The U.S. and overall global economies have taken a beating of late. And one of the biggest tangible results of our economic struggles has manifested in increased consumer prices, which the U.S. government reported were 4.9% higher in April 2023 compared to a year ago. And food is taking a bigger hit. When it comes specifically to food, prices were up a whopping 7.7%.

In a climate of higher prices, consumers have generally responded with decreased spending. So while we saw widespread dollar sales increases for 2023, those increased price points directly reflect the higher cost inputs bakeries have endured. We’ve seen cost inputs from ingredients like eggs, butter, and grain spike over the past year, spurred by inflation, avian flu, drought, energy costs, ongoing supply-chain struggles, and the prolonged war in Ukraine, just to name a few of the culprits. While some of these variables have moderated, the outlook for others—like grain—is still uncertain.

Nevertheless, we continue to identify product categories that show promise of incremental growth, with increasing unit sales as a primary indicator of consumer preferences. These are some of the categories to analyze as targets for potential expansion and ongoing shopper engagement.

The perimeter of the store has seen some good returns over the past year, with baked goods like buns and rolls, tortillas and flatbreads, specialty desserts, and doughnuts seeing good unit sales traction. Perimeter specialty desserts put in a particularly strong year on the perimeter of the store, with unit sales up a nice 20.4%, while perimeter tortillas saw unit prices grow by 17.1%. Private label often stars as the leading player in the perimeter, so bakeries working with retailers on those selections saw some increases over the past year. Private label is often positioned as a budget-friendly option, so it builds momentum in tough economic times. But there’s a prevailing perception of freshness and authenticity that is also driving consumers to the perimeter of the store.

Much like the namesake journeys of our elementary school days, a field trip for a trade journalist is an opportunity to stretch your legs, go someplace new, and learn. When Kemin Industries, Des Moines, IA, extended an invitation to a select group of food industry reporters to visit its Bakery Innovation Center (BIC) at their headquarters, I happily accepted—in small part for a change of scenery, but mostly because in-person learning opportunities have been in short supply since the start of the pandemic.

During the visit, the other journalists (including my BNP Media colleague Prepared Foods Chief Editor Bob Garrison) and I used all five senses in our tour of the BIC, a 2,300-square-foot facility equipped with an analytical lab, pilot-scale production equipment, and other features. We got to see the BIC staff in action, hear them explain the various services they offer tortilla and baked-good customers, get our hands on corn tortillas as we mixed and baked them in preparation for testing, smell the aroma of the cooking disks, and taste the fruits of our labor. Then, we got to put fresh-made tortillas through a number of tests. According to Marketing Director Courtney Schwartz, Kemin customers are invited to visit the BIC and share in these experiences.

Source: Circana, Total U.S. Multi Outlet w/ C-Store (Grocery, Drug, Mass Market, Convenience, Military and Select Club & Dollar Retailers), 52 Weeks ending March 23, 2023

Center-store bakery also offered some highlights over the past year. Some of this activity is due to continued category diversification, with specialized areas like panini, ciabatta, and focaccia gaining ground, mainly in private label. Bagels also continue to show traction. Private label bagels had a strong year, with unit sales up 8.8% for the year. Flowers Foods also got in on the action with its bagel business growing by 6.6% in unit sales.

During challenging times, we often see treat sales spike, and center-store cookie sales were a bright spot over the past year. McKee Foods was a leader in that category, with its center-store traditional cookies growing by 3.1% in unit sales and its iced/frosted cookie sales accelerating with 21.8% in unit sales growth.

Analysts are beginning to forecast an improved economic outlook for the U.S., Europe, and China, but growth will likely prove slow over the coming year. In such an environment, it will pay to control costs whenever possible while identifying new areas of category white space for potential growth to align with ongoing and emerging consumer preferences. SF&WB