Making the Grade
April 1, 2006
Making the Grade
Dan Malovany, editor
With the end of the current school year right around of the corner, let’s evaluate just how well the baking industry is serving its customers. No, I’m not going to grade you. Rather, let’s have people who have worked at two of the world’s largest retail chains give us their report cards.
Speaking at the American Bakers Association’s annual convention last month, James Keyes, former president and CEO of 7-Eleven Inc., described the baking industry as “probably in the middle of the pack … not worse or better than other industries.”
He added that baking companies have a “huge amount of potential,” but they tend to be resistant to change and wed to old-distribution structures that don’t reflect today’s business environment. Producing and delivering baked goods five days a week doesn’t cut it, he said.
“You have to find a way to keep production going seven days a week to keep the shelves full,” he explained.
Meanwhile, John Butler, vice president of bakery/commercial bread at Wal-Mart, gave bakers an “A” for their attitude.
“I've only worked in the baking industry a few years,” he said at the American Society of Baking’s technical conference. “I never met a more committed, involved, passionate group of people. My hats off to you.”
However, he added that the baking industry can do a whole lot more to reduce costs, improve product safety and ratchet up product innovation. In fact, during his presentation, Butler suggested dozens of ways in which bakers can improve their operations to make them low-cost producers.
I wouldn’t take his suggestions lightly.
Specifically, Butler urged suppliers to follow Wal-Mart’s lead and search for every possible way to reduce distribution costs. The retailer’s goal is to streamline transportation by 25% over the next three years to 50% over the next six years. It’s also looking for ways to offset rising energy costs through more efficient lighting and recycling of used motor oil to heat its stores.
To improve service, bakers also should retool their bread lines so they can produce buns during the busy summer barbecue season. To avoid costly recalls, a major concern of any retailer, bakers need to replace outdated manual product inspection processes with computer imaging systems that monitor all products, not just one or two out of each batch.
At a Wal-Mart store, Butler noted, the bakery aisle turns about two to three times a day, on average. If there’s an issue with product integrity, often it’s too late. The products already are in consumers’ homes.
“If you can’t recover product that has had an issue within a day or in less than a day, obviously there are greater problems,” he said.
Additionally, both executives agreed that the baking industry was slow to respond to the Atkins craze and could do a better job responding to emerging trends.
“It took almost a year after Atkins began to build momentum before the baking industry took notice,” Butler said.
He did praise Flowers Foods and Sara Lee for their innovative efforts during that Atkins era, noting that both companies were rewarded with “astronomic sales.” In general, however, low-carb baked goods didn’t deliver, and the excuses failed, as well.
“If you have to say, ‘it’s not bad for low-carb’ or ‘it’s not bad for low-fat’ or ‘its not bad for zero trans,’ then you’ve got the wrong picture, because the consumer who wants that product wants it to taste every bit as good as the fully leaded version,” Butler explained.
Wal-Mart expects its suppliers to be category experts, to identify emerging trends and to develop distinctive products. Many companies are simply not as proactive as Wal-Mart would like them to be. Some don’t communicate openly with the retailer. They often don’t propose creative solutions until the market forces them to react to an emerging issue such as eliminating trans fat.
As for those who believe the Atkins craze has faded, Keyes astutely observed that the diet actually has had a lasting impact on consumers and is driving many current health trends.
“To me, the Atkins revolution was about making people aware about what’s in their products,” he said. “It was not a fad. It was about freshness and what’s in products.”
As a result of this heightened awareness, better-for-you products such as whole grain baked goods have blossomed in popularity. Imagine the Atkins craze being responsible for turbo-charging the whole grains movement. How ironic is that?
“This low-carb revolution is raising awareness not just for moms, but for kids about what’s in products,” Keyes said. “Bakers need to find ways to capture the imagination of consumers and make products that are unique and fun.”
That’s how you make the grade.