How bakery chains are evolving to push back on supermarkets’ gains

Bakers Delight, The Cheesecake Shop, Brumby’s, Ferguson Plarre Bakehouses and Banjo’s Bakery Cafe offer updates on the category.

A continued push for premium or artisanal goods, guaranteed supply, easier access through in-store and online channels, and a non-traditional approach to expansion appear to be the winning combination for bakery chains to retain and gain market share despite supermarkets’ gains over the past years.

“Through the worst of the Covid-19 pandemic last year, many bakeries and bread producers across the market were at capacity and in many cases struggled to keep up with demand, particularly during panic buying periods. As a result, the supermarkets were not discounting as sharply as they normally would. This played to our strength with our ability to adjust our production every day to meet consumer needs, whilst still offering our everyday block combos to provide value to families,” Bakers Delight joint CEO David Christie told QSR Media.

“12 [to] 15 months on and we are seeing supermarkets return to value and discounting to
drive foot traffic.”

“We have also seen the supermarkets invest heavily in upping their bread game and adding ‘premium’ ranges,” a spokesperson for Brumby’s said. “They are trying very hard to shift their bakery positioning in order to win business and demand higher prices, although many of those products arrive frozen par-baked, to be finished in store rather than baked fresh from scratch.”

Lumped together, Bakers Delight and Brumby’s occupy nearly 16% of market share and are making continued investments in loyalty programmes and click & collect.

Christie said the chain’s Dough Getters programme is going “exceptionally well” and confirmed they will be looking at self-serve units in-store. “Modernising” their bakery fit outs is also in the pipeline. Brumby’s said they’re looking to introduce click & collect in 2022 and strengthen its presence on third-party aggregators like Uber Eats.

Partnering with local systems, “creative” location strategies
The Cheesecake Shop managing director Ken Rosebery revealed they are considering partnering with local cafés or franchise systems in regional centres with populations of less than 20,000 and that cannot support a full-sized dedicated bakery.

“We are very careful with site selection and, from time to time, commission Spectrum Analysis to review our network footprint and opportunities using a solid analytical and fact-based approach. As a franchise system, every new site represents a huge investment and commitment from a franchisee, so we want to get it right and make sure they can be profitable and satisfied with their investment, he said.

Ferguson Plarre Bakehouses, which recently celebrated its 120th anniversary and had launched its latest Sweet Rewards app, said “being creative” in location strategies is key.

“People are starting to move differently due to online and the impact of COVID creating a more localised shopping routine. So we’re most certainly looking harder at strip, sub regional and even route trade type locations to be where people need us to be,” CEO Steve Plarre said. “Some of the larger shopping centres remain very expensive despite a meaningful drop in foot traffic and an excess of food competition in their tenancy mix….so having back up plans to mitigate against this is really important.”

Banjo’s Bakery Cafe CEO Jessica Saxby maintained the brand’s continued drive-thru push, revealing they want 50 drive-thru stores across the country in the next three to five years.

“With over 28 established stores in Tasmania alone and 44 stores across Australia, Banjo’s is set to continue our successful expansion in states such as Queensland and Victoria, while continuing to maintain our strong family values and much-loved baked good offering,” she said.

Variety still the name of the game
The chains’ varied observations on trends also indicate consumers’ continued value on them having options - both in what they want to eat and how they want them - regardless of daypart.

“Over the last 18 months through the pandemic broadly, we’ve certainly seen customers visiting our bakeries less frequently, but buying more when they do visit,” Christie noted, adding their community and strip site bakeries continue to perform well as many people still work from home.

“Throughout COVID we’ve seen huge growth in sandwich bread and lunchbox type products for the kids, along with modest growth in artisan products and meal solution and meal accompaniment options. The flip side is our snacking range which we saw decline during the peak pandemic period, but fortunately this is now starting to grow again in line with increased foot traffic.”

“COVID has supercharged our offering as consumers opt for home catering solutions and have been unable to travel and spend money elsewhere,” Rosebery said. “Delivery customers are more impulse driven and looking for smaller sizes and we have responded with our quarters, donuts and other items.”

“We consistently bounce out of the lockdowns very strongly and are seeing a “survival of the fittest” routine out there in the market...I think something people certainly look for is excitement and something new to try. Our NPD [new product development] pipeline is always full and currently, over 10% of all of our current sales are coming from newly developed [and] launched products,” Plarre revealed, adding that plant-based and gluten-free trends continue to deliver results for them.

“We know that Australians are looking for balance in their diet and a variety of breakfast, lunch or snack options that are suitable to their lifestyle. As a result, we are continuously creating fresh options that support a healthy and balanced diet for our customers,” Saxby said, adding their pies remain winter favorites.

For Brumby’s, their single serve sweet, single serve savoury, and hot products performed the best in FY21. 

“The old favourites like Lamingtons and Finger Buns have performed incredibly well, however consumers are also looking for exciting new products and we have seen all-new innovation also perform really well. Our bread category has also performed very well however the product mix remains very similar to the year prior with minimal shifts towards bread types,” the chain said.

IBISWorld’s latest report on bakery chains forecasts industry revenue to increase at an annualised 1.5% over the five years through 2025-26, to $3.7 billion.

Whilst rising consumer demand for artisanal breads and other high-value baked products is anticipated to support the industry over the period, the insights agency expects supermarkets' continued push into the general bread market will likely constrain industry activity. 

“In particular, independent and franchised bakeries are anticipated to struggle due to this trend, causing some small hot bread shops to exit the industry over the next five years,” Arna Richardson, IBISWorld senior industry analyst, said in the report.

Over the next five years, IBISWorld expects consumer demand for quality, freshness and variety to underpin sales of unpackaged, hand-crafted baked goods, including artisan-style breads and gourmet cakes and pies. 

“Rising health awareness is also expected to support further demand for wholemeal, seeded and functional health breads. Furthermore, the industry's structure is anticipated to evolve in line with rising external competitive pressures from instore supermarket bakeries,” Richardson added.