion of a family’s spending decisions. Advertising efforts for baked goods manufacturers should be targeted at a younger demographic that is greatly influenced by its peers. • Bakeries located in areas where there is an influx of Hispanics should begin to incorporate authentic Hispanic products into their daily offerings and develop advertisements using traditional Hispanic colors and verbiage. This will attract local, repeat customers from the Hispanic demographic.
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