Every year poses its share of market challenges to companies operating in the snack and bakery market—a vital economic sector, which at retail alone accounts for over $100 billion in annual US sales.
But our current era presents myriad unprecedented obstacles. The ongoing global COVID-19 pandemic has drastically altered how Americans work. The home office is the new normal for an increasing percentage of employees, thereby reducing, or eliminating, morning and evening commutes—and the typical meal replacements and/or snacks that accented those times. Fewer people are out and about—particularly in sensitive geographical areas with high population density, like our major metropolitan areas. These factors change how Americans interact with foodservice across every daypart. The pandemic has also catalyzed more nutritional self-reflection in American consumers—perspectives that will factor into product purchase decision-making.
And then there’s the supply chain. We have seen variables related to workforce development pose significant obstacles to snack and bakery companies for several years—a situation further exacerbated by the pandemic. Factors at any point along the food chain can contribute to supply-chain gaps, often culminating in periodically empty store shelves.
But the industry perseveres. And we have much to consider as we enter 2022 on a mission to meet consumers where they are in the newly forming and shifting parameters of American—and global—society.
Societal shifts
“At-home occasions continue to drive elevated sales and consumption vs 2019 for many categories. Hybrid working models have had the largest impact driving this trend,” says Sally Lyons Wyatt, executive vice president and practice leader, IRI, Chicago.
“The evolution of hybrid working models coupled with migrations to more suburban vs. urban areas are the largest drivers of change for bakery and snacking occasions,” says Lyons Wyatt. Noteworthy dynamics include:
• Suburban households have bigger pantries and account for larger baskets in the store
• With the demands of working at home, we have seen an increase in demand for convenience at home (e.g., meal bars)
• Multipacks continue to gain in sales and consumption
• Snack and bakery categories continue to expand online, as e-grocery captures more food purchases
• Variety-seekers purchase not only packaged bakery items, but also those found in the in-store bakery (ISB), permitting customization for special occasions or even everyday celebrations
The industry continues to grapple with workforce and labor issues, weak links that market sectors like the ISB will seek to mitigate. Therefore, “labor-light” options will be in greater demand during 2022, reasons Heather Davis, senior manager of customer insights, Bimbo Bakehouse, Horsham, PA. “Driven by ongoing labor challenges and employee turnover, ISBs are seeking quality, turnkey products that also require less labor.” One example would be bulk and retail-ready thaw-and-serve products that are convenient and easy-to-prep, she suggests.
Over the past few years—and particularly during the early days of the COVID-19 pandemic—more people were experimenting with baking at home. “The well-documented explosion in home-baking—on both sides of the pond—at the start of the pandemic will see well-practiced home bakers graduate from staples like loaves of bread and sourdough and add more indulgent and fun treats to their baking repertoires,” says Paul Baker, founder, St Pierre Bakery, Manchester, England.
This pandemic-fueled re-emergence of home baking helps drive more at-large interest in higher-quality baked goods in retail and foodservice. Passionate adventures into home baking cultivate greater appreciation for the effort and art required to consistently create quality baked goods, variables that could factor into future purchase decisions.
The transformative power of food
Perhaps in the absence of their usual patterns of leisure travel, people will seek adventure through creative snack flavors. “Intense flavors will be a theme in 2022,” says Lyons Wyatt. “The bolder the better, but this doesn’t have to be just spicy. We have seen some bold-sweet combinations, too,” she says.
“One flavor that has grown rapidly this past year is everything bagel seasoning,” says Davis, a flavor option with potential in the ISB. “Sourdough also continues to skyrocket in popularity among consumers.” Take-and-bake options sold via the ISB continue to prove popular with consumers, says Davis.
“It’s likely that as the pandemic continues, global travel will remain limited,” says Baker. “Consumers whose palates have become more adventurous during the course of the COVID-19 crisis will start to explore overseas flavors in different sectors.”
But people always retain a love of the classics. “Nostalgic flavors are here to stay,” says Baker. “What started as a COVID-related craving for comfort and familiarity now seems to be established as a trend to watch. In fact, Mintel recently revealed that 72% of US consumers claim to enjoy products that remind them of their childhood,” he says.
Baker cites St Pierre research from November 2021 that supports this return to familiarity. St Pierre’s research shows 38% of people believe sharing food brings people together, and two in five said food traditions have been passed down through their family. “Foods often bring back nostalgic experiences, such as eating with family or friends, trying new cuisines for the first time, going on a first date, or being on vacation or in a different city. Often, the best feel-good moment comes from a simple home-cooked meal or baked treat, and we can all relate to that,” he says.
For 33% of those polled, notes Baker, sharing food is key to their family dynamic, while 35% state that food is at the heart of every family occasion. “Sharing food” is seen as a way to bring people together for 38% of those surveyed. Results also showed Americans typically have four conversations a day about food, notes Baker.
“The poll also asked respondents what it was that stood out about food in fond memories,” says Baker. “Whilst 58% said the taste, and 52% the smell, almost half (43%) said that preparing the food with their loved ones was key to making the memory stand out. That’s why the idea of ‘nostalgia’ as a trend is such a powerful way to engage shoppers.”
Product dynamics
Our homebound culture creates new product opportunities. “The rise in ‘party platters’ will continue, and there’s an opportunity for businesses like ours to gain new shoppers as they look for items that can be ‘decorated’ for celebrations at home,” says Baker.
More consumers are also looking to recreate their favorite coffee shop experiences in the comfort of their own home, says Davis. “With that, we’ve seen an increase in consumers purchasing ISB items like croissants.”
The desire for grab-and-go items has also grown, notes Davis. “With convenience and safety top of mind, it’s important to find the quickest, most-effective ways to keep these items fresh and accessible.” To that end, she notes Bimbo Bakehouse offers flow wrap packaging options for individually wrapped grab-and-go items, which helps to simplify operations while meeting consumer needs, especially for the ISB.
In foodservice, ordering ahead has grown in popularity—a trend that will likely continue, suggests Davis. “Operators are learning how to manage a new balance of receiving orders both online and in person.”
Therefore, bakeries have more opportunities to work with operators to facilitate more back-of-house flexibility.
“Portable options also continue to grow in popularity as we adopt a ‘new normal,’” says Davis. “Operators have been adding both takeout and curbside pickup options, as well as items that can easily be consumed on-the-go. With that, it’s key to offer rolls and buns that hold up during transport.”
In foodservice, Davis notes an ongoing re-emergence of classics like brioche buns, which she notes is one of the fastest-growing carriers for burgers and chicken sandwiches.
Baker says internet searches for enriched doughs such as brioche are up 457%. He notes more shoppers are embracing new flavors, and St Pierre has plans for 2022 to continue providing an elevated “experience” for shoppers, with premium in-store displays.
Product size preferences can also influence purchase decisions. “Where snack and bakery items are being consumed, we have seen a drive on ‘mixed bag’ sizes,” says Lyons Wyatt. Other packaging variables are driving growth. “Categories like potato chips, tortilla chips, and cookies are seeing smaller-size dollar trends outpace larger-size.”
Then there are categories where both large and small packages are growing in double digits like in other salted snacks.” One of the drivers for increased other salted snacks sales is multi-packs, notes Lyons Wyatt. Multi-packs have done well for many reasons, she notes, including portion control, the convenience of single-use, better flavor variety, etc. “Consumers have gravitated to multipacks, because there is something for everyone in the home,” she says.
Lyons Wyatt notes in categories, smaller sizes have not rebounded to pre-pandemic levels, like in snack bars and pretzels.
Where consumers shop factors into the equation, too. “Channel trends will continue with mass, club, online, and convenience driving most of the growth,” says Lyons Wyatt. “These channels provide value—which is not only price—and convenience to consumers.”
Looking ahead
Economic variables always factor strongly into the retail climate—and the current economic situation remains tenuous. “The reduction of government stimulus will likely reduce growth from low-income consumers,” says Lyons Wyatt. However, some demographics might factor more strongly into retail patters in the coming year. “With younger consumers becoming more mobile, including Gen X being more mobile with vaccine availability for young children, we will see some shifts in shopping and consumption,” she notes.
“The economic situation, labor shortages, and supply chain will be the top challenges that will impact 2022 sales,” says Lyons Wyatt. “The rise in the price of ingredients, including commodity ingredients, has resulted in increased prices across snack and bakery categories. We have begun to see many high inflation categories realize private label and mainstream share growth. Labor shortages have impacted transportation, manufacturing, in-store, and other aspects of ensuring products are available for consumer purchase. We have predicted that the supply chain shortages will continue through the first half of 2022, but should improve throughout the year.”
Lyons Wyatt notes several ideas for consideration to persevere through these obstacles:
• Suburban households have bigger pantries and account for larger baskets in the store
• With the demands of working at home, we have seen an increase in demand for convenience at home (e.g., meal bars)
• Multipacks continue to gain in sales and consumption
• Snack and bakery categories continue to expand online, as e-grocery captures more food purchases
• Variety-seekers purchase not only packaged bakery items, but also those found in the in-store bakery (ISB), permitting customization for special occasions or even everyday celebrations
“The impact of COVID-19 will continue to play out—especially as we head into 2022 with renewed uncertainty,” says Baker. “The pandemic has had significant impact on global trading, and data now suggests that 83% of shoppers are aware of and concerned about the widespread inflation. The reaction to this is to stock-up, and shoppers will continue to do so whilst uncertainty remains.” This brings value to products with a longer shelf-life, he suggests.
“The other impact of the pandemic was to cause a huge move to online shopping and reduce time spent in stores,” says Baker. “Retailers have been implementing more eye-catching displays and experimenting with cross-merchandising in order to engage shoppers as footfall began to return to stores. With new variants leaving shoppers unsure, retailers will need to continue this work to create ‘an experience’ for shoppers that entices them back.”
When St Pierre introduced its innovative Eiffel Tower displays in stores, the company increased sales by 58%, notes Baker. “Clearly there is value in finding new ways to engage consumers.” He also points to opportunities for branded cross-merchandising opportunities for retailers to maximize shopper engagement.
But there is cause for continued optimism related to consumer shopping behavior. “Another point worth mentioning is consumer ‘fatigue’ around the pandemic,” says Baker. “Despite 33% of consumers claiming to still be ‘extremely concerned’ about COVID, Thanksgiving sales were hardly dampened. When comparing bakery sales between November 2021 and 2019, total bakery grew by 13%. Early sales figures from Christmas showed that most Americans planned to celebrate as normal. So, whilst there is significant concern amongst shoppers as they continue to navigate the pandemic in 2022, the true impact on their shopping habits remains to be seen.”
