Freshness, added nutrition, and a clean ingredients deck are among the priorities for online retailer Ocado when it comes to bakery.
Speaking at the British Society of Baking’s Autumn conference this month, Ocado’s head of category Kerry Barker outlined the online retailer’s strategy for bakery and the top trends it is looking to tap into with new listings over the coming year.
Giving an overview of Ocado’s operations, Barker explains that the retailer – which is a 50:50 joint venture between Ocado Group and M&S – has 1.2m active customers and an average basket size of a “whopping” £120. There’s a lot going on at Ocado with 45,000 products available from 4,500 brands and 2,000 suppliers with most customers actually seeing less than 1% of its total range because they’re searching for a particular product and add them very quickly once found.
“It’s a really competitive place online and you have to fight to be seen,” Barker says.
So, how do you stand out against the competitors and bring bakery to life via a website or app?
The first stumbling block, Barker explains, is the way the bakery category is shopped online versus in-store. Describing in-store bakeries as “a pretty magical place”, Barker highlighted how the smell of freshly baked bread really draws customers in making it a “beacon for the bakery category”. The visual merchandising coupled with amazing products which customers can handle and squeeze, selecting the ones at the back for the freshest offering are all part of the experience.
Online “feels a little bit clinical” in comparison, she admits, questioning how Ocado can “recapture the bakery magic” in a virtual environment. It’s worth considering, particularly as PWC says 40% of growth in the UK grocery sector over the next five years will come from online.
The answer, Barker believes, is data. In a bricks-and-mortar retailer, you won’t have access to all customer data. This could be because they pay with cash or perhaps, they don’t scan their loyalty card. “We have 100% customer data,” she asserts. “Every click, every product taken out of the basket, every repeat purchase or every search is all data that we can use.”
Take search, for example. Ocado can look at what customers are buying but also what they want to buy based on the items they are searching for. “Instead of waiting for trends to kind of land on the high street or somewhere else, we see them kind of bubbling away in the search bar and we can act quicker than anyone else,” Barker explains.
This was true for the phenomenal rise seen in sourdough over the past few years. “We saw this coming,” Barker explains, noting a significant uptick in searches for sourdough as well as trends for products better for gut health as well as searches for “UPF-free bread”. The retailer took action and “massively expanded” its sourdough range with different priced options including Jason’s Sourdough, Gail’s, Bertinet Bakery, Celtic Bakers, Modern Baker, M&S, and the Ocado own brand. Sourdough now accounts for 44% of Ocado’s bread sales.
Another way to combat the clinical feel is through exceptional imagery, descriptions, and inspirational content such as recipes, all of which help to “maximise the fresh perception”. Understanding consumer missions is also helpful. For example, “how do you get bagels to show up if someone’s thinking about what they want for their weekend brunch?”
“We are looking to massively expand in areas like high fibre, gut health, and high protein”
Or how do you encourage purchases of toppings with bread? One example was served up by a collaboration between Jason’s Sourdough and Bold Bean Co Baked Beans which saw a banner advert appearing when customers searched for ‘beans’ or ‘bread’, with money off if they bought both brands.
Health remains on the radar for Ocado customers as Barker highlights customers now being “less worried about what something is free from and more worried about what it’s full of”, resulting in increased searches for high-protein breads, low-carb wraps and products with ancient grains.
“We are looking to massively expand in areas like high fibre, gut health, and high protein,” she adds.
Bakery focus
This feeds into the five key trends that Ocado is focusing on at the moment in bakery, all of which need to be balanced to meet consumer needs.
“The first is clean deck,” she says, using “familiar ingredients” to really help drive that fresh perception for the category.
Another is added nutritional claims but, coming back to the first trend, delivering this “in as natural a way as possible”. This includes high protein, gut enriched, high in fibre, and any other kind of nutritional claim that comes along.
“If you’re running a really exciting high street or restaurant brand, we’d love to talk to you”
Balancing the above with the trend of maximising product life presents a potential challenge for suppliers, particularly as Ocado insists on giving customers “at least half” the available shelf life. So, if a loaf had a six-day shelf life from the factory floor, customers should get a minimum of three days. This also allows the firm to donate food to surplus charities with enough time to use it.
The next focus for Ocado in bakery is to “bring the magic of the high street online”. “We want to bring brands that customers know and love into their weekly shop and surprise and delight to offer something a little bit different than the rest of the market. So, if you’re running a really exciting high street or restaurant brand, we’d love to talk to you,” she enthuses.
Rounding off the trends is “winning the party occasion shop” as Ocado looks to take the pressure out for hosts by offering a one-stop shop for everything. Customers that use the platform for this reason become “really sticky and bring a high average basket spend”, so they’re worth investing in.
“We’re going really big on celebration cake in the next few years, but also cupcakes and all the sweet treats that go on the side of celebration cake,” Barker says. Then it’s looking at the wider basket so how can it make sure there are sandwich platters and more to round off the mission.
The value proposition
With all of the above taken into consideration, Barker remains clear that “any ranging decision is really underpinned by what drives the point of difference versus what we’ve already got, what is absolutely great quality, and what offers fair value”.
Value doesn’t strictly mean price either, with a range of price tiers seen across bakery. For example, Ocado sells sliced white bread for 75p but the ongoing demand for sourdough proves that there are plenty of customers who are willing to pay more for the right product.
“Really what we want to do is work with you to transform our online shelf from the kind of clinical bit… into something that feels more loved and a little bit more cared for, with great quality products, amazing images and kind of great execution online,” Barker concludes.
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