CONSUMERS IN THE BAKERY: Attitudes, Buying Behavior, & Purchase Drivers

CONSUMERS IN THE BAKERY: Attitudes, Buying Behavior, & Purchase Drivers THE INTERNATIONAL DAIRY-DELI-BAKERY ASSOCIATION 636 Science Drive, Madison, WI 53711-1073 P.O. Box 5528, Madison, WI 53705-0528 Phone: 608-310-5000; Fax: 608-238-6330 E-Mail: iddba@iddba.org; Web Site: www.iddba.org

Copyright October 2010 by the International Dairy Deli Bakery Association 636 Science Drive, Madison, WI 53711-1073 P.O. Box 5528, Madison, WI 53705-0528 Phone: 608-310-5000 Fax: 608-238-6330 E-mail: iddba@iddba.org Web site: www.iddba.org Consumers in the Bakery: Attitudes, Buying Behavior, & Purchase Drivers A special report prepared for the IDDBA by Thomas Opinion Research No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission of The International Dairy Deli Bakery Association. The information presented in this report has been compiled from sources and documents believed to be reliable. However, the accuracy of the information is not guaranteed, nor is any responsibility assumed or implied by The International Dairy Deli Bakery Association or Thomas Opinion Research. Single copy price: IDDBA Member....... $395 Non-member...$795

CONSUMERS IN THE BAKERY: Attitudes, Buying Behavior, & Purchase Drivers Table of Contents Full Report This executive summary has excerpts (content and tables) from the full report. The full report is available for purchase at www.iddba.org or by calling 608-310-5000. 1. Study Objectives And Sample Methodology Study Objectives Consumer Study: Sample & Methodology The Cluster Analysis Methodology Sample Characteristics The Retailer Study: Objectives, Methodology, And Sample Characteristics 2. A Picture Of Today s In-Store Consumer Consumers And Their Pocketbooks Economic Effects On Consumers: Price And Perceptions Of Price Have Become More Prominent As The Key Consumer Purchase Drivers Communications Channels To Search For Cost Savings Changes In The Ways Consumers Shop Saving Money By Preparing Food At Home Consumer Health Concerns Consumers Need Healthy Eating Help Fad Or Trend Retailers Speak Out 3. Consumer Connections With Foods Food Shopping Is Fun Think And Talk About Food A Great Deal Love To Try Different Or Creative Baked Goods I Eat More Sweets Or Carbs When I m Feeling Down Or Stressed Love Bread Deserve Special Bakery Treat Because Of Economic Sacrifices Eat What You Want In Moderation 4. Opinions About Modified And Kosher Bakery Products Opinions About Fat-Free Or Low-Fat Bakery Products Opinions About Reduced-Sugar Or Sugar-Free Bakery Products Opinions About Trans-Fat Free Bakery Products Opinions About Gluten-Free Bakery Products Kosher Baked Goods 5. Shopping Venues & Basic Beliefs About In-Store Bakeries Where Are Consumers Buying Baked Goods? Primary Reasons For Shopping At In-Store Service & Self- Serve Bakeries Overall Satisfaction With Bakery Visited Most Often Value Consumers Get From Bakery Purchases Willingness To Recommend Supermarket Bakery General Changes In Purchase Patterns 6. Bakery Shopping Frequencies Shopping Frequencies Frequency Of Shopping For Baked Goods At Various Venues Once A Week Or More 7. Baked Sweet Goods Overall Changes In Baked Sweet Goods Consumption Consumption Of Baked Sweet Goods By Meal Occasion Favorite Desserts To Eat Out Percentage Of Consumers Purchasing Specific Sweet Goods Where Most Sweet Goods Are Purchased Baked Sweet Goods Consumption And Purchase Patterns By Category 8. Breads Overall Changes In Bread Consumption Consumption Of Breads By Meal Occasion Increase Or Decreases In Consumption By Bread Type Percentage Of Consumers Purchasing Specific Types Of Bread Where Specific Bread Categories Are Purchased Most Frequently Bread Purchase Patterns By Category 9. Satisfaction With In-Store Bakeries Satisfaction With In-Store Bakery Visited Most Often Importance Of 22 Bakery Services And Characteristics Satisfaction Ratings For Specific Bakery Services Performance Gaps Where In-Store Managers Should Focus 10. Bakery Purchase Drivers Top Purchase Drivers Labeling As Purchase Drivers 11. Negative Experiences And How It Affects Consumer Loyalty Prevalence Of Negative Experiences Prevalence Of Negative Experiences By Clusters Negative Experiences Impact Customer Loyalty How Do Consumers Voice Their Negative Experiences Negative Word-Of-Mouth 12. Conclusion Consumer Trends Of Note Demographic Points To Keep In Mind Recommendation Highlights Appendix A: Cluster Analysis Methodology iii

CONSUMERS IN THE BAKERY: Attitudes, Buying Behavior, & Purchase Drivers Tables Full Report (summary list by general categories) (There are159 total tables in the final report. If multiple tables are in a specific category, we ve shown the number of tables represented). Attitude Products: If baked sweet goods were fresher; If breads were fresher; If it was easier to get assistance when you needed it; If more products fit in with my special diet (e.g., Gluten-free, diabetes friendly); If the product had additive-free on the label; If the product had all natural on the label; If the product had gluten-free on the label; If the product had low or light on the label; If the product had no trans-fat on the label; If the product had omega-3 on label; If the product had organic or made with organic ingredients on the label; If the product had whole grain on the label; If the sales associates were more helpful; Nutritional labels help consumers decide which products to buy; Opinions about gluten-free baked goods; Opinions about low-fat or fat-free bakery products; Opinions about reduced-sugar or sugar-free bakery products; Opinions about trans-fat free bakery products (23 tables). Attitudes Customer Satisfaction: Rate the value of the products you buy at your bakery; Samples of the product were available or provided upon request; Satisfaction with bakery products/services; Satisfaction with in-store bakery prices; Satisfaction with in-store bakery s visual display; Satisfaction with packaging that can be resealed or reused; Satisfaction with product availability; Satisfaction with product freshness; Satisfaction with sales and specials; Satisfaction with taste of baked sweet goods ;satisfaction with taste of bread; Satisfaction with variety of baked sweet goods; Satisfaction with variety of breads; Satisfaction with variety of items for special dietary needs; Satisfaction with variety of low-carb baked goods; Satisfaction with variety of low-fat, no-fat, or low-cal baked goods; Satisfaction with variety of reducedsugar or sugar-free baked goods (16 tables). Satisfaction with bakery you visit most often; With in-store bakery you visit most often Attitudes shopping: Food shopping is fun; Your children wanted it; Love bread; It would be hard to live without it; Love to try different or creative baked goods; negative word-of-mouth. Attitudes health/nutrition: Percent who have made a serious effort to enact the following dietary modifications; Percentage of households with the following health concerns; Primary reason for shopping at supermarket service bakeries: Product had nutrition labels; Product was available in smaller portion sizes (e.g., 2 vs. 5 danish); think about food a great deal; How respondents feel about their own weight. Category assortment: percentage of baked sweet good categories going to traditional supermarket in-store bakeries; Percentage of bread categories going to traditional supermarket in-store bakeries; Percentage of consumers who buy the following baked sweet goods. Consumption behavior: eating less baked sweet goods or bread than a year ago? What consumers say would make them buy more from their in-store bakery; top 3 most frequently mentioned desserts to eat out (first mentions) (4 tables). Percent who say they have made shopping changes; Bakery sample characteristics; Employment status of respondents. Consumption frequency: Consumption changes in specific bread types since last year (2 tables); Daily bread servings by demographics; Frequency of eating baked sweet goods for specific meal occasions; Or in the morning; Frequency of eating bread or rolls for specific meal occasions; With dinner; With lunch; Frequency of eating dessert after dinner; Frequency someone in household eats baked sweet goods for an afternoon snack; Frequency someone in household eats baked sweet goods such as donuts or sticky buns in the morning; Frequency someone in household eats bread or rolls with breakfast; Frequency someone in household eats bread or rolls with dinner; Consumption: frequency someone in iv

household eats bread or rolls with lunch; Consumption: number of bread servings consumed daily (13 tables). Customer service: Top 5 negative experiences that most impact loyalty & satisfaction scores ranked in order of most important negative experience; Having negative experiences at supermarket bakery over the past 3 months; Employees knowledge about the products in the service bakery; Percent who spoke to manager about most serious problem (5 tables). How likely are you to recommend your supermarket bakery to family and friends? Economy: Do you expect your financial position to improve or worsen? How much money do you have to spend today compared to two years ago? In response to the economy; Percent doing the following more often ; Percent doing the following activities more often in response to the economy; Which statement best describes your level of financial security? Marketing: Consumer use of various media to search for cost savings; Use of internet at various locations; Performance gap; Importance of various factors when shopping at in-store bakeries ; At the in-store bakery (2 tables). Purchase behavior: Buying more or less from supermarket bakeries than 2 years ago; Changes in way consumers purchase grocery products in response to economy by gender; Deserve to reward self with something special from bakery because of economic sacrifices; Frequency of purchasing bakery items on impulse during regular trips to grocery store; Drivers that would encourage purchase of more in-store bakery products; Eat more sweets/carbs when feeling down or stressed; Eat what you want in moderation; Percentage of consumers who buy the following types of bread; Where consumers most often buy artisan, hearth or crusty bread/ baguettes; Bagels; Brownies or bar cookies; Buns & rolls; Coffee cakes or sweet buns; Cookies; Croissants; Cupcakes; Danish or pastries; Donuts; Ethnic breads; Frosted or iced cakes; Gluten-free breads; Kosher baked goods; Low-carb breads; muffins; non-frosted cakes; Organic breads; Pies; Special occasion cakes; Sugar-free or reduced-sugar sweet goods; value-added breads; White breads; Whole grain breads; Favorite dessert to eat out (35 tables). Purchase location: Bagel shops; Coffee shops; Convenience stores; Discount supercenters; Donut shops; Ethnic supermarkets; Natural or organic stores; Specialty bread and sandwich shops; Full-service supermarket bakeries; Self-serve supermarket bakeries; Bagel shops; Independent bakeries; Supermarket aisles; Food warehouses/club stores, etc., for baked goods percent shopping at various venues once a week or more; (25 separate tables). Retailer attitudes: Fad or trend; Thoughts consumers feeling they deserve something special from bakery because of economic sacrifices. This executive summary has excerpts (content and tables) from the full report. Table numbering may differ. The exact questions asked in the consumer survey are shown below the tables. The full report is available for purchase at www.iddba.org or by calling 608-310-5000. v

CONSUMERS IN THE BAKERY: Attitudes, Buying Behavior, & Purchase Drivers Executive Summary Who is in store and what are they buying? What is the short- and long-term impact of changing economic factors, health concerns, demographics, tastes, purchase patterns, and product changes? By looking at past behavior from the previous benchmark studies, this study identifies shifts in eating behavior and attitudes and makes predictions for the future. One of the goals of this research is to identify the changes in current consumer attitudes and to predict how eating behaviors will change by category and product type (including the valueadded products like organics, whole grain, health and wellness, etc.). Consumers are looking at discounters, the Internet, and other non-traditional outlets in order to save money. Retailers and manufacturers are faced with rising prices, increased competition, and a greater variety and size of retail outlets. How are in-store bakeries doing? Are consumers purchasing more products from in-store bakeries than they did five years ago? Where else do they purchase baked goods? Consumers are faced with tightened budgets and more retailers competing to offer baked goods. What portion of the market for specific baked sweet goods and breads are won by traditional in-store service and self-serve bakeries; what portion is won by competitors? Are consumers more satisfied with the products and services provided by their in-store bakeries? What types of problems have they experienced in their bakeries and how do these experiences affect customer loyalty? These are some of the questions addressed in this 2010 study of in-store bakery consumers. The results of this study are compared with those from the 1999 and 2004 IDDBA studies (a few select 1994 findings are also included). In addition, a select set of questions about the economy and how it has altered shopping behavior, asked in IDDBA s The New Value Shopper in 2009, were re-asked to determine how consumers have changed since the height of the recession. The International Dairy-Deli-Bakery Association commissioned Thomas Opinion Research [TOR] to conduct a trend study of in-store supermarket bakery users. A total of 2,000 bakery consumers were interviewed between February 12, 2010 1 and March 26, 2010. Qualified respondents had to do at least half of the grocery shopping for their household and they had to purchase bakery products from in-store bakeries. Today s In-Store Consumer Since the 2004 Consumers in the Deli and Consumer in the Bakery (CID/CIB) research, Americans underwent the worst economic crisis since the Great Depression. Large financial institutions collapsed. The Federal Government bailed out banks and the auto industry. The stock market suffered serious losses. Americans lost jobs in record numbers. The housing sector saw evictions, foreclosures and prolonged vacancies in both residential and commercial properties. Declines in consumer wealth spawned a significant decline in overall economic activity. IDDBA s 2009 landmark research, The New Value Shopper, provided evidence that America s strained economy fundamentally altered consumer food purchase behaviors. Many wonder whether these consumer changes will permanently define the new shopper or will consumers revert back to their previous shopping behaviors when the economy improves? Our latest 2010 research, Consumers in the Bakery and Consumers in the Deli provides fascinating insight into these questions. Not only has the economic landscape changed dramatically since 2004, but so have: Shopping venues: The number of supercenters/discount shopping venues has increased dramatically. Communication channels: a greater percentage of consumers are using the Internet for commerce. The use of social media, such as Facebook, Twitter, chat rooms, and blogs has mushroomed. The face of America is changing with a more ethnically diverse, younger population and a significantly larger older population.

2 International Dairy Deli Bakery Association TM Consumers and Their Pocketbooks: Economic Forecast Less Cloudy While 2009 s economic landscape was downright gloomy, the new research offers some rays of hope. In 2009, only 17% said they had more money to spend than compared to two years ago. Today that percentage has almost doubled to 31%. In 2009, 45% said it was very difficult to make ends meet. Today, that percentage has dropped to 31%. In 2009, 27% said they expect their financial situation to worsen. Today, that percentage has fallen to 20%. Despite these positive changes in direction, consumers are still financially stressed. The greatest impact of the fragile economy on in-store deli and bakery purchases is that price and perceptions of price have become more prominent as the overarching consumer purchase driver. Consumers are more price conscious and are actively seeking ways to control spending. Consumer Health Status Dismal. Consumers Need Healthy Eating Help The percentage of consumers who have someone in their household who is overweight, has high cholesterol, high blood pressure, or diabetes has significantly increased from 2004 to 2010. Sixty-four percent (64%) report someone in their household is overweight. More than half have someone in their household with high cholesterol or high blood pressure. However, having health issues doesn t always motivate people to make sensible behavioral changes. Despite an uptick in health concerns, the percentage who are decreasing their intake of fat, calories or sugar has declined somewhat since 2004. The percentage who say someone in their household is making a serious effort to exercise more has declined from 69% to 64%. While Americans may not be changing their lifestyles and habits sufficiently to improve their health, more of them are at least buying more products with health concerns in mind. They are looking for information to guide them in making better food choices when they shop. Bakery Findings Freshness is overwhelmingly the number one volunteered reason for shopping at in-store full-service bakeries (16%). This is the first time since this survey was conducted that freshness has out-polled convenience as the number one reason. Convenience remains the number one reason for shopping at the self-serve bakeries (32%, up from 26% in 2004). Consumers are getting baked sweet goods and breads products from multiple locations: 94% from supermarket aisles 78% from discount supercenters 61% from independent bakery shops 59% from donut shops 57% from club stores/food warehouses 56% from convenience stores 45% from coffee shops (e.g., Starbucks) 45% from bread & sandwich shops 43% from natural/organic supermarkets 43% from bagel shops 38% from ethnic supermarkets Discount supercenters had the biggest increase in the percent of consumers who shop there for baked goods (up from 52% in 2004 to 78% in 2010) a substantial 26 percentage point increase. Top 5 Bakery Purchase Drivers: Fresher breads Fresher baked sweet goods Samples Nutrition labels Product had whole grain on the label In-Store Bakery Shopping: Frequencies & Buying Trends In-store bakery shopping frequency dropped somewhat since 2004 but increased for supercenters. The good news is that consumers aren t necessarily buying less baked goods than in 2004 and in many cases, they are buying more. 25% shop at in-store full-service bakeries once a week or more (down sharply from 51% in 2004); 21% shop there one to three times a month; the rest shop there less frequently. 41% shop the self-serve bakeries once a week or more; 32% shop there one to three times a month; the rest shop there less frequently.

IDDBA s Consumers in the Bakery 3 Almost half (46%) say they are buying the same amount from their supermarket bakery as they did two years ago; 14% are buying more (down from 17% in 2004); 38% are buying less (up from 35% in 2004). Consumption Patterns Sweet Goods 52% are eating less baked sweet goods than a year ago (a slight improvement from 59% in 2004). Americans favorite dessert to eat out is cheesecake, mentioned by 26%: chocolate cake comes in second. On average, Americans are eating dessert after dinner 2.05 times a week. 18% eat sweet goods for breakfast at least once a week down from 25% in 2004. Breads 38% are eating less bread than a year ago. Consumers eat an average of 1.78 bread servings a day (barely changed from 1.8 in 2004). The percentage of consumers who eat bread for lunch every day continues to dramatically decline: 8% in 2010, 30% in 2004. 7% eat bread with dinner every day (down sharply from 19% in 2004). 34% say their consumption of white bread has decreased and 28% say their consumption of rolls and buns has decreased since last year. On the other hand, consumption of complex carbohydrate breads has increased. For example, 37% say their consumption of whole grain breads has increased and 28% say their consumption of value added breads (such as iron-fortified, high fiber, crustless) has increased. Healthy Bakery Products Despite increased media attention to gluten-free products, two thirds of survey respondents have never purchased these products. About one in ten have purchased these products and say they are good and they will buy them again. A much larger percentage of consumers are buying trans-fat free bakery products (60% compared to 36% in 2004). Sixty percent (60%) of consumers have also purchased reducedsugar or sugar-free bakery products (up from 37% in 2004). Gluten-free bakery products are still a mystery to most bakery consumers: 65% of consumers have never purchased gluten-free bakery products and an additional 11% don t know if they have purchased them. 1. STUDY OBJECTIVES AND SAMPLE METHODOLOGY Table 1. Bakery Sample Characteristics (n=2000) Gender % Male 30 Female 70 Age % Region 18-29 13 Northeast 19 30-49 36 Midwest 22 50-64 38 South 37 65 or older 12 West 23 Race Caucasian 71 Large city/urban area 24 African American 13 Small city/town 24 Latino 11 Suburbs 30 Other 5 Rural 20 Education Marital Status % High school or less 23 Married 54 Business school/some college 37 Not married, but living with a partner 9 College graduate 28 Single 19 Graduate degree 12 Divorced separated 13 Other 1 Widowed 5 Number in Household Area Income One 19 Less than $25k 20 Two 39 $25k to less than$50k 29 Three 18 $50k to less than $75k 23 4 or more 24 $75k to less than $100k 12 $100k or more 10 2. A PICTURE OF TODAY S IN-STORE CONSUMER Consumers And Their Pocketbooks Five years ago, IDDBA released the 2004 Consumers in the Bakery and Consumers in the Deli studies. Since then the consumer landscape has gone through extraordinary changes. Americans underwent the worst economic crisis since the Great

4 International Dairy Deli Bakery Association TM Depression. Large financial institutions collapsed. The Federal Government bailed out banks and the auto industry. The stock market suffered serious losses. Americans lost jobs in record numbers. The housing sector saw evictions, foreclosures and prolonged vacancies in both residential and commercial properties. Declines in consumer wealth spawned a significant decline in overall economic activity. IDDBA s 2009 research, The New Value Shopper, showed that America s challenging economy had fundamentally altered consumer food purchase behavior. IDDBA s latest research, Consumers in the Bakery and Consumers in the Deli confirms the 2009 research. One year ago, the picture was grim IDDBA s 2009 landmark research, The New Value Shopper, argued that America s weakened economy fundamentally altered consumer food purchase behaviors. Some of the dramatic findings were: 50% said things were tight and an additional 45% said it was difficult to make ends meet. Only 6% felt financially secure. 27% expected their financial situation to worsen. Only 17% said they had more money to spend than they did in the 2 years prior. Many wondered whether these consumer changes would permanently define the new shopper or whether consumers would revert back to their previous shopping behaviors when the economy improved. This research provides fascinating insight into these questions. Today, the picture is somewhat rosier While last year s economic landscape was downright gloomy, our new research offers some rays of hope. In 2009, 45% said it was very difficult to make ends meet. Today, that percentage has dropped to 31%. In 2009, 27% said they expect their financial situation to worsen. Today, that percentage has fallen to 20%. In 2009, only 17% said they have more money to spend today compared with two years ago. Today that percentage has jumped to 31%! Even though gains have been made in the last year, the vast majority of consumers remain financially pinched (see Table 2). Only 11% say they are secure financially, a 5% increase over 2009. Those who find it very hard to make ends meet total 31%, a 14% drop from 2009. Those in the middle, who feel things are tight but feel in pretty good shape overall, increased 8% since 2009. They are comfortable, but worried, and conscious of their spending. For those reporting that they and/or spouses are unemployed and looking for work, 51% say it is very difficult to make ends meet, 45% report things are a little tight and 4% report being financially secure. Retailer Insight. When asked whether they agree with the following statement, I am seeing a return to pre-recession spending by consumers 57% disagreed, 40% agreed, and 4% weren t sure. Table 2. Which Statement Best Describes Your Level Of Financial Security? (n=4000 for 2010) 2009 2010 Very difficult to make ends meet 45 31 A little tight, but still in pretty good shape 50 58 Very secure financially 6 11 Q32. Which of the following statements best describes your level of financial security? Perceptions about economic future In both 2009 and 2010, most consumers expected their financial situation to improve or stay the same. The margins in 2010 for the more optimistic consumers improved slightly (see Table 3). Thirty-six percent (36%) felt their finances would improve (up from 31% in 2009), 44% felt their finances would not change, and 20% felt their finances would worsen (down from 27% in 2009). As we might expect, the unemployed are more pessimistic: 31% expect their situation to worsen, 37% expect it to improve and 32% expect no change. Table 3. Do You Expect Your Financial Position To Improve Or Worsen? (n=4000 for 2010) 2009 2010 Worsen 27 20 Not change significantly 42 44 Improve 31 36 Q33. In 2010, do you expect your financial situation to improve, worsen, or not change significantly? Among the three bakery consumer segments, the Health- Conscious segment is most optimistic about the financial future, with 43% expecting their financial situations to improve in 2010, and one-third expecting no significant change. Among the other two segments, almost half expect no significant change in the coming year.

IDDBA s Consumers in the Bakery 5 Consumers financial situation Consumer views about spending money have improved across the board since 2009 (see Table 4). Thirty-one percent (31%) say they have more money to spend than they did two years ago up from 17% who responded this way in 2009. IDDBA s 2009 survey showed that 64% said they had less to spend than they did two years prior; today that percentage is down to 41%. The three shopper clusters do not differ significantly in their responses to this question. Table 4. How Much Money Do You Have To Spend Today Compared To Two Years Ago? (n=4000 for 2010) 2009 2010 Much less 32 19 Somewhat less 32 27 Same amount 20 23 Somewhat more 13 21 Much more 4 10 Q31. How much money do you have to spend today compared to 2 years ago? [2009 Questions from New Value Shopper] The financial differences between the three bakery clusters are not great however, the Health-Conscious consumers are likely to report that they have much more to spend compared to 2 years ago (15%, vs. 8% of Bakery Lites and Happy Campers). Economic Effects On Consumers: Price And Perceptions Of Price Have Become More Prominent As The Key Consumer Purchase Drivers Consumers have altered the way they search for cost savings, their shopping behaviors, and how and when they consume their foods. When asked what would make them buy more from the supermarket bakery, the number one volunteered response was: make items less expensive (volunteered by 18%); an additional 5% volunteered more sales or specials (see Table 5). Twelve percent (12%) want more variety. Other responses can be seen in Table 5. Since 2004, the top-of-mind call for less expensive products has remained steady. In fact, the call for lower prices peaked in 1999, at 28%. However, the 2010 consumer is still price conscious and nearly 1/5 of the current market continues to view price as its top priority. Communications Channels To Search For Cost Savings How does the current economic condition affect consumer deli and bakery purchases? The answer is that price has become Table 5. What Consumers Say Would Make Them Buy More From Their In-Store Bakery (2004, 2010; open-ended; multiple responses) 2004 2010 % % Less Expensive 18 18 More variety 18 12 More sales/specials 5 5 Fresher/home baked taste 9 4 More sugar-free/less sugar products 4 3 Better service 4 3 I visited the store more often 2 Healthier products 5 2 Better taste 3 2 Better quality * 2 More individual serving size packages -- 2 Product consistency 2 2 More low-carb/low-cal products 5 1 Less waiting in lines * 1 More samples** 5 1 Better displays -- 1 More fat-free or less-fat 5 1 More convenient location -- 1 Bakery open more hours 1 * More products for my special dietary needs * Food safety/cleanliness 3 * Pre-order/delivery services 1 * Seating area -- * Better brand image of store/department -- * Better advertising * * Knew more about where/how products are made -- * Other 8 7 Nothing 15 * Don t know 9 31 B17. If you had a chance to talk to the owner of the supermarket bakery you visit most often, how would you complete this sentence: I would buy more products from your bakery if *=less than 1%. means there was no response in this category in 2004. **=In 2004, more samples was merged with better displays. more prominent as the overarching consumer purchase driver. Half (51%) frequently scan newspaper ads for weekly specials or sales and 44% frequently clip coupons before going out to the supermarket (see Table 6). Consumers are increasingly using the Internet to search for ways to save money on groceries and this trend is likely to increase tremendously over the next few years. In this study, 39% frequently or occasionally search online for supermarket deals prior to their

6 International Dairy Deli Bakery Association TM shopping trip. Fifteen percent (15%) frequently or occasionally use social media networks to find out about supermarket specials or sales and the same percentage of consumers with children consult blogs for information about foods. Table 6. Consumer Use Of Various Media To Search For Cost Savings (n=4,000: deli & bakery consumers) Frequently Occasionally Rarely Never % % % % Scan newspaper ads for weekly specials 51 23 13 13 Clip coupons before going out to the supermarket 44 29 16 11 Print online coupons before going to the supermarket 22 26 22 30 Search supermarket deals online before going to the supermarket 19 20 20 40 Use social media networks like, Facebook, My Space, or Twitter to find 8 7 12 72 out about supermarket specials or sales Consult blogs like Babble or Busy Mom for information about foods (asked of 6 9 15 69 those with children n-1,232) Q25. How frequently do you do the following frequently, occasionally, rarely, or never? The three bakery clusters differ significantly in how frequently they engage in these cost-saving practices. Generally, the Health- Conscious cluster are far more frequent users: for example, 56% of Health-Conscious consumers search for online deals ahead of time, compared to 38% of Happy Campers and 32% of Bakery Lites. Sixty-three percent (63%) of Health-Conscious consumers print online coupons, compared to 47% of Happy Campers and 39% of Bakery Lites. Thirty-one percent (31%) of Health- Conscious consumers use social networks to find out about specials, which is done by only 14% of Happy Campers and 10% of Bakery Lites. Changes In The Ways Consumers Shop Consumers in 2010 have altered the way in which they shop for food, but not as much as they did at the height of the recession in 2009 (see Table 7). Today, 64% of consumers report buying fewer items on impulse; that is down from 75% in 2009. Still this represents almost two-thirds of the consumer population who are monitoring their purchases more closely. Sixty-four percent (64%) are paying more attention to advertised prices, down from 73% in 2009. Sixty-three percent (63%) are sticking more to buying just what s on their grocery list, 54% are using coupons more often, and 39% are visiting discount stores more often. The three shopper clusters do not differ significantly on their frequency of shopping behavior changes. Among those with someone in the household unemployed and looking for work, 75% are buying fewer items on impulse and 50% are visiting discount stores more often. Nine percent of consumers have not made any of these shopping changes. Among the three bakery consumer segments, the Health- Conscious and Happy Campers segments are more likely to say they are less likely to buy on impulse than Bakery Lites (68% and 66% vs. 59% of Bakery Lites). Health-Conscious consumers are also using coupons more than others (63% vs. 55% of Happy Campers and 48% of Bakery Lites). Key Take-away: A very large majority of consumers, two-thirds, are monitoring their purchasing habits more carefully. They are doing so by watching out for advertised specials, sticking to their shopping lists and reducing impulse buying, using coupons more often, and shopping more frequently at discount stores. Table 7. Percent Who Saying They Have Made Shopping Changes (2009 and 2010; n=4000 for 2010) 2010 2009 Visiting discount stores more often 39 46 Using coupons more often 54 66 Sticking more to buying just what s on your grocery list 63 68 Paying more attention to advertised prices 64 73 Buying fewer items on impulse 64 75 Q34. In reaction to the economy, how often have you done the following related to grocery store shopping? By gender, female bakery consumers are significantly more likely than men to have made all of the five changes in the way they shop (see Table 8). Table 8. Changes In Way Consumers Purchase Grocery Products In Response To Economy By Gender (combined responses; n=2,000 for 2010) Women Men % % Buying fewer items on impulse 66 59 Paying more attention to advertised prices 65 61 Sticking more to buying just what s on your grocery list 64 59 Using coupons more often 56 48 Visiting discount stores more often 41 34 Bakery Specific Impulse Buys Bakery consumers were asked to think about their trips to the grocery store and then to estimate how often they purchased bakery items on impulse 36% say rarely or never, 28% do so during less than half of their trips to the bakery, 25% buy on impulse 50% of the time and 11% always or almost always buy

IDDBA s Consumers in the Bakery 7 bakery items on impulse (see Table 9). When combining the always or almost always and the about half the time segments, a total of 36% say they buy bakery items on impulse. Table 9. Frequency Of Purchasing Bakery Items On Impulse During Regular Trips To Grocery Store % Always or Almost Always 11 About half the time 25 Less than half of the time 28 Rarely 32 Never 4 B2a. Thinking about your trips to the grocery store, how frequently do you buy something on impulse from the supermarket bakery? The demographic groups most likely to buy items on impulse at least half of the times they go grocery shopping (36% of the consumers or greater) are: Ages 18-29 (48%) Latinos (43%) Those with children (44%) Those with 4 or more in the household (44%) Happy Campers (41%) and Health-Conscious (63%) segments are the more likely to purchase on impulse at the in-store bakery than Bakery Lites (20%). Saving Money By Preparing Food At Home In-store customers report little change in preparing food at home in order to save money. The majority say there is no change in the frequency they entertain at home or pack lunches for their spouse or children. Strong majorities continue to do those things. And, they are more likely to prepare meals at home 56% say that is now the case. While still a majority, the percentage eating-in has dropped from last year s high of 74%. Table 10. Percent Doing The Following Activities More Often In Response To The Economy (n=4000 for 2010) Less Often % No Change % More Often % Preparing meals at home 4 40 56 Packing your or your spouse s lunch 5 66 29 Packing your child s lunch 7 67 26 Entertaining at home 24 57 19 Q35. In response to the economy, are you doing the following less often, more often or no change? Among bakery consumers with at least one person in the household unemployed and looking for work, 68% are preparing meals at home more often and 29% are entertaining at home more often. Their responses did not significantly differ from the other responses shown in Table 10 and 11. Health-Conscious bakery shoppers are making more of these changes in response to the economy: 65% are preparing meals at home more often, 37% are packing lunch for spouses, and 28% are entertaining at home more often. Since 2009, the percentage who say they are preparing meals at home more often has dropped from 74% to 56%. Table 11. In Response To The Economy, Percent Doing The Following More Often *(n=4000 for 2010) 2009 2010 Entertaining at home 21 19 Packing your child s lunch NA 26 Packing your/your spouse s lunch 29 29 Preparing meals at home 74 56 Q35a. In response to the economy, are you doing the following more or less often? Table 12. Percentage of Households with the Following Health Concerns (2004 and 2010: n=4000 for 2010) 2004 2010 Gluten intolerance NA 9 Child being overweight NA 28 Diabetes 30 34 High blood pressure 48 52 High cholesterol 48 54 Being overweight 55 64 Q28. Is anyone in your household concerned about? Table 13. How Respondents Feel About Their Own Weight (n=4,000) % You would like to lose some weight 73 You are content with your current weight 23 You would like to gain some weight 3 Not sure/none 1 Q30. Which of the following statements best describes how you feel about your own weight you are content with your current weight, you would like to lose some weight, or you would like to gain some weight? [SINGLE RESPONSE] Consumer Health Concerns Dietary concerns The percentage of consumers who have someone in their household who is overweight, suffering from high cholesterol,

8 International Dairy Deli Bakery Association TM high blood pressure or diabetes has significantly increased from 2004 to 2010 (Table 12 ). Seventy-three (73%) percent of the respondents would like to lose some weight, 23% are content with their weight and 3% would like to gain weight (see Table 13). Demographic variations a. Overweight. Sixty-four percent (64%) say at least one person in their household is concerned about being overweight. The demographic groups even more likely than the average to say someone in their household is concerned about being overweight are: Ages 50-64 (71%) African Americans (67%) Income $100k or more (67%) Married individuals (68%) Those in rural areas (70%) Among the bakery segments, the Health-Conscious group is more likely than others to have a concern about being overweight (74%), compared to 64% of the Bakery Lites and 60% of the Happy Campers. b. High cholesterol. Fifty-four percent (54%) say at least one person in their household is concerned about high cholesterol. The demographic groups even more likely than the average to say someone in their household is concerned about high cholesterol are: Males (57%) more than females (51%) Ages 50-64 (65%) and 65 or older (67%) African Americans (59%) Among the bakery segments, the Health-Conscious group is more likely than others to have a concern about high cholesterol (66%), compared to 51% of the Bakery Lites and 49% of the Happy Campers. c. High blood pressure. Fifty-two percent (52%) say at least one person in their household is concerned about high blood pressure. The demographic groups even more likely than the average to say someone in their household is concerned about high blood pressure are: Ages 50-64 (61%) and 65 or older (67%) African Americans (63%) Those earning under $75k (53%) more than those earning more (45%) The Health-Conscious group is more likely than others to have a concern about high blood pressure (60%), compared to 49% of Bakery Lites and 52% of Happy Campers. d. Diabetes. Thirty-four percent (34%) say at least one person in their household is concerned about diabetes. The demographic groups even more likely than the average to say someone in their household is concerned about diabetes are: Ages 50-64 (37%) African Americans (41%) Among the bakery segments, the Health-Conscious group is more likely than others to have a concern about diabetes (48%), compared to 29% of the Bakery Lites and 31% of the Happy Campers. Dietary restrictions Having health issues doesn t always motivate people to make sensible behavioral changes. Despite an uptick in health concerns, the percentage who are decreasing fat, calories or sugar has declined somewhat since 2004; and, the percentage who say someone in their household is making a serious effort to exercise more has declined slightly from 69% to 64% (see Table 14). At least six in ten consumers say they are making an effort to decrease the fat in their diets, decrease calories and decrease trans-fat. Fifty-eight percent (58%) are making an effort to reduce sodium and half are making an effort to reduce carbohydrates. Table 14. Percent Who Have Made a Serious Effort to Enact the Following Dietary Restrictions (n=40,00 for 2010) 1994 1999 2004 2010 % % % % Decrease fat 85 81 72 66 Decrease calories 72 66 67 63 Decrease trans-fat NA NA 58 61 Decrease sugar NA NA 68 60 Decrease high sodium foods NA NA NA 58 Decrease carbohydrates NA 42 49 50 Q27. Within the past year, have you, or has anyone in your household, made a serious effort to do any of the following? NA=not asked. See full report for information on demographic variations including: fat, calories, trans-fat, sugar, sodium, and carbohydrates.

IDDBA s Consumers in the Bakery 9 Dietary modifications Table 15 shows that 64% say they are making an effort to increase their exercise. Sixty-six percent (66%) say they are making a serious effort to increase their fiber and 49% are making an effort to increase their calcium. Table 15 also shows that while there has been a decrease since 2004 in the percentage reporting that they are making an effort to exercise more and increase calcium, there has been a slight increase in the percentage who say they are seeking to increase their fiber. Table 15. Percent Who Have Made A Serious Effort To Enact The Following Dietary Modifications (Trends, n=4,000 for 2010) 1999 % 2004 % 2010 % Exercise more 70 69 64 Increase fiber 66 64 66 Increase calcium 59 59 49 Q27. Within the past year, have you, or has anyone in your household, made a serious effort to? Demographic variations a. Exercise. Sixty-four percent (64%) say that they have made a serious attempt to exercise more in the past few years. The demographic groups significantly more likely than the average to say they are doing this are: Females (65%) more than males (60%) Ages 18-29 (69%) African Americans (71%) Those with children (69%) Incomes $75k-100 k (75%) and $100k or more (71%) Among the bakery clusters, the Health-Conscious group is more likely than others to say someone in the household has made a serious effort to exercise more (77%), compared to 60% of the Bakery Lites and 58% of the Happy Campers. b. High-fiber. Sixty-six percent (66%) say that they have made a serious attempt in the past few years to eat more high fiber foods. The demographic groups significantly more likely than the average to say they are doing this are: Females (68%) more than males (60%) Ages 50-64 (75%) and 65 or older (73%) African Americans (76%) Incomes $75k or more (71%) Among the bakery clusters, the Health-Conscious group is more likely than others to say someone in the household has made a serious effort to increase dietary fiber (81%), compared to 60% of the Bakery Lites and Happy Campers. c. Calcium. Forty-nine percent (49%) say they have made a serious attempt in the past few years to increase their calcium consumption. The demographic groups significantly more likely than the average to say they are doing this are: Females (53%) more than males (40%) Ages 50-64 (54%) and 65 or older (59%) African Americans (58%) Among the bakery clusters, the Health-Conscious group is more likely than others to say someone in the household has made a serious effort to increase calcium (66%), compared to 44% of the Bakery Lites and Happy Campers. Consumers Need Healthy Eating Help Almost three in ten consumers with children worry that their children are overweight. The childhood obesity crisis affects all of our futures. We are already seeing the consequences on a national level. For example, the number one reason prospective military recruits are denied into the armed forces. Obesity. There is no doubt that consumer interest in more healthful eating has increased. For example, more than 1 million customers accessed nutritional information through Starbucks iphone application in the first three months it was available.the consulting company, Nutrition Information Services, has seen its clients such as Austin Grill, California Pizza Kitchen, the Cheesecake Factory, Fuddruckers, Silver Diner and Sizzler, ask for their help in revamping their recipes to fit today s nutritional concerns by reducing calories, sodium, fat and adding whole grains. NIS watched its nutritional analysis business grow by 80% in 2008 and by 100% in 2009.While Americans may not be changing their lifestyles and habits sufficiently to improve their health, more of them are at least buying more products with health concerns in mind. The majority of consumers are concerned about the nutritional content of the bakery foods they eat. Eighty-one percent (81%) of bakery and deli consumers say nutritional labels help them decide which products to buy. As noted in Table 16, this is a strongly held belief that has held steady since IDDBA began tracking this question. Table 16. Nutritional Labels Help Consumers Decide Which Products To Buy (% agreeing; n=4000 for 2010) 1995 77 1999 71 2004 84 2010 81 Q23b. To what extent do you agree or disagree with the following statement: The ingredient and nutrient information on labels helps you decide which products to buy.

10 International Dairy Deli Bakery Association TM Key Take-away: The retail food industry has an opportunity to help increase our collective consumer health. At a minimum, nutritional labels across all bakery products disclosing the amount of calories, salt, sugar, fat and other nutrients the product contains would go a long way toward helping consumers make more intelligent purchasing decisions to help their own and their family s health. For those bakeries that are able to go a step further, posters or signage touting bakery items that fit well into a calorie-conscious, fat-conscious, sodium-conscious, carbconscious or calcium-conscious diet would not only promote the sale of those items, it would show an excellent public service commitment and would contribute to the education so many American consumers badly need. Retailer Insight. 56% of retailers somewhat agree and 41% strongly agree that consumers are trying to be more Health- Conscious; 4% disagree. In addition 99% of retailers agree that consumers want more nutritional information (this includes 43% who strongly agree). Fad or Trend Retailers Speak Out More than half of the retailers believe low-carbs and omega-3 added products are fads. Table 17. Fad Or Trend? Retailers Speak Out (n=106) Fad Trend Don t know Omega-3 added 56 27 17 Low-carb 71 22 8 Organic products 37 51 12 Kosher items 15 57 28 Chemical-free/additive-free 29 58 12 Non-fat/low-fat 29 66 5 All natural products 22 72 7 Gluten-free 17 75 8 Low-sodium 12 81 7 No-trans fats 12 84 4 Whole grains 10 87 3 Diabetes-friendly 7 91 3 Retailer Q3. Do you think the increased interest in the following types of products will be a long-term trend or a fad? More than seven in ten of the retailers surveyed believe the following types of products will be long-term trends (see Table 17): Diabetes-friendly Whole grains No-trans fats Low-sodium Gluten-free All natural products See full report for additional retail findings. Call 608-310-5000 to order the full report.