Apr 7, 2007

Fresh Baked Goods Bring Added Sales

Baked goods are hot items at farm markets these days. The aroma of fresh-baked pies, pastries, breads, rolls and muffins – hot from the oven – creates an atmosphere that boosts sales in all departments.

At Algoma Orchards in Whitby, Ontario, a half-hour from Toronto, the decision was made 10 years ago to add a bakery. Now, it accounts for 35 percent of the market’s sales.

Diane Challis, the retail manager at Algoma, said the bakery is “the right asset to add to your market.” She spoke during farm marketing sessions in December at the Great Lakes Fruit, Vegetable and Farm Market EXPO in Grand Rapids, Mich.

“Initially, it may have been produce that drew your customers to your location, but why not add a more profitable department to help your bottom line and give your customers something else to buy when they visit?” she asked.

A decision to add a product like fresh-baked apple pie doesn’t mean Mom has to contribute her secret recipe and retire to the back room to make pies en masse from scratch. In fact, you don’t need to sell Mom’s pies. There is product of quality very comparable out there, Challis said.

Algoma is a major grower and packer of apples, but its 10-inch apple pies are purchased from a supplier they trust, removed from those boxes, baked, put into Algoma boxes and sold for $6.99 on sale, with regular price of $7.99, generating a 60 percent gross margin – more than double the purchase price of the pie. Algoma offers all pies frozen as well as fresh.

“We are not a scratch bakery,” Challis said. Advertising the pies as fresh-baked does not mean they are made on-site. In her studies, Challis found that most scratch bakeries devote 30 percent to 35 percent of their costs to labor, while Algoma’s bakery pays 16 percent for labor. Whether to choose scratch or bake-off depends on labor costs, capital expense, space and skills, she said.

Apple muffins is the only bakery product they make from scratch on-site. Other pre-made products made elsewhere and baked at Algoma include Danishes, croissants, bread, frosted cinnamon rolls and a variety of sweet goods.

Algoma Apple Market started 40 years ago as a roadside stand offering apples from the Algoma orchard.

“Fruit picked from the nearby trees was the ultimate in freshness,” Challis said. “For the customer, it felt good to buy produce from people who worked the soil. Today, Algoma Orchards still has the attitude and freshness that a roadside stand offers.”

The secret, she said, is to combine the concepts of freshness and homemade quality with very high standards.

How good are the pies? Last year, the 2,000-square-foot market sold more than 20,000 pies in14 flavors, including a line of dietary pies aimed at people who have diabetes. The market carries several diabetic-friendly products including cookies, jams, pies, apple syrup and fudge.

Challis combines an accountant’s desire for information and cost control with an artistic merchandiser’s sense of what customers like and how they like it presented to them. Sampling, for example, is a good marketing practice, she said, a way to give customers something free – and a better way to handle broken products than to sell them at a reduced price or throw them out.

“Take advantage of this tool,” she said. “Our suppliers are quick to issue credits for damages.”

The bakery staff must keep good daily records of what was baked, and Challis tracks inventory, reductions and waste. Products carry UPC codes, which are used to track sales. She’s ruthless about proper stock rotation.

“It all starts from the outside,” she said. “We keep the lawn and gardens manicured, the buildings painted and decorated appropriately for the seasons, and everything is clean, from the washrooms to the kitchen.”

Diane gives a lot of attention to how products are displayed. Fresh bread is sold in white paper bags, day-old bread in plastic bags. Sweet goods are displayed in the center with bread on the sides.

Devices like tablecloths, lights, baskets and bags give a sense of fullness to the shelves, as do mirrors that double the apparent depth of a display.

“More is good,” she said. “Customers like shelves looking full. They don’t like holes.” Everything is displayed faced up.

Crafts and gifts are displayed with products they are related to. You find oven mitts right next to the pies.

Challis leads an aggressive marketing program that targets new customers in the new subdivisions in the area. The market uses coupons to draw customers, as well as attractive signs. On the buying side, she seeks similar treatment from her suppliers – rebates and discounts for volume.

Algoma Market has a Web site at www.algomaorchards.com.

The Expo program also looked at other matters related to farm marketing. Les Bourquin, a food scientist from Michigan State University, reminded everyone that operating a food service facility means obtaining a license and complying with food laws. Important laws are the Michigan Food Law, which was rewritten in 2000 and adopts the FDA’s Model Food Code of 1999. That code outlines good manufacturing practices and provides the rules for running a safe, clean food facility.

Anyone going into such a business can find the food code at www.cfsan.fda.gov and the licensing requirements at www.michigan.gov/mda.

Don Walker, from Hobart Sales and Service, talked about the availability of new and used peelers, mixers, fryers, ovens, kettles, refrigerators – the machines that make a bakery run. Hobart operates worldwide.

As Challis put it, a bakery can add a third to your farm market sales, but it’s a venture that will bring new challenges.