A Powerful Category With Upside Potential

Bread is a power category warranting special attention. Fresh bakery is one of the largest and most active product groupings in the store. Sales were an estimated nearly $10 billion in 2010. Household penetration is 98 percent, and 60 percent of households purchase bread every week. Annual purchasing frequency is over 21 times. Fresh bakery items -- at an average of over 216 eatings annually per American -- are more frequently consumed than any other product.

Bread is productive, and for a very simple reason: the humble sandwich. The sandwich is one of the most important elements of the American diet and accounts for 51 percent of bread consumption. They are the #1 meal solution for lunch and dinner.

Due to sandwiches, bread is generally not purchased alone, and the many sandwich compliments include fresh deli meat, packaged deli meat, fresh deli chicken, cheese, condiments, mayonnaise, spreads, and jams/jellies. There are also companions such as salty snacks and fruit. As a result, fresh bread is a transaction builder.

Fresh bread is a significant contributor to store profitability; to be exact, the category generates 4.9 percent of store profits, the second largest contribution. But this is only a floor: sandwiches act as a profit multiplier for bread to the tune of 5X. This adds up, with bread profits, to 25.5 percent of store profits flowing from bread and closely associated items.

  

It is also important to realize that the fresh bread category is a branded business. As a result, 85 percent of the category’s true profit flows from branded products, which means the branded/pl mix has to be carefully managed.

Excellent as bread’s productivity is today, it can easily be argued that current performance is a foundation for even greater growth. Indeed, the fresh bread category has a far greater potential than is now being realized not only because bread is a high-performing staple -- in 1 in 4 baskets, broad demographic appeal, consumed at 1 out of 5 meal occasions, and appeals to adults and children to mention just a few -- but also because merchandising could be more focused at many stores. A reinvention of the fresh bread aisle can unleash this untapped potential and provide retailers with even greater productivity. Strategies can focus on organizing, optimizing and innovating in the aisle. Aisle management is the key, addressing category space, adjacencies, segments, and positioning. Perimeter exposure is essential as well as taking advantage of the many cross-merchandising opportunities that bread has.

COMING IN FUTURE TIPS:
A three-phased approach that can build the Fresh Bread category beginning with how to organize, optimize and innovate, then guidance on how to manage the Fresh Bread aisle and finally how to develop perimeter locations for this power category.

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