Dive Brief:

• The bakery department is one of the biggest draws for in-store grocery trips, bringing shoppers into the store nearly once a week, according to the inaugural Power of Bakery report from the Food Marketing Institute and the American Baker's Association.
• Total bread and baked goods sales surpassed $59 billion in 2018, accounting for sales in fresh bakery departments, grocery, frozen and dairy departments. In-store bakery department sales reached $13.8 billion, primarily driven by desserts, sweets and cookies.
• About 60% of shoppers purchase functional bakery items from both grocery aisles and in-store bakeries, while for indulgent items and desserts, 39% of shoppers buy exclusively from the in-store bakery. 

Dive Insight:

From fresh bread and tortillas to cookies, muffins or an abundance of other baked goods, grocery stores are a clear destination for their bakery offerings. With most households going to the store almost every week to buy bakery items, grocery companies have an ongoing opportunity to win with their customers and innovate through what they offer — and the ability to drive bigger basket sales overall.

According to the report, "functional" items are bread, buns and rolls, while indulgent items are desserts such as donuts, cupcakes, cookies and pies. Special occasion items include birthday cakes or cupcakes. Other items that are fall into bakery include granola bars, cereal and crackers.

Well-stocked bread and cereal aisles are essential for shoppers. In the grocery department, bread is the top seller at $8.5 billion in sales in 2018, followed by cookies, crackers and sweet snacks, with sales between $6.5 and $6.7 billion. This signifies the ongoing need that customers have for food staples and snack items, and retailers should pay close attention to their assortments in these categories to ensure that the products are meeting their customers' tastes.

In-store bakeries attract attention and drive indulgence. While shoppers purchase bakery items across the store, they primarily turn to their in-store bakeries for desserts and special occasions. Indulgent items make up 76% of total sales for in-store bakeries, and desserts specifically generated annual sales of $5.4 billion, or 40% of department sales, in 2018, the report found.

Fresh, from-scratch bakeries in particular have become a popular feature in grocery as companies remodel stores or open new locations. Grocers such as Albertsons, Whole Foods, and Stew Leonard's have all added upscale bakeries to new stores recently, which will continue to attract shoppers.

In-store bakeries face competition outside the store, however. About 37% of shoppers purchase indulgent bakery items somewhere else, such as a specialty store or stand-alone bakery, and only 40% of people purchase special occasion items, such as birthday cupcakes, at their primary store.

Based on the Power of Bakery report, it will remain important for retailers to have a solid assortment of functional bakery items in their grocery aisles — which continue to be routine purchases for shoppers — while still offering enticing in-store bakery cases.

Despite the frequent purchase of bakery items, consumption is moderate. About six in 10 households eat functional items just three days a week, while 41 percent of shoppers eat indulgent items or desserts less than once a week.