Dive Brief:

• Costco will sell packaged brioche and croissant rolls from San Francisco’s La Boulangerie in 12 northern California stores, according to Fortune.
• La Boulangerie, which operates six bakeries in and around the Bay Area, says it plans to expand to other retail stores in the near future. The company makes its products with cage-free eggs and non-GMO ingredients, and does not use artificial preservatives.
• In 2013 the bakery, then known as La Boulange, was sold to Starbucks. Founder Pascal Rigo worked with the coffee company to improve its food offerings. Two years later, Rigo bought the stores back and renamed them.

Dive Insight:

It might seem odd that a club retailer known for selling crates of diapers and tubs of ketchup would bring upscale baked goods into its stores. But Costco has always had a lively yet carefully curated product mix, and one that’s increasingly focused on freshness and quality. It sells more organic groceries than Whole Foods — or any other grocer for that matter — according to reports. It also sells everything from cosmetics to furniture and electronics, all frequently updated to give stores a “treasure hunt” feel.

This store-focused approach has paid off for Costco, which is seeing strong sales even as other retailers that sell much of the same merchandise are struggling. Same store sales for the company rose a robust 3% in the most recent quarter, and its shares are nearing record levels.

The partnership with La Boulangerie could further solidify Costco stores as a destination for shoppers. The bakery is much loved in the Bay Area, and founder Pascal Rigo has a lot of business savvy. Shortly after selling to Starbucks, the coffee company announced it would shutter all the bakery’s stores. “San Francisco collectively threw a tantrum,” is how Eater San Francisco put it. Rigo swooped in, bought the company back, and opened a 40,000-square foot factory to begin making its products en masse.

Bakeries and baked goods are also resonating with retail customers right now. According to Progressive Grocer’s Retail Bakery Review, nearly 70% of retail bakeries say their profits increased last year, up from the 53% that reported the same in 2015. According to Nielsen, the bakery category brings in $11.6 billion every year for grocers.

Although its store focus has been profitable, Costco lags behind its club competitors and the rest of the industry in e-commerce. Currently, just 4% of the retailer’s $119 billion in sales happen online. This is partly by design, since shipping bulk goods is expensive. “We want you to go into the store because you’re going to buy more,” CEO Richard Galanti said during a recent earnings call. But as Amazon and other retail competitors ramp up their e-commerce capabilities, the pressure is building on Costco to do the same.