Sales trends in bread over the past year remained soft, as affirmed in scanner data covering most major retail channels. While concerned about the lack of growth in the baking industry’s core product, bakers representing the major chain, independent and specialty baking segments in interviews shared a more nuanced picture of the overall health of the bread business.

Center store bread sales in the 52 weeks ended Sept. 8 totaled $10.9 billion, up 0.6% from a year earlier, according to data from Chicago-based market research firm Circana covering supermarket, drug, mass market, military, convenience and select club, dollar, beauty and online retailers. Unit volume totaled 3.2 billion over the period, down 1.3%. The price per unit for bread over the past year was $3.43, up 1.7%. The average price increase was far more modest than the 13% jump indicated a year earlier and 11% in the year ended September 2022.

Trends were better in the buns and rolls category, with dollar sales up 2.3%, at $6.1 billion, and unit sales up 0.1%, at 1.9 billion. The price per unit for buns and rolls climbed 2.2%, to $3.27.

While acknowledging weakness in sales volume overall, bakers emphasized both opportunities for growth in certain niches and that many of the factors pressuring business over the past two years, including severe labor shortages and surging ingredient prices, had eased meaningfully.

Successful year at Pan-o-Gold

Even as the company navigates a variety of challenges in the dynamic baking sector, Pan-O-Gold Baking Co. is finding success, said Howard R. (Robin) Alton III, president and chief executive officer of the St. Cloud, Minn.-based business.

“Honestly, last year was a really good year for Pan-O-Gold,” Alton said of the company’s 2024 fiscal year ended Aug. 31. “That was mostly due to labor market softening. It’s the same reason the Federal Reserve just lowered interest rates by half a percentage point, because they saw unemployment up to 4.2%. That has allowed bakeries to hire and keep people. Our staffing was so improved in the last 52 weeks over the last two years, where we really struggled with everything from mixing dough to finding people to deliver the bread.”

An improved labor market was not the only tailwind helping Pan-O-Gold over the last year.

“We saw ingredient costs come down substantially,” Alton said.

Pan-O-Gold also benefited when price hikes the company began implementing in 2023 took effect more broadly.

“It’s always lagging,” he said. “When costs are rising, we’re trying to raise prices on our products. It’s slow to come. It’s a lot of contracts, a lot of pushback from customers. It’s difficult. All of those things improved last year, and we were able to catch up on pricing. We had a good year. We were able to take some market share.”

Asked whether the market share gains reflected Pan-O-Gold’s ability to operate closer to capacity because of its improved labor situation, Alton said the company managed to produce needed volume levels even when it was unable to find as many workers as sought.

“We struggled to produce it, but it was more in producing all the SKUs (stock-keeping units), everything the consumer was looking for,” he said. “No one went without bread. You struggled to produce, but somehow we managed to supply the marketplace. The consumer maybe didn’t get their favorite product, but they got product.”

He said a residual change from this period is that supermarkets have become more tolerant of product holes on shelves.

“It’s throughout the store, whether aspirin, shampoo or the bread rack,” he said. “They used to insist on full shelves — one major customer wanted it full at 5 at night.”

Over the course of the year, Pan-O-Gold saw considerable variation in its business trends by channel. The supermarket business was soft, Alton said.

“Our good year wasn’t because of things improving everywhere,” he said. “Where we’re having a harder time is in traditional grocery stores.

“Big-box retailers are doing very good; club stores are doing very good. Traditional supermarkets, a lot of the big chains, they are having a hard time maintaining the sales because of food inflation. Consumers are definitely watching the dollars, changing their buying patterns. They are trading down, to big-box retailers, where we do a lot of business. They also are trading down to Aldi’s. We don’t do business with Aldi’s. It hurts our main customers.”

While convenience store traffic has softened in recent months, Alton said one regional chain just completed the construction of a large baking plant in Pan-O-Gold’s geographic market.

“They sell their product at a very good price,” he said. “It’s a loss leader for them to bring traffic into their convenience store. They are selling a lot of product. If they’re baking and delivering it, it’s business we’re not getting. Consumers only need so much bread. We are seeing shifts in the marketplace. I don’t necessarily agree that consumers are buying less bread. I read the statistics of how much flour is milled. I’m not sure that much less bread is being consumed. There are changes with the growth of gluten-free and other fringe products, but all and all, it’s hard to get your arms around it.

“You’ve written about Ozempic, what that might have to do with consumers purchasing habits. I agree that, at the moment, its effects are on the lower end of what people are estimating — as much as 6%. I think that’s way out of line. I’m more in the 1.5% camp. It could become a lot bigger as time goes on.”

While Pan-O-Gold has seen shifts in the channels from which its bread is being purchased, the company’s product line mix has not been altered dramatically with consumer buying habits. The company’s top stock-keeping units are the same as five years ago.

Bread made from enriched flour remains front and center, with variations on a white bread theme, Alton said.

“We consider ourselves a variety bread baker,” he said. “We sell sandwich bread, which is a white bread. We have our Kids Choice. It’s a white bread, private label, Texas toast. It’s a white bread. We sell muffin bread, it’s a white bread. Italian bread, sourdough, it’s a white bread. A lot of white bread is still consumed.”

The market share held by private label, a significant business for Pan-O-Gold, has not changed dramatically over the past year, Alton said.

“Private label is not a much bigger part of the market,” he said. “You’d think it would be. You’d think consumers would be trading down. For a decade it was going down 6% year after year, down, down, down. Now, it has ticked up a little bit. Not a lot.”

Zingerman’s trends vary

For Zingerman’s Bakehouse, a retail and wholesale baker based in Ann Arbor, Mich., business over the past year varied by channel. While the company’s retail business flourished, its supermarket business hit speed bumps, said Amy Emberling, managing partner. Mail order business has flattened below peak levels that occurred during the COVID-19 pandemic. Meanwhile, she said, institutional foodservice business has been strong, while demand from restaurants has continued a downward trend dating back decades.

Zingerman’s product line includes artisan bread that retails for $5.99 to $7.99 for standard loaves and $12.99 for specialty loaves, and coffee cakes and babkas sell in the high teens, Emberling said.

“We have some very big grocery customers, and they definitely either plateaued or decreased,” she said. “I think this has to do with inflation. The supermarkets started offering less expensive brands to try to capture consumers who are now more closely watching their grocery budget because of price increases across the board.

“Our own shop, at our bakery, which is in an industrial park, has become even more of a destination as the neighborhood has grown. We have been open for 28 years and have seen double-digit growth in the last four years. It’s great for us, but a little surprising after all this time. People are coming to us, I believe, because they trust us on the quality and the service. People get taken care of well.”

Similar variations were noted in other channels.

“In this part of Michigan (southeastern), there are more and more restaurants,” Emberling said. “Detroit is definitely revitalized, and restaurants are a big part of it. Unfortunately, restaurants aren’t buying much bread anymore, and they tend make their own desserts. Our sales to restaurants compared to the late ’90s and early 2000s are very minimal. I rarely think about them as a promising sales channel.”

Institutional business growth has been fueled by business customers, including Ford Motor Co., which has been a growing customer for the automaker’s production plants and corporate offices, Emberling said.

“They buy a lot of morning pastries and afternoon desserts for embedded cafes and some bread for their cafeterias,” she said.

Mail order business remains about 25% above pre-COVID levels but 15% or so below pandemic peaks.

The shape of Zingerman’s product lineup has not changed much since before the pandemic, with notable exceptions, Emberling said. For instance, sales of brownies — once a staple — have been falling steadily.

“We used to be known for brownies,” she said. “Now it’s not so interesting, even made with great ingredients. You can get a good brownie more easily now.”

In bread, the popularity of sourdough grew sharply during the pandemic and has remained strong.

“Our No. 1 bread used to be rustic Italian,” Emberling said. “It has a pre-ferment, but it isn’t sourdough. It was a great starter bread for people who wanted artisan bread. Now we sell much less of that, and in our own shop we sell dozens of loaves of pure San Francisco-style sourdough every day. We bake hundreds of loaves daily.”

Ingredient costs and food safety/allergens have been sources of anxiety at Zingerman’s over the past year.

“The cost of eggs, sugar and butter is up and has never come down, and chocolate just went crazy,” she said. “All of these increases at once are difficult for us, but we are trying to manage. The other challenge is all the food safety rules and allergen management.”

Zingerman’s has taken steps to mitigate the effects of the cost increases, but the company’s options are limited, Emberling said.

“We tried to pre-buy as much as possible at the current pricing levels,” she said of chocolate purchases. “We put price increases in.”

In one instance, the company negotiated a lower rate for 2024 from a supplier of chocolate while committing to continue purchasing in 2025 at an increased price. One product with chocolate in the formulation was discontinued because of the high cost of the ingredients.

“We put a product on vacation,” Emberling said.

The company also has taken steps to ease the difficulties associated with allergens.

“We just went through the product line and took allergens out of formulations where the ingredient wasn’t making a big difference to flavor, to reduce some of the complexity of our production work,” she said. “We aren’t a big plant where you have a line that makes 10,000 cases of one item at a time. We go back and forth between small batches of things. There is a lot of changing of plastic aprons, gloves and sanitizing areas — it causes a considerable expense to do that over and over again every day. Anything we could take allergens out of, mainly nuts, we did.”

Zingerman’s continues to offer sesame in its bread bakery on bagels and two bread varieties but doesn’t use sesame seeds (named a major allergen in 2021 by the Food and Drug Administration) in its pastry kitchen at all. While the company offers a bread coated with sesame seeds, Emberling said the number of days it is baked each week has been reduced — and then reduced again “in order to not be dealing with sesame and the intensive cleaning procedures needed to avoid any cross contact.”

In interviews during and just after the COVID-19 pandemic, Emberling highlighted labor issues, specifically large numbers of open positions, as a primary challenge facing Zingerman’s. Few positions are unfilled at present, but other labor-related difficulties have emerged, she said.

“Labor is available,” she said. “So that’s not the problem. But there are attendance issues throughout all of the Zingerman’s businesses. The number of people and frequency of people calling in sick has gone up tremendously. The standard for missing work seems to have changed.

“Managing attendance is taking up much more leadership time.”

She went on to say that, increasingly, the physicality required of work in a bakery in 2024 does not appear to meet the expectations of many 20-somethings.

Another attitude change cited by Emberling revolves around global political issues, including pressure from certain staff and community members for the bakery to issue statements on the wars happening around the world.

“Some people in the community have wondered why we were not making statements about them,” she said. “There has been some tension. We learned that campus student organizations were boycotting us for their catering because we had not made specific statements.”

She said that the groups were not significant customers in the past.

“We don’t make statements like that,” she continued. “But unfortunately, everything has become political. For years, we’ve made cupcakes for different celebrations like Pride Month and Black History Month. Now this is perceived as political, even though we view it as inclusive. It’s our community. It’s our market. So then not saying something about these wars is perceived as us not properly engaging. We were asked, ‘Why are you saying something about these political things but not the wars?’ These other things are not political; they’ve been politicized. They are just our community. We make things for Christmas. We make things for Rosh Hashanah. It’s to be inclusive.”

Creative ways to economize

Flowers Foods, Inc., Thomasville, Ga., has found a way to make its Nature’s Own brand more affordable for those looking for a lower price point.

“Recognizing the consumer desire for increased value, we introduced Nature’s Own small loaves, which are off to a great start,” said A. Ryals McMullian, chairman and chief executive officer.

Available in two flavors, Homestyle White and Ancient Grain, these smaller-sized loaves feature a lower price point and 12 perfectly sized slices to help smaller households maximize value and minimize waste without compromising on quality.

“Additionally, our Wonder brand, which has a lower price point than some of our more premium brands, expanded into the breakfast category earlier this year with the introduction of bagels and English muffins,” he said.

While many consumers are aggressively seeking opportunities to economize, the continuing strength of the company’s super-premium brand demonstrate the diversity of consumer priorities, McMullian said.

“As consumers continue to prioritize differentiation, Dave’s Killer Bread, a premium brand with a higher price point, continues to perform well,” he said. “Additionally, our Nature’s Own Keto loaf, which targets individuals following a lower-carb diet, was the No. 1 new item introduced in the bread category last year. Despite its short time on the market, our Keto loaf is already the No. 1 SKU in its subcategory, and we are close behind and quickly gaining on the current leader in overall Keto sales.”

Even as bread sales volume has decreased and the category has lost market share to eating alternatives, McMullian believes finding segments of the baked foods industry that are growing and investing in new product development create paths for growth for bakers.

“While the overall category has been soft, there are pockets that continue to perform well,” he said. “For example, subcategories with more-differentiated offerings, such as dinner bread and rolls, sandwich buns and rolls, and specialty/premium, outperformed the less-differentiated traditional loaf. Continued innovation is critical to ensuring our brands and products stay aligned with consumer preferences.”

At the same time, McMullian offered a hopeful view of sales trends in the bread category after Flowers’ most recent fiscal quarter (ended July 13).

“Sales came in slightly better than we expected, helped by improving volume trends in the fresh packaged bread category, which turned positive toward the end of the quarter,” he said in August. “We believe this improvement was influenced by consumers shifting more spending to at-home eating as they look to economize.”

McMullian said the improvement was achieved without bakers resorting to promotions at levels more aggressive than pre-pandemic norms.

The baking industry for many years has struggled to attract and retain skilled workers for its plants, and McMullian said ensuring that a Flowers career is an attractive option for would-be employees is foundational to how the company approaches its business.

“By living our company values — honesty and integrity, respect and inclusion, sustainability, passion and humility — we foster a company culture where all team members feel welcome,” he said. “In addition to ensuring our team is competitively compensated and that they and their families are strongly supported by our robust benefits and resources, we invest in their career advancement through learning and development programs designed to build and strengthen leadership and professional skills. To identify opportunities to improve the overall employee experience, we conduct anonymous surveys and act on the results. In addition to surveys, we hold skip-level meetings and focus groups throughout the year as another tool to solicit feedback.”