Fresh Perceptions
By Dan Malovany
In July, it became official when Atkins Nutritionals, Inc. filed for Chapter 11 reorganization. The low-carb craze had run its course. Sure, consumers are still conscious of carbs, and in some markets, low-carb and light breads still sell well. But at least people are not as fanatical as before, eating gobs of red meat and bacon all under the guise of eating healthy and being on a diet.
Lettuce burgers? May they rest in peace.
Actually, the news about Atkins was hardly surprising to anyone in the industry. For several months, reports indicated that the Ronkonkoma, N.Y.-based company was in financial distress. Many fast-buck artists who opened low-carb shops were closing their stores. Most bakers simply responded to the bankruptcy filing with a shrug of the shoulders.
Premium Pays
(Median Price of Sandwich by Bread Type)
Bread/Roll 2004 2003 2000 1996
White $4.09 $3.97 $3.40 $3.14
Italian $4.99 $4.79 $4.69 $4.84
Wheat $5.49 $5.59 $5.29 $4.35
Buns/Rolls $5.50 $5.45 $4.99 $4.19
French $5.54 $5.50 $4.99 $4.59
Multigrain $5.60 $5.19 $4.95 $5.29
Panini $5.69 $5.99 $5.95 $6.85
Wraps $5.75 $5.38 $5.95 $6.99
Pita $5.79 $5.45 $4.09 $3.60
Croissant $5.89 $6.39 $4.39 $4.39
Submarine $5.95 $5.50 $4.86 $4.15
Foccacia $6.49 $6.97 $6.77 $6.42
Rye/Pumpernickel $6.55 $6.29 $5.99 $5.39
Cheese/Flavored $7.29 $7.29 $6.64 $6.50
Ciabatta $7.45 $7.45 $6.99 $6.89
Total* $5.59 $5.79 $4.95 $4.49
*Includes breads not listed. Total number of breads/rolls listed on menus by foodservice establishments in 2004. Sample size is 8.894. Does not including hamburgers and hotdogs.
Source: MenuMine Database of Foodservice Research Institute, Oak Park, Ill.
That’s because many of them have seen the momentum in the market slowly shift over the last 18 months. Since the beginning of the year with the announcement of the U.S. Dietary Guidelines and its positive focus on grain-based foods, the momentum has only accelerated as bakers roll out premium breads in an effort to adjust their product portfolios to reflect changes in the market.
In the retail channel, variety has become the spice of renewed life for the bread aisle. Sara Lee Food & Beverage and Interstate Bakeries, for instance, created a media splash this summer with new white breads made with whole grains under the Sara Lee and Wonder labels. Weston Bakeries grabbed a few headlines as well with Arnold Smart & Healthy bread made with Omega-3 fish oil.
Additionally, Pepperidge Farm is joining Flowers Bakeries with breakfast breads made with whole grains. In April, Flowers introduced its Nature’s Own Special Mornings breakfast breads in cranberry raisin, maple French toast and cinnamon flavors. In June, Pepperidge announced that it’s introducing Cinnamon with Raisins and Cinnamon Swirl breads made with whole grains.
In fact, Pepperidge is going whole hog with whole-grain bagels, croutons, crackers, Goldfish, English muffins, new sandwich breads and even frozen garlic Texas Toast under what it calls its Sensual Nutrition campaign.
“We are committed to gratifying consumers’ senses and indulging their appetites while also delivering the healthful benefits they need – that’s what Sensual Nutrition is all about,” says Ruthann Walsh, Pepperidge Farm business director, bakery. “The cornerstone of our new whole-grain products is definitely taste, but we also wanted to provide consumers with a more distinctive eating experience.”
Healthy Bread Destinations
Meanwhile, in the in-store bakery sector, companies like Chicago-based Maple Leaf Bakery are expanding their lines with breads, rolls and bagels made with higher-end, more differentiated grains. The goal, notes Brock Furlong, president of Maple Leaf’s frozen baked goods division, is to create “a healthy bread destination within their in-store bakeries.”
Maple Leaf is currently rolling out its Wholesome Harvest line, which includes more than 20 par-baked wheat, whole-wheat, multigrain and whole-grain breads, rolls, boules, baguettes, sub buns and other specialty breads. Retailers can pick and choose from Maple Leaf’s broad portfolio to customize their SKU (stock-keeping units) count to maximize the profitability of the in-store bakery.
Along with the products, Maple Leaf offers display racks, point-of-sale materials and product labels. This fall, it plans to tie in with the Whole Grain Council’s stamp program to promote and validate its products nutritional value. The program is designed to be a one-stop shop for in-store bakeries looking to upgrade their product offerings.
“What it’s meant to be is really a turnkey solution for the retailer to drop into their in-store bakery,” Furlong says.
Bread is back and not because consumers have forgotten about carbs, but because they are more educated about nutrition, Furlong says. Savvy marketers are now using that knowledge to their benefit.
“One of the positive things that the low-carb phenomena drove was it made consumers far more knowledgeable about what would be good carbs versus bad carbs,” Furlong notes. “With Atkins in Chapter 11 and everyone predicting the demise of that trend, I think the real benefit for consumers is they’re really trying to distinguish between their carbs, which is a very positive thing, health-wise, to do.”
To differentiate themselves from their competitors, many in-store bakeries are creating a “fresh from our bakery image” with higher-end products such as artisan breads, bistro-style items and rustic rolls that cannot be easily duplicated at home, says Craig Fierstein, director of marketing and new business development at Better Baked Foods Inc.
“Par-baked products stand out among the most desirable types of products sought out by our operators and customers,” Fierstein says. “The value proposition of these par-baked products have improved dramatically over the past five years. The cell structure of the crusts and the frozen and refrigerated shelf life of these items have improved the use of these products for longer periods of time without diminishing taste and freshness.”
Better Baked Foods produces a wide variety of frozen breads, French bread products, rolls, pizzas and pizza crusts at its Westfield, N.Y., plant. Toppings are then applied at its North East, Pa. based-plant.
In the foodservice and hospitality industry, bakers are searching for ways to incorporate bread into menu ideas that fit into “center of the plate” concepts as well as in appetizer choices, such as bruschetta and mini pizzas.
“Our new products development department is continually looking at new ways to approach this fast-changing food business,” Fierstein says.
Moreover, there is a renewed emphasis on improving the quality of the bread basket to enhance the overall dining experience. Additionally, the proliferation of gourmet sandwich offerings prompted many bakers to turn the page on last year’s woes and concentrate on taking advantage of new opportunities that await them.
As Renato Turano, president of Berwyn, Ill.-based Turano Baking Co., explains, “As far as the problems that we were going through as an industry with the Atkins Diet and some of the other diets, it seems like it never happened. For some reason, it seems like people are back to eating like they were before. Bread is again a part of their diets.”
No doubt, the low-carb craze dented consumers’ enthusiasm for sandwiches last year, and many foodservice establishments responded by lowering prices on their menus last year. In fact, according to the MenuMine database of Oak Park, Ill.-based Foodservice Research Institute, which gathers and analyzes restaurant data from thousands of menus, the median price of sandwiches actually declined to $5.59 in 2004 from $5.79 in 2003.
Higher Prices for Quality
On the bright side, a MenuMine analysis of more than 8,800 sandwiches and handheld items made with bread, rolls, tortillas and other grain-based carriers seems to document what bakers have been telling restaurateurs for years. On the whole, foodservice operators have greater flexibility to charge more for sandwiches if they upgrade their bread offerings.
Hot Sandwiches Command Higher Prices
(Median Prices of Hot/Cold Sandwiches with and without an Accompaniment)
Sandwich Type 2004 2000 1996 % change
Hot Sandwich Alone $5.49 $4.50 $3.70 +48.4
Cold Sandwich Alone $4.99 $4.49 $3.95 +26.3
Hot Sandwich (w/accomp.) $6.75 $5.99 $5.95 +13.4
Cold Sandwich (w/accomp.) $5.95 $5.50 $4.45 +33.7
Total Sandwich* $5.59 $4.95 $4.49 +24.5
*Total sandwich involves 8,894 sandwiches and hand-held meals offered byfoodservice establishments in 2004. Does not including hamburgers and hotdogs.
Source: MenuMine Database of Foodservice Research Institute, Oak Park, Ill.
For example, a sandwich made on white bread sold for an average of $4.09 last year while a sandwich made on Ciabatta commanded $7.45, according to MenuMine data. Likewise, the price of premium offerings such as cheese/flavor breads, which includes everything from Asiago cheese rolls to Kalamata olive loaves, indicated that restaurants can charge more by going high-end on their bread and roll choices. (See accompanying charts).
In addition to higher prices for sandwiches, switching to premium breads can add to larger average ticket sales because restaurants can charge more for premium accompaniments, such as gourmet chips and other snacks. As a result, sales of sub sandwiches made on higher quality rolls continue to increase over the years.
“The evolution we’re seeing occur [in the bread industry] is not unlike what we’ve seen in the coffee business,” Furlong says. “We’re seeing more and more foodservice operators realizing that bread, like a better-quality coffee, can be a key differentiator and potentially a platform for a whole concept. The recognition that a quality bread can really change the view of their patrons as they walk into their restaurant is driving rapid adoption of cost-effective, premium bread offerings. In the grand scheme of things, the proliferation of upscale sandwich offerings is nothing new, says Jerry Smiley, founding partner with Roselle, Ill.-based Strategic Growth Partners, which monitors trends in the foodservice and in-store bakery channels.
“What’s new is that we’re seeing an acceleration of where we had been with the use of premium breads on sandwiches,” he explains. “In fast food, it started with Arby’s and its Market Fresh program. Now, everyone is jumping on the bandwagon.”
Even McDonald’s finally jumped into movement with its new line of chicken sandwiches on premium rolls. Even when its advertising campaign began in August, the chicken sandwiches were selling well, according to analysts who cover the fast food chain.
By the end of the year, McDonald’s plans to have a deli sandwich program in about 400 units. The sandwiches come in Turkey BLT, Buffalo Chicken, Beef n’ Provolone, Leaning Tower Italian and New York Reuben.
It’s easy to see why McDonald’s is moving over into the deli sandwich arena. Companies like St. Louis-based Panera Bread continue to experience faster growth than the fast-food giant. At Panera, same store sales of its bakery/cafes open for at least 18 months were up 7.7% for the year-to-date through July 12, 2005. For the most recent 12-week period ending July 12, same store sales rose 9.3%, the company reported. By contrast, McDonald’s July sales rose 4.9%, which was still impressive for a mature company of its size.
All about Freshness
In the foodservice and in-store arena, the buzzword is all about “freshness,” Smiley says. That’s why Panera and Arby’s have been so successful with their sandwich programs.
“A BLT made on a premium bread with lettuce and freshly cut tomato may not be healthful for you, but it is perceived as so because it’s made fresh,” Smiley notes.
McDonald’s is just the latest company to follow in Panera Bread’s lead. Over the last few months, Chick-fil-A started serving chicken sandwiches on wheat buns. Wendy’s is testing sandwiches made on bread called Frescata, which has a crisp crust, soft interior and is baked in the restaurants.
Jack-in-the-Box began serving its chicken sandwiches on thick-crusted Ciabatta bread. Even the struggling Blimpie International finally got on the bandwagon and recently began offering Ciabatta to spruce up the images of its traditional subs.
Upgrading bread allows restaurants to easily refresh their sandwich programs with new or seasonal items, Furlong says.
“What we’re seeing with more mature sandwich programs is a desire to use the carrier as a source of differentiation and potentially news,” he says. “For an operator to launch a new sandwich is a lot of work. To launch the same sandwich except with a more interesting carrier is much more manageable in the back of the house and the development cycle time is much quicker.”
Fierstein adds that foodservice operators are seeking new ways to present their food ideas in creative formats.
“Asian/ethnic flares in sandwich applications have increased awareness among foodservice operators that, in order for to them to improve their value and create more awareness for their products, they need to differentiate themselves with a sustainable competitive advantage,” he says. “This will set them apart from their competition.
“At Better Baked foods,” he adds, “we excel in meeting customer demands for new flavors, new shapes and new applications of traditional recipes.”
Better Baked Foods develops and produces a wide variety of products for foodservice and private label customers. The company also provides customer product development and packaging.
Many companies also have upgraded by toasting their sandwiches. Denver-based Quizno’s has been so successful that it prompted Subway, the largest sub chain, to retool all of its units with toasters. Other smaller chains like Chicago-based Potbelly Sandwich Works are experiencing superior growth with higher-end toasted sandwiches made fresh for customers, Smiley says. Even convenience stores, such as White Hen Pantry in the Midwest, advertise that its stores now sell toasted deli sandwiches.
It’s easy to see why the toaster has become so hot. MenuMine’s data seems to confirm that hot sandwiches command a higher price than their unheated counterparts. In 2004, the average hot sandwich sold for 50 cents more than its cold counterpart. In 2000, both hot and cold sandwiches sold for an average of about $4.50.
“It really doesn’t cost them anymore to heat a sandwich, but they can charge more because it’s perceived as fresh from the oven,” Smiley says.
Selling Panini sandwiches has opened several doors for Turano Baking over the years. The company produces a pre-sliced 3-lb. loaf that foodservice operators use to make the grilled sandwich. The breads come in white, wheat and multigrain varieties.
“Panini means sandwich in Italian,” Turano explains. “Over here, it means two slices of bread toasted on a grill with some meat, cheeses and other condiments. It’s not just a sandwich. It’s a specialty, upscale gourmet sandwich.”
In the restaurant industry, it’s all about hospitality and presentation. For consumers, the return to consuming bread is all about health, freshness and perception.