Welcome to “It’s GOTTA Taste Good!” — the hit program that everyone in the snack and baking industries is talking about. Screaming fans across the nation are flocking to check out this new reality show that’s sweeping supermarkets, convenience stores and other distribution channels. To contestants, it’s all about becoming “The Next Best Thing.” The competition often involves an “Extreme Makeover.” And the ultimate prize is to be declared “America’s Next Top Model.”

Behind the scenes are marketing gurus, food scientists, master bakers and savvy snack producers facing their next 15 minutes of fame … or a boatload of blame. Despite the risk of ridicule and shame, they march out new products that are more or less innovative to compete for best buns in the bread aisle, to create the sweetest thing, to dance with the bars or to emerge as the next star among all salted snacks.

When reality bites, it’s gotta taste good. No ifs, ands or buts. Certainly, it helps if the new cookies and crackers come in convenient 100-calorie pouches for portion-control or are made with organic flour like Northfield, Ill.-based Kraft Foods’ new Ritz crackers. The edge could go to bagels, buns, English muffins or anything, it seems, made with whole grains.

Even potato and tortilla chips are playing the health card by losing 40% of the fat. Without a doubt, getting rid of trans fat might be where it’s at for every contestant, whether baked or fried. But nutrition alone won’t do the trick. If a product tastes lousy, there’s simply no second chance. The verdict will be clear when the audience of consumers yells, “That’s Crap!”

Yes, participating in the snack and baking industries often is like a reality show. When it comes to consumers’ preferences, it’s all about being “hot or not.” And it’s all about “deal or no deal” when  it comes to retailers’ demands. If the price isn’t right, put it on promotion or face elimination.

For Jennifer Hartley, director of bread innovation for Horsham, Pa.-based George Weston Bakeries, the baking industry has been a lot like “Survivor.”

“Baking is a tough business, and the industry is facing steep cost increases on ingredients and energy, and pricing can only take us so far because there is a limit to what consumers are willing to pay for bread,” she says. “The companies that can leverage their infrastructure and their brands are the ones that can stay on the island.”

Larry Marcucci, president of Alpha Baking Co. in Chicago, compares the industry to “The Amazing Race.”

“All of us are traveling around, looking for the next big thing to happen and trying to stay ahead of the trials and tribulations that we have to face with fuel costs and other rising expenditures,” he explains.

Serving the market, adds Michelle Peterman, vice president of marketing for Kettle Foods, Salem, Ore., is like being on “The Biggest Loser.”

“Everyone’s trying to lose weight and be more balanced and all of the attention is toward better-for-you,” she says. “I think consumers are becoming more aware that there is no silver bullet. You have to deploy a balanced approach.”

2006 Bakery Food Sales
Category	Dollar Sales (in millions)	% Change vs.Previous Year
Bread Aisle(1)	$13,122.0	+3.7
Cookies & Crackers	$11,498.8	+1.9
Sweet Goods(2)	$4,666.0	-0.2
Refrigerated & Frozen Baked Goods	$3,432.7	+0.4
Snack Bars	$3,047.9	+7.8
Total Bakery Food Sales	$35,767.4	+2.6%
(1)Includes packaged bread, rolls, buns, bagels, tortillas, English muffins and other related grain-based foods. (2)Includes snack cakes, doughnuts, Danish, toaster pastries and other sweet goods. Sources: Information Resources Inc., ACNielsen, Mintel. Includes all channels, supermarkets, drug, mass merchandisers, wholesale clubs, foodservice, C-stores and others.

Passion is the key for Kris Malkoski, executive vice president and chief marketing officer for Ubiquity Brands in Chicago. That’s why she likens snack food sales to “The Bachelor.”

“Consumers will experience different chips, but ultimately, they will find the chip they love,” Malkoski explains.

For most products, the ultimate goal is, of course, to become “America’s Idol,” adds Kyser Thompson, chief storyteller for Lesser Evil Brand Snack Co., Village of Tuckahoe, N.Y. “It’s all about the fans’ choices,” he notes. “The audience chooses the winner. The fans vote, and they vote a lot.”

There’s no question that whole grains have stolen the show in many producers’ minds, with all-natural running a close second. In 2006, food and beverage companies cranked out a whopping 1,553 new whole grain products, according to Chicago-based Mintel’s Global New Products Database and the Whole Grains Council in Boston. That number is up 121% from the 704 new whole grain items that were unveiled in 2005 and more than 900% from the 154 launches in 2000.

Leading the pack, not surprisingly, is the bakery category, with an unreal 642 entries, more than double the 291 new whole grain products that came out the year before. At a distant second were breakfast cereals with 387 entries, followed by the snack category with 249 new whole grain items.

It’s not difficult to see why adding whole grains has become a no brainer to revitalizing a brand. What an easy way to give a product a healthy glow. Just look at the numbers. Sales of baked goods making a whole grain health claim last year reached $221 million, surpassed only by all-natural with $254 million in sales and no trans fats at $349 million, reports Mintel, The Food Institute Report and the International Dairy-Deli-Bakery Association.

However, the reality is that few Americans eat the recommended three servings of whole grains daily. In fact, nearly half of adults say they don’t eat them at all, according to a study published in the May issue of Nutrition, Metabolism and Cardiovascular Diseases.

That’s stupefying, because they’re shoving everything else into their mouths. Per capita consumption of calories has risen more than 26% since 1970, notes a report called “Attitudes to Food: Weight and Diet,” published by Mintel in March. In short, the report found that most Americans have a love-hate relationship when it comes to food. Yes, they love to eat it, but they also hate themselves because of it. Look in the mirror, and take a reality check. Who’s the fattest of them all? It’s you.

Despite consumers’ dyslectic behavior, snack food and wholesale baking companies are trying to market their products in a way that educates consumers about how to improve their eating habits.

The key is not to get caught up in in-and-out fads, says Tim Zimmer, vice president of marketing for Sara Lee Brands, Sara Lee Food & Beverage. For example, he adds, Sara Lee’s strategy is to identify long-term trends such as whole grains and marry them up with its brands.

“We make sure that we’re not developing products where the benefit statement is the only thing that comes through,” Zimmer says.

For instance, during the low-carb era a few years back, the Downers Grove, Ill.-based company came out with its Sara Lee Delightful line, which delivers multiple benefits but maintains the taste and texture of conventional soft white and wheat bread. As a result, the products still are relevant today, even though the low-carb craze is not.

2006 Snack Sales
Category	Dollar Sales (in millions)	% Change vs. Previous Year
Potato Chips(1)	$6,339.7	+0.9
Tortilla Chips	$4,866.9	+5.4
Corn Snacks	$835.3	+1.9
Pretzels	$1,334.3	+6.8
Microwave Popcorn	$1,276.9	-2.3
RTE Popcorn	$468.9	+5.2
Snack Nuts/Seeds/Corn Nuts	$2,861.0	+3.5
Meat Snacks	$2,779.0	+6.7
Pork Rinds	$607.6	+8.1
Cheese Snacks	$1,256.5	-1.4
Variety Packs	$371.6	+6.3
Other Snacks	$2,662.1	+13.7
Total Snack Sales	$25,659.8	+4.3
(1)Includes potato chips and baked potato crisps Sources: Information Resources Inc., ACNielsen, Mintel. This year’s data do not include information from the Snack Food Association. Includes all channels, supermarkets, drug, mass merchandisers, wholesale clubs, foodservice, C-stores and others.

“They’re low-calorie, low-sugar and low-carbs, and we never have to sacrifice taste,” Zimmer adds.

Not long ago, healthy snacking was an oxymoron. Today, brands such as Mrs. Freshley’s SnackAway line by Flowers Foods Specialty Group, Thomasville, Ga., specialize in better-for-you snacks. The treats have 150 or fewer calories per serving, no trans fats, and less overall fat and sugar and more fiber than similar snacks in the market. Flowers recently added chocolate cupcakes and peanut butter bars to its brand and will explore new ways to grow this snack cake line, notes George Deese, chairman, president and CEO of Flowers Foods.

“We are focused not just on honeybuns anymore,” he says. “We know we have to broaden our alternatives. SnackAway is the first step in doing that.”

At LesserEvil, the mantra is to “Stop Bad Snacking.” Declaring 2007 “The Year of the Snack,” the company joined the legions of salted snack producers rolling out yet another, not-as-bad-for-you alternative. In addition to varieties of more healthful popcorn, its KrinkleSticks line has 75% less fat than regular potato chips.  

“We never elude that we’re selling baby carrots or celery here — just healthier options,” Thompson says.

To help consumers make better-informed choices about whole grains, Flowers Foods began labeling the number of whole grain grams per slice on the top panel and gusset of Nature’s Own all-natural bread packaging. Sooner or later, the company notes, the baking industry will have to come to grips with the issue of labeling and the confusion over health claims.

George Weston Bakeries also is clearly labeling grams of whole grain per slice on its Arnold, Brownberry and regional brands.

 “We’re doing that on all of our whole grain breads as a way to help consumers understand the continuum of whole grains,” Hartley notes.

It’s easy for consumers to get confused, especially with the proliferation of products. Do they understand the difference between whole grain, multi-grain and high-fiber breads? Is a 12-grain bread healthier than a 9-grain variety? Consumers might think so, but in reality, it’s not necessarily true.

“Maybe it’s partly our fault,” Marcucci says. “Everyone is trying to parse that consumer up into as many pieces as possible, and there gets to be a limit as to how many different ways you can reformulate the 10 or 15 grains that are out there.

“You have wheat and honey bread,” he continues. “You have sweet wheat. You have whole wheat. Is somebody going to have a bread made of wheat and sea salt? I can understand why the consumer is somewhat confused. We have so many different versions of whole grain products that they’re trying to decide which one is the best one, where I think they are all pretty good.”

In December, Men’s Health magazine named pork rinds “Genius Junk Food,” but that doesn’t mean they should be labeled a “smart choice” for everyone.

2006 Specialty Food Sales
Category	Dollar Sales (in millions)	%Change
Pizza(1)	$3,202.3	+5.2
Hot Snacks(2)	$883.9	+3.5
(1)Includes refrigerated and frozen packaged pizza and pizza kits. (2)Includes frozen appetizers and poppable snacks. Sources: Information Resources Inc., ACNielsen, Mintel. Includes all channels, supermarkets, drug, mass merchandisers, wholesale clubs, foodservice, C-stores and others.

In April, the Road Pizza Co., Merrillville, Ind., developed a pizza that may lower cholesterol because it contains plant sterols, but does that necessarily make it “heart-healthy?”

One man’s truth doesn’t make it a reality for all. Sprouted grain tortillas might sound like a good fit, but filled with chorizo just doesn’t cut it, especially with many nutritionists.

That doesn’t mean snacks and baked goods, especially breads and rolls, can’t be excellent carriers for vitamins, nutrients and other good ingredients.

“If carefully done, the field is wide open,” Deese explains. “Bakers must be cautious that the products they offer don’t become too pharmaceutical. However, as people look for easier ways to incorporate specific nutrients or other nutritional benefits into their diet, bread has the ability to fill that need.”

Health and nutrition may be the celebrities for the industry, but in the real world, they’re always the runners up because everyone knows “It’s GOTTA Taste Good.” SOI

During the past year, a couple of products that had been featured on “Ahead of Their Time” began playing in primetime on the big stage.

Take microwaveable pizza and panini. A decade ago, death row inmates would rather be executed than be forced to eat one of these. Now, thanks to advances in technology, they’re some of the most popular items in the freezercase.

Likewise, flax got voted off the stage just a few years back. Today, it’s among the hottest ingredients in town among bread bakers, tortilla producers, snack bar manufacturers and some snack producers. Currently, it’s the ingredient of choice — over fish oil — for getting Omega-3 nutrition into a product.

This year, we salute the real champions in our business: those companies that recognize the latest trends and develop truly innovative products that bring excitement to the snack and bakery sections.

Once again, for this year’s State of the Industry report, your intrepid reporters at Snack Food & Wholesale Bakery banged the phones, interpreted the data, developed our own analysis and then reconfirmed our findings with industry sources. Let’s give applause to SF&WB’s Managing Editor Deborah Cassell and our contributing editorial staff of Kathie Canning, Anne Ford and Jeanette Hurt for their hard work. These are the real stars behind the scenes. Also, please give a standing ovation to Michael Escobedo for his great design again this year.

Personally, we 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.

And last but not least, we want to high-five John McIndoe, Ryan Stredney and the folks at Information Resources, Inc., Chicago, who provided us with the branded data found on the dozens of charts in this issue. To obtain more detailed information from IRI, call 1-312-474-2884. — Dan Malovany, editor

In this year’s State of the Industry report, we focused on the theme of reality shows to demonstrate how innovative products survive every week in a variety of channels in the sometimes surreal snack and baking industries. Because we use parody, sarcasm, satire and some sophomoric humor, the content in this issue might not be suitable for trade journals and is intended to inform, intrigue and even amuse our readers. Any replication of this report without the express written consent of this magazine’s editors is strictly prohibited.