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Take Bread to the Bank

By Jamie Hartford

Packaged bread is far from con­venience stores’ bread and but­ter. Last year, the category, which includes bread, buns, rolls, English muffins and bagels, ac­counted for just 0.38 percent of in-store sales and contributed less than $2,200 in gross profit dollars per store, accord­ing to NACS State of the Industry data. 

Yet, packaged bread products still have a place on the shelf in more than 96 percent of convenience stores. Despite the category’s lackluster sales, opera­tors continue to carry bread —in part as a convenience to customers.

"If you are servicing your local resi­dential community, it’s something you’re expected to have," said Hugh Large, president of Hugh Large & Associates, a convenience store consulting firm based in Toronto. 

"Hence the name c-store," added Neal Frandsen, category/procurement man­ager for Fas Mart/Shore Stop, a chain of more than 200 convenience stores on the East Coast. "Bread is one of those items customers associate with convenience stores. They come in for their milk, their bread, their gasoline. Whether it makes a lot of money or not, you want them to be able to come here rather than the grocery store to get what they need."

But operators don’t have to begrudge bread for not adding to the bottom line. There are ways to bring in dough with packaged bread.

A Missed Opportunity
Packaged bread is a consumer staple. Penetration for fresh bread across all re­tail outlets (including club, convenience, dollar, drug and grocery stores) is more than 97 percent, according to proprietary data from Hostess Brands, a wholesale baker whose brands include Wonder and Nature’s Pride bread products.

But Rich Alheidt, president of C-Store Design, a convenience store consul­tancy based in Jefferson Township, New Jersey, said the category is a missed opportunity for most operators.

"The things you really want to sink your teeth into in the convenience store busi­ness are things that people consume on a daily basis," Alheidt said. "Bread is part of [shoppers’] lifestyle. They have it every morning, every afternoon. The opportu­nity is there for people to take advantage of, but I haven’t seen anybody doing it."

Convenience stores, he said, have ceded the bread aisle to larger format re­tailers. In grocery stores, penetration for the product is 92 percent, according to Hostess Brands. In supercenters it’s nearly 50 percent, and in club stores it’s almost 20 percent. In convenience stores, however, penetration is just over 3 per­cent. Even other small-format retailers such as dollar and drug stores have better penetration rates, at around 9 percent and 5 percent respectively.

Convenience stores are making strides in the category, though. The number of buyers purchasing bread in convenience stores is up almost 42 percent, and total category sales are up more than a third —the highest jump among all retail outlets.

It’s a trend that could continue, said Rob Colarossi, vice president of category leadership for Hostess Brands. "With gas prices going up, folks are more inclined to make a quick trip for the top staple items when they are out," he said. "Con­venience fits this perfectly."

Carry the Right Products
Because of their small footprints, conve­nience stores can only carry a limited number of SKUs. But when it comes to selling bread, operators can’t skimp on the options. "Simply having a couple of loaves on a shelf to say you’re in the bread biz doesn’t work very well because€¦if you only have two or three loaves, [consum­ers] suspect that it isn’t fresh," Large said.

But bread has a limited shelf life, and suppliers can be hesitant to deliver prod­uct if a store’s volume isn’t high enough. That’s why it’s important for operators to think strategically about what pack­aged bread products they stock. Stats from market research provider Packaged Facts show that more than half of conve­nience store customers purchase whole-wheat bread, around 40 percent buy white bread, about a quarter buy multi­grain and 13 percent buy French or Ital­ian. For varieties such as potato, rye, pumpernickel and sourdough, the per­centage is less than 10.

Most consumers choose bread by type first, said Hostess Brands’ Colarossi, so he recommended that convenience stores carry the top-selling brands of each of the top-five bread types: white, wheat, multigrain, buns/rolls and breakfast breads.

Frandsen said Fas Mart/Shore Stop stores typically carry six types of bread products, king- and regular-sized loaves of white bread, wheat, multigrain and hot dog and hamburger buns. They stock both premium and value varieties from Flowers Foods, whose brands include Nature’s Own and Sunbeam, as well as Schmidt Bakery and Hostess Brands.

Price It Right
East Coast chain Tedeschi Food Shops’ stores typically carry eight types of pack­aged bread products: two sizes of white bread, wheat bread, Italian bread, ham­burger and hot dog buns, New England-style rolls and English muffins. The chain stocks national brands, but Category Manager Dan Powers said its private-label Tedeschi Select varieties lead sales in every subcategory. Tedeschi Select prod­ucts, launched in 2006, account for half of the stores’ bread sales, which, at around 1 percent of sales, are almost triple that of the average convenience store. 

Powers said Tedeschi promotes its private-label bread products by giving them prime real estate, at eye-level on the top two shelves. They also play up the price, which is competitive with grocery stores and can be $1 or more below the premium national brands carried in Te­deschi’s own stores. "We always sticker our bread with bright orange retail stick­ers to make the price point stand out," Powers said. "That way, the value jumps out compared to the national brand."

Frandsen said Fas Mart/Shore Stop has also seen success with value pric­ing. It offers Aunt Hannah’s bread at two for $2 as part of the Simple Savings program at participating locations.

But bread is often a planned purchase, and some consumers come to conve­nience stores not because they offer a good deal but because it’s quicker than a trip to the supermarket. For that reason, Colarossi discourages the use of bread products as loss leaders.

"Grocery stores are making about a 28 percent margin on bread, so a convenience store has got to make 30 or 35 percent," he said. "If you’re a dime or 20 cents higher [than the grocery store], most consumers are going to be okay with that."

Promote It Properly
One reason why convenience stores, in general, haven’t seen bread sales take off is because they don’t give the cate­gory the attention it deserves. While su­permarkets dedicate 30 to 40 feet of store space to the bread aisle, most con­venience stores reserve little more than four or five feet for the category. 

Alheidt said stores serious about selling bread should dedicate eight to 10 feet of wall space to packaged bread and related bakery-type products, including packaged snack cakes. "Putting 10 loaves of bread on an in-line shelf doesn’t represent a category," Alheidt said. "You need to incorporate all those things into a bread section and market it as a bakery department. A category is only good when it looks like a serious category."

The bread aisle, Alheidt said, should be graphically treated and promoted with signage to remind customers that it’s there. He and other experts suggest plac­ing packaged bread near other staple products, such as milk, eggs and butter. "In a convenience store setting, packaged bread is a destination," said Jeff Blalock, vice president of sales for Flowers Bakery. "For best results, bread products should be placed in the front of the store adjacent to groceries."

Operators committed to building bread sales should also ensure that their store looks like a place where a customer could feel confident buying food, he said. For starters, they could clear some space at the cash register. "With all of the junk on the counter —cigarette lighters and energy [shots] —there’s nothing there to say it’s a food store," Al­heidt said. "The customer needs space to put their items down."

With a little attention, packaged bread could become a winning category. 

Jamie Hartford is a freelance writer based in Los Angeles, California. Read her work online at jlhartford.com.