Business Trends to Pick Up Steam in 2006
February 1, 2006
Business Trends to Pick Up Steam in 2006
Robert Shearer, president & CEO, Shearer’s Foods
Despite the economic turbulence impacting the industry, bakers and snack producers are monitoring consumer awareness of health and nutrition and their proclivity to trade up to better-tasting products, which are two trends that have deep roots. Pat Callaghan, president of Norwalk, Conn.-based Pepperidge Farm, forecasts that these trends are accelerating, especially in terms of how they are impacting the food industry.
“Specifically, there are two things causing this acceleration, and they’re both demographic and attitudinal,” he notes. “What we’re seeing is this baby boomer aging issue. You’re seeing fewer households with kids, which are heavy bread consumers and white bread consumers. As a result, consumers are becoming more health aware and are significantly trading up for products that offer health, nutrition and great taste.”
Actually, consumers were health-conscious during the low-carb phase. The only problem with these quick-fix diets was that they were nutritionally dubious at best and harmful at worse. In many ways, the emphasis on whole grains is simply the prevailing winds of change toward a more balanced diet with more nutritious, and hopefully better-tasting, foods.
“Unlike the low-carb bread that tasted like a piece of wood, the whole-grain products are very tasty, and people like them,” says Renato Turano, president of Turano Baking Co. in Berwyn, Ill. “Those products offer more variety and more creativity for people.”
In the salted snack category, the low-carb craze has morphed into a high-protein one and boosted sales for pork rinds and meat snacks, says Joe Papiri, vice president of sales & marketing for Snak King Corp.
Likewise, whole grain products have gotten traction, and the whole organic movement in the snack arena has gone from niche status to more mainstream, Papiri explains.
“The organic trend has not experienced faddish growth,” he says. “It’s a true trend that has been going for a long time, but it’s picking up steam.”
In fact, organic corn is priced fairly competitively with its non-organic counterpart, although organic oil for frying the chips remains “incredibly expensive” because it’s only available from overseas sources, Papiri says. As volume for organic snacks increases, Papiri expects prices to come down, especially when U.S. producers jump into the fray.
For snack producers, obesity remains one of their weightiest issues. That’s especially true for companies like Snak King, which is based in City of Industry, Calif., where Gov. Arnold Schwarzenegger has been riding the issue hard over the last couple years. The publicity over obesity has prompted snack manufacturers to crank out more “moderately healthy snacks” with a high taste profile, Papiri notes.
“They might have a little lower fat content, but they still taste good,” he says. “The new offerings have a better [nutritional] profile and a better taste than other ‘healthy’ products.”
Robert Shearer, Shearer’s president and CEO, and chairman of the Snack Food Association, adds that the trans fat labeling issue prompted snack companies to change oil. Both Shearer’s and Snak King report that they are getting more requests for the so-called “clean” labels as consumers search for products that are more natural, if not more healthful. Uniformity of labeling is another issue that is impacting the entire food industry, Shearer adds.
“The marketplace — looking at it from a healthier snacks and reduced-fat snack perspective — has made the industry more determined to work with their R&D departments to produce products that are healthier for you,” he says.
“Portion control has also been a major factor with companies responding to consumers’ desires for different packaging sizes,” he notes. “We’re producing a lot more small bags than we ever have done so in the past.”
With the explosion of sub and other sandwich chains, demand for salted snacks products in the foodservice channel is higher than ever before, Shearer says. In addition, the dominance of Wal-Mart and other mass merchandisers “has forced a lot of us to do business differently and be more competitive,” he says.
New but Familiar Products
To add excitement to an impulse-driven market, snack producers such as Shearer’s are rolling out unique flavors of snacks, like its wasabi-flavored chips. Moreover, limited-time offers are becoming increasingly popular because they allow snack producers to introduce creative products that can provide a sales spark in the short run.
“We’re going a little off the wall and stealing [ideas] from foodservice, such as going into Asian, with products not necessarily thought of before in the chip category,” Shearer says.
For bakers serving the foodservice channel, the focus also is on variety and product differentiation, with operators asking for different shapes and sizes of ciabatta, focaccia and every type of cheese bread under the sun.
“We’ve had more requests from foodservice operators for ‘something different’ than ever before,” notes Michael Marcucci, CEO of Alpha Baking Co.
With the wind down of the whole “Atkins fiasco,” Alpha Baking is seeing improved volumes across the board. The move by consumers away from standard white bread and buns plays into Alpha’s strong suit as a variety baker, he says.
Although the company’s variety baked goods business is solid, Marcucci suggests that he needs to see more proof that the heartier whole grain bandwagon is definitely what the media cracks it up to be. Sure, he sees increased interest by his customers, but he isn’t totally convinced yet.
“We’re getting many requests for samples of various whole grain breads and rolls, but very few orders to date,” he says.
On the other hand, Tobias Donath, director of marketing for Bäckerhaus Veit, is convinced that the whole grain train is not a fad hyped by the media. It’s the real thing, he says, bolstered by the federal government’s new food pyramid and the 2005 Dietary Guidelines that emphasize the consumption whole grains and are backed by scientific research.
“Whole grains are something we like to innovate against because it’s something that we believe in,” he explains. “It’s good for people, and it’s perfect for bread. There are great opportunities for the cereal guys, the pasta guys and, of course, the bread guys.” SF&WB
Ubiquity Brands Buys Into Private Label
Ubiquity Brands, a Chicago-based manufacturer, marketer and distributor of premium-quality snack foods, has acquired Wyandot, Inc.’s private label salty snack business. Through the transaction, Ubiquity will obtain a broad customer base, as well as state-of-the-art manufacturing and warehouse facilities in Jeffersonville, Ind. However, Wyandot will maintain its Marion, Ohio, plant and business, which serves various trade channels.
“Our retail customers are increasingly looking for premium, private label, snack solutions,” says Jeff Dunn, Ubiquity’s president and CEO. “This acquisition adds new capabilities and significant scale to our already growing private label and retailer branded business, and will help us further the needs of our strong and growing customer base.”
Ubiquity Brands’ majority shareholder is Willis Stein & Partners, a Chicago-based private equity investment firm.
“Expanding Ubiquity’s private label presence is an important element of our overall growth strategy for the business … This snack food platform is very well-positioned for the future,” says Avy Stein, managing partner at Willis Stein.
The Snack Gap
When it comes to snacking, consumers and supermarket retailers don’t see it the same way, according to a survey by the International Dairy-Deli-Bakery Association (IDDBA).
In fact, retailers have a much narrower perception of snacking than consumers do.
Specifically, nearly 42% of retailers still classify snacks as including just chips, cookies and other traditional snacks. Only 20.4% of consumers share that view, according to the IDDBA’s “Snacking Trends, World of Opportunity,” which was released in September.
The result is that supermarkets and snack producers are losing potential business opportunities because they don’t have a full understanding of the snack market and what motivates consumers to snack.
According to the survey, “Consumers are being presented with a less-than-optimal array of snacking choices, and although they will tend to sacrifice with what is available, they will be primed to switch should someone else offer them what they really want in a way that’s easily accessible.”
For more information on this report, contact the association at www.iddba.org.
George Marcucci Becomes New Gonnella President
After 38 years with the family bakery, Lou Gonnella retired from Gonnella Baking Co. of Chicago. George F. Marcucci was named the new president.
Marcucci, 58, most recently held the position of corporate treasurer at Gonnella, but his beginnings were a bit more unassuming. As a teenager, Marcucci began his career at the company by sweeping the bake shop floor, loading bread onto trucks and making deliveries.
A graduate of Oak Park, Ill.-based Fenwick High School, and Loyola University of Chicago with a degree in accounting, Marcucci first moved into the front offices at Gonnella when he was promoted to an accountant position.
“This is a tremendous honor, and I am looking forward to taking the company to the next level,” Marcucci says. “Gonnella Baking has accomplished many things in the last five years, and we and the baking industry have many more success stories ahead of us.”