Foodservice Bakeries Address A New Consumer

Dec 1, 2008 12:00 PM, by Matthew Reynolds, associate editor

Fast food and quick casual foodservice bakeries are gaining in new markets by paying attention and being creative

Lunch rush at Lee's Sandwiches

The competition for customers is as tough as it has ever been. Consumers naturally behave differently during a recession, as people are forced to prioritize their expenditures to receive the most out of every penny. Modern Baking's Top 50 Foodservice Bakeries, representing the largest chains in terms of units, are navigating this turbulent market by looking closely at their evolving customer base.

"People are having to make tough choices on where they spend their shrinking disposable income," says Kevin Schuk, vice president of Breadsmith, a Milwaukee-based bakery chain. "We have certain core customers that know about us and will continue to patronize our stores, but it's our challenge to find new customers and convince them to make the extra stop."

A recession produces a "trading down" effect. When given the choice, consumers tend to opt for goods and services that might be a rung or two below their normal station on the price ladder. While this is bad news for those on the top of the ladder, the middle rungs end up exposed to new customers who, despite the economy, are used to paying more for quality.

"We're getting a lot of customers that may be trading down from a white tablecloth experience," says Tom Gumpel, director of research and development at St. Louis-based Panera Bread Co. "We are enjoying a lot of extra new folks coming to the concept because of that."

Bakery cafes in the quick casual mould tend to enjoy a clientele that isn't price driven, which helps them retain customers they already have. Panera Bread Co. comfortably increased prices by up to 6.5 percent this year to mitigate volatile ingredients prices, but still posted increased profit margins and revenues.

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