Top 50 foodservice bakeries: Redefining foodservice

January 18, 2012

Top 50

Top 50 foodservice bakeries: Redefining foodservice

Consumers continue to explore casual dining options at different dayparts, indicated by the continued expansion of the bakery café segment over recent years. The sluggish economy hasn’t deterred consumers from allowing themselves small treats, which is evolving to include specialty beverages.

The health food trend shows no sign of abating, which noticeably impacted donut shops, although Canton, Mass.-based Dunkin’ Donuts answered by expanding its menu offerings to maintain the number one spot. And a cupcake bakery jumped to number 38 on Modern Baking’s Top 50 Foodservice Bakeries list, demonstrating the trend’s staying power.

Bakery cafés stay strong

The bakery café segment, which accounts for $5 billion in annual sales and more than 3,600 units nationwide, continues to thrive in a persistently flat economy. According to Chicago-based research firm Technomic, the number of bakery cafés operating in the United States climbed 4.2 percent during the past three years, while sales at those units rose 12 percent, outpacing the overall foodservice industry during the same period.

A survey of more than 1,500 consumers by Technomic this fall found that 71 percent have visited a bakery café, with nearly 75 percent saying they visit one at least once a month. One-third of the survey respondents haven’t visited a bakery café, mainly because of inconvenient location and unfamiliarity.

“This is a segment that continues to grow and steal business from full service,” says Darren Tristano, executive vice president of Technomic, adding that breakfast will become increasingly important for the category in the coming years. “Breakfast is a very underpenetrated daypart because people skip it or eat at home. But younger generations have a higher frequency of dining out, and as they grow up, we will see greater frequency, more penetration at breakfast and greater sales growth.”

The success of the bakery café format can be seen in segment-leading Panera Bread, Richmond Heights, Mo., which has opened 73 locations in the past year to reach 1,453 units. The company has 110 additional outposts planned for 2012. According to the Technomic survey, consumers continue to frequent Panera the most, as seven in 10 purchase food from the chain at least occasionally, with 69 percent of that subset going at least once a month.

The segment’s growth hasn’t translated to expansion for everybody, however. Although Atlanta Bread Co., Smyrna, Ga., was one of the fastest-growing franchises in the late 1990s, it has shuttered more than half its locations in the past year.

“It has been a strategic initiative to let stores close,” says CEO Jerry Couvaras, adding that same-store sales have been positive the past 24 months. “We had a choice some time ago and made a strategic decision that we would rather be strong and smaller rather than have a dirty little café on every street corner. Unfortunately, it affects the brand because you are culling the system slowly. But it looks like you are on a shutdown path.” He attributes the wave of closures mainly to real estate and operator issues.

A recent Atlanta Journal-Constitution article found that half of the 66 U.S. Small Business Administration-backed loans (worth a total of $32.8 million) made to Atlanta Bread franchisees since 2001 have failed.

“We have spent a lot of time reimaging, and a lot of time on real estate. We’ve opened our own stores and taken over some from other operators. We are a lot more possessive over who operates stores now, having made a concerted effort to look at what it takes,” Couvaras adds. “The coming year will be a miniscule amount–maybe one or two stores closing. We will open six to nine locations in different parts of the country next year. We’ll be doing a lot of company stores. And we have franchise locations that are being sold.”

Revamping the consumer experience

Atlanta Bread is one of many bakery café chains looking to reconcept its store layout to improve efficiency and overall customer experience. Chains also are adding menu items that emphasize artisan bread, locally sourced ingredients and wholesome items.

“We brought in banquette seating, curved walls, high and low seating,” Couvaras says. “If you walk into one of our 4,000-sq.-ft. stores, there is a lot of demarcation. We wanted to make it cool, funky and eclectic, where people could spend more time, rather than tables from one wall to the other.”

Atlanta Bread implemented an all-day menu, adding items like a turkey lingonberry sandwich on focaccia, pizza (made from its focaccia dough) and made-to-order omelets and upgrading its muffin formula, with plans for additional whole grain varieties.

“In the old days, lunch was huge and breakfast was good. Dinner was nonexistent,” Couvaras says. “Today we have stretched the day. Cafés have introduced continuous service where people feel comfortable in the morning having soup or an omelet of the afternoon. We serve our entire menu all day to make people feel comfortable.”

Cinnabon has increased its focus on portable treats with products like Center of the Roll, which was originated by a franchisee.
Boston-based Au Bon Pain in June launched a chain-wide café remodeling to make shopping more efficient and freshen the store’s look. The soup bar was moved further away from the sandwich station to relieve lunchtime congestion.

“The genesis of that was refreshing the café to try to bring a new energy into our place but also to improve guest flow,” says Ed Frechette, senior vice president of marketing. “Unlike quick serve, in our concept you pay on the way out so you shop the floor. The exercise with refreshing cafés was to reevaluate flow.”

Additionally, Au Bon Pain is expanding bakery and made-to-order sandwiches to remain distinctive in the increasingly crowded market.

“We are looking to update products and innovate, and we are really innovating in bakery,” Frechette says. Last year, the chain upgraded its croissant formula and introduced cupcakes including French vanilla, red velvet and double chocolate. It also launched toursades, 1-in. strips of its croissant dough sandwiched with French cream, twisted together and rolled in sugar. Chocolate mocha and chai spice whoopie pies also joined the bakery offerings. The chain is expanding its savory offerings as well, with a grilled chicken avocado sandwich and Cobb salad with avocado being added this year.

“Our top two categories are baked goods and sandwiches,” Frechette says. “We have evolved over time, but baked goods are still core to the brand. Since the health trend is here to stay, our chef is looking to reduce the sodium level of the bread. We also want to offer more vegan and vegetarian options in the coming year.”

Atlanta-baesd Cinnabon, traditionally known for its cinnamon rolls, also has found success in the burgeoning bakery café segment. Locations are either 600-sq.-ft. full bakery cafés or 200-sq.-ft. Cinnabon Express units. According to president Kat Cole, the company plans to open more than 20 full bakery café locations and 200 express units in 2012, with plans for remodeling all the stores for a more contemporary look.

In response to consumers’ growing concerns about healthful eating, the company has taken a long, hard look at its core product: the 800-calorie classic Cinnabon.

“Strategically we had a decision to make. Do we go down this path of trying to make a light Cinnabon?” Cole says. “There is only one way to take calories out of fresh baked product and that is to add something not natural. I could make a 400-calorie Cinnabon but it would be riddled with preservatives. Where we are headed is keeping the same high quality ingredients but get at it through portion size and allow people to enjoy it responsibly. This allows them to keep nutrition goals but still treat themselves with a best-in-class treat.”

The chain is looking to make its products more portable with launches like its Center of the Roll chopped in a cup and Cinnabon Bites, pastry dough rolled in cinnamon sugar. It is using the Cinnabon dough as the base for egg, ham and turkey sandwiches. Additionally, it is looking to expand the number of ambient products for the pastry case such as Danish, which has a longer shelf life and is less sweet than the cinnamon roll.

Coffees, teas and coolattas

Foodservice bakeries across the board are focusing more attention than ever on specialty beverages and coffee.

“While older consumers tend to go for standard coffee, the younger generations are looking for more gourmet, specialty coffee, which means a higher price point and more sales to that area,” Technomic’s Tristano says.

“Starbucks has trained the consumer to consider coffee treats with a straw as a snack,” Cole says. “Our line of beverages–the Mochalatta Chills and Chillatas–has a renewed popularity. And while we’re not going to try to be Starbucks, we are working toward a better quality and consistently offered cup of coffee and line of drinks so people don’t have to go elsewhere for their coffee drink, which goes so well with our pastry. I think the coffee program is a big part of where we are going.”

Dunkin’ Donuts has moved beyond its signature coffee to offer blended coffee and fruit Coolattas, along with cappuccinos, espressos and hot and iced lattes.

Atlanta Bread now offers flavored coffee beverages, and this year inked an agreement with Lavazza to carry its coffees in all of its stores. The company also recently converted all its stores to Mighty Leaf Teas. “Our tea and coffee sales are through the roof,” Couvaras says.

Economy, health trend tough on donuts

The past few years haven’t been especially kind to the donut category. According to data from IBISWorld, Los Angeles, donut stores experienced a significant slowdown in business due to both the lingering recession and changing consumer tastes. The trend toward healthful eating has seen consumers becoming more aware of the detrimental effects of eating fatty, sugary foods.

To combat slumping sales major operators, such as Dunkin’ Donuts and Krispy Kreme, have launched lower-calorie, more substantial items like breakfast sandwiches. In 2008, Dunkin’ introduced two flatbread sandwiches made with egg whites. This year, the chain introduced a limited-edition Smokehouse Sausage breakfast sandwich, featuring a toasted English muffin stacked with egg, melted American cheese and split sausage; and the Big ‘N Toasty breakfast sandwich, which comprises two peppered fried eggs, four slices of bacon and melted American cheese on Texas toast.

“We realize that people on the go at times crave heartier foods to start their day,” said John Costello, chief global customer and marketing officer at Dunkin’ Donuts, in a press release. “With the Big ‘N Toasty breakfast sandwich, Dunkin’ Donuts can satisfy even the biggest appetites with a fulfilling, portable breakfast at an affordable price.”

Dunkin’ Donuts continues to grow, with sales topping $6 billion in 2011 and aggressive expansion efforts planned in Washington, D.C., and Louisiana through 2020.

The year of the cupcake…again

The cupcake craze continues to surprise even the most hardened of skeptics (some Modern Baking editors included), as consumer demand showed no sign of slowing this year. According to a report from IBISWorld, specialty cupcakes have been a significant growth segment for the cake industry, helping it achieve consistent revenue growth over the past five years.

And the cupcake proved to be fairly recession-proof, according to IBISWorld. During 2008 and 2009, industry revenue climbed 6.4 percent and 2.4 percent, respectively, as consumers continued to buy inexpensive, small serving luxuries like cupcakes, while larger items like wedding cakes were on the decline.

The country’s largest cupcake chain, New York-based Crumbs Bake Shop, reached $8.9 million in sales this year. The chain aims to reach 200 stores by the end of 2014 and already is set to open in two new markets in 2012–Philadelphia and Boston–and has a second confirmed location planned for Chicago. Crumbs went public early this year through a $66 million merger with 57th Street General Acquisition Corp. to help finance its ambitious expansion plans.

Crumbs appeared on the scene in 2003, about the same time a wave of cupcake shops were popping up all over the country, including New York-based Magnolia Bakery (credited with launching the craze), Los Angeles-based Sprinkles and Washington, D.C.’s Georgetown Cupcake. Market share concentration is expected to increase over the next five years, as cupcake-only stores expand to less saturated regions, according to IBISWorld. Sprinkles, for one, already has plans to open locations in Las Vegas, Boston and Seattle. And despite persistent rumors of the “bursting of the cupcake bubble,” Crumbs maintains that cupcakes are more just than a fad, as owner Jason Bauer insisted to the New York Times around the time of the 57th Street merger.

“I’ve been in this business for eight years, and we’ve grown it every year,” he said. “If I had a nickel for every time someone asked me if cupcakes were a fad, I wouldn’t need to do this deal.”

Technomic’s Tristano says the lines dividing the various foodservice bakery segments will continue to blur as categories offer more variety and lengthen the day to steal business from full service.

“If you were to take a look at coffee, snack (Dunkin’ Donuts and Krispy Kreme) and bakery cafés, we are starting to see them merge into one category I would almost call cafés.” MB

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