Is there a winning approach to supermarket ISBs?

With the major retailers taking different approaches to in-store bakery, which strategy now seems more likely to win consumers’ spend?

Two major supermarket chains have recently shown very different approaches to their in-store bakery operations.

In February, Tesco announced it was axing scratch-baking in 58 stores and reducing it to only the most popular products in more than 200 other sites. Morrisons, meanwhile, had said it would ramp up the number of staff employed on its Market Street bakery counters – and even offered to give Tesco workers at risk of redundancy the chance of interviewing for a job in its own bakeries.

What does such a difference in attitude suggest for the future of in-store bakeries (ISBs)? Can we expect to see more businesses go the way of Tesco and rely more heavily on bake-off over scratch?

A key reason given by Tesco for its ISB shake-up, which is being implemented this month, was the shift in consumer demand away from traditional products.

Supermarket scratch baking is typically focused on more traditional lines, such as white loaves and baguettes, and this is not where growth is to be found. One of the big success stories of recent years has been artisan-style speciality breads. For supermarkets, these are usually bake-off.

Basing an in-store offer on bake-off alone requires fewer, less-skilled (but not unskilled) bakers

A larger factor, arguably, is cost.

“There are two areas for extra costs associated with scratch in-store baking; one is the need for investment in mixing and make-up plant and the other is related to staffing levels and skills,” says Stanley Cauvain of bakery consultants BakeTran.

“Basing an in-store offer on bake-off alone requires fewer, less-skilled (but not unskilled) bakers, which is probably where the greatest saving would be made.”

Loss of floor space is also a factor, points out industry veteran Brian Clarke of European Food Consultants, who says studies have shown that higher-value goods could be sold in floor space if it were released from a scratch operation.

Retailers may continue with scratch in the larger stores as footfall is greater and turnover may give them the return they require

Given this, is it likely we will continue to see businesses move away from scratch operations? Having a bake-off-only offer doesn’t seem to be doing Lidl or Marks & Spencer any harm. Both have seen growth in the category, and M&S was named Supermarket Bakery Business of the Year in the 2019 Baking Industry Awards.

Cauvain says consumer demand for a wider range of products will be a factor in a gradual shift away from scratch baking.

“As this happens, it becomes more difficult for in-store bakeries to deliver the scratch-baked options required,” he adds. “In some cases this may be related to the production volumes and limited space. In other cases it may be because more specialist equipment and a wider range of specialist ingredients are required.”

Retailers may continue with scratch in the larger stores as footfall is greater and turnover may give them the return they require

The shift away from scratch will be seen particularly in smaller  stores, suggests Clarke.

“Like any business, retailers need the return on spending. They may continue with scratch in the larger stores as footfall is greater and turnover may give them the return they require.”

Ultimately, changes to ISB operations will be driven by whether they meet consumer expectations when it comes to choice and product quality.

If a retailer can meet these expectations, then shoppers may be unconcerned whether a loaf has been produced from scratch or taken out of a freezer, as Clarke found out when he once undertook an in-store consumer survey as part of a project to establish consumer understanding of scratch versus bake-off.

The vast majority simply said: “Of course this is baked in-store”. While some even responded: “Why are you asking me this – I can see the bakery over there!”