Battles on all Fronts
During the commodity crisis two years ago, bakers took aggressive price increases as the cost of wheat skyrocketed faster than what could be passed onto consumers. As a result, dollar sales soared as bakers pumped up prices that, in many cases, exceeded 10%.How times have changed. In the depth of the recession last year, competition in the bread aisle became brutal as many of the players began discounting in a way that many bakers haven’t seen in years.
On a positive note, consumers are buying more bread, says Tim Hassett, senior vice president and general manager of bakery at Pepperidge Farm, Norwalk, Conn.
“We have witnessed significant change in the bakery category in the last two years,” he notes. “On the positive side, we’re seeing unit growth in the industry for the first time in well over a decade. Dollar growth, however, is tough to come by - as there is a tremendous amount of trade promotion as bakers reinvest deflation savings into better prices for the consumer.”
Sales also are rebounding in the high end of the bread category. That’s good news for the health of the industry in the long run.
“When we were at the height of the recession, consumers traded down to more price-oriented offerings, including private label, and the premium segment really got hurt for about six months,” Hassett says. “However, premium players have led consumers to trade back up through brand building efforts and innovation.”
The economy has created challenges for a lot of categories, and cookies and crackers are no different, adds Ed Carolan, Pepperidge Farm’s senior vice president and general manager of snacks.
“The key is to stay in tune with your consumers and the challenges they face such as value, which has certainly become more important in today’s economy,” he says. “You just have to be sure, which is what we’re trying to do, to offer a balance of quality products and experiences that come at a great value.”
Such efforts may include couponing, cross merchandising and good old-fashioned promotion and discounting. That’s what all of the major branded players are doing to compete with one another as well as with private label offerings.
“Brands have to strike that right balance between being competitive on value with everybody in the market inclusive of private label while making sure you are innovating, which is a role brands can play,” Carolan says. “That has been more challenging in recent years because private label is now very sophisticated and very competitive in bringing innovation themselves into the market.”
As a result, private label producers are duking it out with some of the biggest in the food industry.
“We operate in a space that has really great competitors, and I always view that as a good thing,” Carolan says. “Having great competitors challenges you to rise to the occasion and actually reach your true potential.”
As we finish up this year’s report, I would like to thank our managing editor Marina Mayer and contributing editor Anne Ford for their hard work. Once again, our intrepid reporters banged the phones, decoded the data, developed their own analysis and then reconfirmed our findings with industry sources. Let’s also give applause to our designer Michael Escobedo for his innovative interpretation of this year’s theme.
Believe it or not, it’s the 25th Anniversary since the first Back to the Future made its debut.
Personally, I also would like to thank the dozens of industry executives who shared their unique perspectives about what’s going on with their companies and the industry as a whole.
Finally, special thanks to John McIndoe, Ryan Stredney and the folks at SymphonyIRI Group (formerly known as Information Resources, Inc.), who provided us with the branded data found in this issue. To obtain more detailed information from SymphonyIRI Group, call 312-474-2884.
