2013 State of the Industry Reports:
Our 2013 State of the Industry report explores market information for the bread aisle, sweet goods, cookies, bars, snack cakes, frozen baked goods, tortillas, pies and more.
Bakery products are evolving all the time in today’s market. To win the race, they mix healthful and tasty ingredients with a scoop of distinction. Yet they must also hug the curves when it comes to pricing and discounting. Even if the economy continues to lag, bakers are providing customers and consumers with what they want to stay on course.
With the wonderful warm weather finally arriving, it’s time to enjoy the outdoors, kick back a bit, maybe even take in a car race. But in the baking market, it’s time to put the pedal to the metal. Health, wellness and nutrition remain top priorities among consumers, and clearly, bakers are listening to their demands for better-for-you products.
But consumers also want some spice in their lives, in terms of new tastes, such as sweet and savory, according to several bakers we’ve contacted. Asian, Hispanic and Mediterranean influences are key trends and new ethnic flavors are making hairpin turns in this category. Unusual pairings of familiar tastes are also causing some nice traffic, such as fruity or chutney-like flavors, peppery corn muffins that are both sweet and spicy, a new black pepper and orange flavor combination and the use of olive and olive oil, garlic and jalapeno flavors in breads and rolls.
Today, there are many tasty, new gluten-free products, ethnic products, organic and healthful whole-grain items. Pretzel bread is also quickly becoming one of the fastest-growing U.S. food trends because the country still craves nostalgic comfort food. And consumers want to buy bread, buns and rolls in nontraditional outlets, such as dollar stores, discount outlets and drugstores.
Healthy breads offer the largest opportunity for growth in the bread aisle, affirms Lawrence Marcucci, president of Chicago-based Alpha Baking Co. “People continue to educate themselves about the effects and benefits of the foods they eat, and bread manufacturers need to match (if not lead) consumer desires for healthy products that taste great,” he explains.
New breads and pastries are being fortified with healthful ingredients or feature reduced sodium, sugar and fat. After asking for more whole grains this past decade, consumers are getting what they want. Bakeries are complying, and consumers are buying.
According to data from IRI Chicago (the recently rebranded name of SymphonyIRI), consumers are buying more whole-wheat and whole-grain bread varieties than white bread. Whole-wheat bread is the most popular bread in America, based on data from both IRI and Mintel, and ancient grains also continue to pick up speed in the bread market in a big way.
But bakers agree, they’re still feeling the impact of an economy that put the breaks on everything.” The economy has impacted bread, rolls and bun sales significantly over the last three years. Restaurants continue to downshift, as many people are eating at home. Bakers face other challenges such as escalating distribution and commodities costs, availability and competition from private labels, though many bakers also produce private-label products.
“Bread, buns and rolls are price/value-sensitive, and economic hardships allow for more value for the dollar spent,” relates Alan Edington, vice president of operations, at Tennessee Bun Cos., Nashville. “Consumers still focus on the price/value relationship, but the value portion of the equation has changed. Value used to be more about taste. Now, it means additional things like sustainable sourcing, organic, gluten-free, etc. So price is measured against the new value equation. Also, the younger generation wants to positively impact the world. Food is part of that impact. It will continue to be that way, and bread items will need to adapt to meet those demands.”
Alpha Baking, a national baker of fresh and frozen breads, rolls and buns, recently branched out into discount and dollar stores. “This is a new area for us,” says Marcucci. “We have formulated products specifically for this price point and have seen success selling where, in some cases, bread wasn’t offered on the shelf until we came in.”
He says the slumping economy has also led to a drop in brand loyalty in the bread aisle. “It’s less [of an issue] there than in many other grocery categories,” Marcucci explains. “Retail customers often decide which bread to buy in the aisle. They base their decision on price (what’s on sale?), new or different varieties, and more frequently, on which bread can make the boldest health claims without seeming medicinal. Because of this, we have to consistently offer customers an added incentive to choose us over the competition.”
Restaurant chefs and buyers are looking for consistency and want to know that each bun they serve will be identical in shape, color, texture and taste to what they order next month, Marcucci adds. “They’re also on the lookout for new and different bread/roll varieties to help differentiate themselves from their competition,” he says.
One drawback that can lead to is product varieties being produced in small quantities, meaning less efficient production. On the plus side, Marcucci says, the success of some of these varieties is often a first indicator of future trends on the retail side.
Meanwhile, Edington says organic products continue to be popular. “Retailers continue to expand their organic sections, and organic products sourced locally from sustainable farm programs and that taste good will gain a competitive advantage over other products in the category,” he adds.
Edington sees more people moving to organic products from nonorganic ones if the products taste good. “They’re doing this to support sustainable practices,” he says. “It’s the newest focus for the organic generation.”
But in certain segments and locations, organic product availability can be a challenge for retailers and consumers, says Doug Radi senior vice president of marketing and sales for Rudi’s Organic Bakery, Boulder, Colo. “In the mainstream bread aisle, most retailers don’t have any organic options, but consumers who are buying organic breads at Whole Foods are also shopping at the conventional grocery store. It’s important that conventional retailers offer an assortment of organic items to make sure they cover the shopping basket. While Rudi’s Gluten-Free products have always been available in the freezer, we have expanded our Rudi’s Organic product line to freezer options for a variety of retail customers.”
Radi says the overall organic industry is keeping pace at or near 10% growth. “We are experiencing similar trends in organic breads and baked goods,” he maintains. “As consumers continue to make an increasing connection between diet and health, they are making these improvements, despite the economic situation they face. With the continued growth of organic bread and baked goods, we are [also] seeing an increasing presence of private-label products in the category. Brands such as ours must continue to drive the best nutrition, quality and new innovative products, such as our new Super Seeded breads, to continue to grow the category. ”
Alpha Baking’s customers haven’t given up on organic breads, but other health claims, such as whole grains, fiber content and removal of artificial flavors have taken the lead in their minds, says Marcucci.
A significant trend in the bread market that he says will likely continue is the reduction in sodium. “Sodium is poised to be the latest media-appointed boogeyman, and many speculate that the Food and Drug Administration (FDA) will soon revise the daily recommended level of sodium sharply downward,” he adds. “This trend won’t be exclusive to bread products, but eliminating bread could be seen as an easy way to reduce sodium intake (many consumers don’t realize sodium is in bread at all, let alone know that a serving of sandwich bread can contain a significant percentage of the recommended daily allowance). Foods that are labeled ‘low sodium,’ ‘reduced sodium’ and the like will appear on store shelves and restaurant menus more often.”
Marcucci believes that if cutting sodium is as widespread as some predict, “food producers across the board will need to reformulate to achieve lower sodium levels. Even those items that contain no sodium (or have it in miniscule amounts) will need to reflect this on their packaging and in advertising. There have been initiatives toward sodium reduction in the past, but now, sodium reduction is primed to be a much hotter topic. And finally, there are reduced-sodium products that taste good.”
To that end, Alpha Baking is currently testing sodium reduction with great success. “In test formulas, we have been able to significantly reduce sodium without introducing the bitter taste that has traditionally stymied reduction efforts,” Marcucci points out.
Whole-grain has wheels
While whole-grain bread is nothing new, it keeps on truckin’, so to speak, because consumers like how it tastes. “Last year’s changes to school lunch programs educated people about the benefits of whole grains, and parents and kids alike found that they like the taste,” Marcucci says. “Labeling retail and restaurant items prominently with ‘whole-grain’ claims and Whole Grains Council stamps will continue as long as it attracts new customers.”
Cordia Harrington, owner and CEO of Tennessee Bun Cos., says it’s exciting to see products such as ConAgra’s Ultra Grain being introduced. “It’s a white whole grain, which gives it the appearance of white flour, yet it provides the nutrients of whole grain,” she explains. “We’re seeing great success with breakfast bread products such as those in McDonald’s Egg White Delight McMuffin. It’s unique, innovative and a great new wheat. We also notice that portion sizes continue to decrease, for nutritional purposes and perceived new product offerings.”
Tennessee Bun Cos. is leveraging its new products against these factors. “We introduced whole-grain biscuits, buns and muffin products that have good taste and are receiving great approval,” Edington says. “But we notice that private-label products are getting bigger each month. Branded products use advertising to combat private label. We also see foodservice as one of the greatest opportunities for growth in the bread aisle categories.”
Family-owned Klosterman Baking Co., Cincinnati, increased the vitamin D in its 100% Whole Wheat and 12 Grain bread loafs, which hit stores in March in the Cincinnati, Dayton, Columbus and northern Kentucky markets. Klosterman increased the previous 2% per serving to 10% per serving because it says 10% is considered a good source of vitamin D.
The upgrade was implemented after “the FDA amended food-additive regulations to allow bakers to significantly increase levels of vitamin D in bread and make ‘High,’ ‘Rich in’ or ‘Excellent source’ claims, if they use vitamin D2 bakers’ yeast,” explains Elaine Watson, author of the article, “Regulation Change Could Help Turn Bread Into Key Source of Vitamin D.”
“I’ve seen a boost in the amount of white breads that are fortified, as well as updated packaging, [which is allowing bakers] to garner a new perception surrounding whole-grain products overall,” states Klosterman’s Amy Ott, director of marketing. “Our whole-wheat breads boost the nutritional value, helping us to not only stand out, but to deliver even more value for the dollar, overall.”
Gluten-free products continue to be refined, as do organic and whole-grain products, but pretzel rolls are really fueling the tank right now. Adds Edington, “The hottest trends are gluten-free and sustainably sourced ingredients. There is also a new generation of consumers that think about the triple bottom line: That’s what we call, ‘People, Planet and Profit.’ They want products that meet those expectations.
“Gluten-free is a health issue for many people,” Edington continues. “Those impacted by health issues who need gluten-free products will consume them no matter the economic status. I think gluten-free fits into the bread/buns/rolls category well. If commercial bakeries can establish a formulation that works with no gluten, it should reduce costs long-term and add value to the category.”
Rudi’s, which just remodeled its Boulder bakery with a dedicated facility for gluten-free products, says the facility will allow for increased production of both its gluten-free and organic brands. The expansion adds more than 10,000 sq. ft. of space and nearly doubles the plant’s weekly output of both the organic and gluten-free production lines. Part of the remodel was adding a dedicated gluten-free facility, which shifted production schedules so that both organic and gluten-free products can be produced every day of the week.
“Demand for gluten-free has increased,” confirms Radi. “Gluten-free products and brands cater to both people who need to consume food free of gluten, due to dietary restrictions, and those who choose to eat gluten-free foods as part of a healthy lifestyle diet. According to the Mayo Clinic, one in 100 people have celiac disease, an increased number from previous reported data. We’re doing our part to help provide gluten-free bread and baked goods made with wholesome, natural ingredients and a taste and texture closer to wheat breads for those who need and want it. This trend is different than trends of the past, because even if the trend for people eating gluten-free as a healthy lifestyle went away, there would still be strong consumer demand for the products because there is a growing number of consumers who must eat gluten-free products due to medical diagnosis.”
Last November, Rudi’s Gluten-Free launched a Soft and Fluffy Sandwich Bread recipe after learning the gluten-free community was less than satisfied with industry sandwich bread offerings. The bakery improved its recipe to make the breads more soft and fluffy, with better taste and texture, Radi says. They also have a better shelf life, double the fiber content to 2 g. per serving and maintain a standard Gluten Free Certification Organization (GFCO) seal while being made with all-natural ingredients. The breads are available in Original, Multigrain and Cinnamon Raisin varieties.
The environmental engine
Sustainability is being more recognized and acted upon by various bakers. In the past few years, bakers started paying more attention to issues of sustainability, genetically modified organisms (GMOs), clean labels and food safety, as these factors are increasingly important.
Tennesee Bun has various sustainable initiatives. “Our initiatives are also focused on the triple bottom line of People, Planet and Profit concept I mentioned earlier,” Edington says. “We have energy-reduction goals, social initiatives for employee health and well-being and zero-waste-to-landfill plans, to name a few. Sustainability is a focus for our company, but it will need to become a core competency for us to be part of the fast-changing expectations of consumers worldwide.”
Harrington says her company will be zero-waste-to-landfill this year. “We have many sustainable initiatives in place, and have an aggressive three-year plan,” she adds.
Marcucci says Alpha Baking has always looked for ways to do business with one eye on its environmental impact and another on the community. “We have greatly increased the amount of material we recycle, ensuring that our packaging is recyclable wherever possible and switching to plastic pallets wherever possible,” he says. “Something as simple as switching light bulbs has decreased our energy usage in those areas by 75%. In a more complex example, we have just launched a test fleet of 22 delivery trucks that are 100% propane-powered, which has the potential to decrease our environmental impact considerably.”
Radi says Rudi’s latest sustainable initiative is a partnership with a nonprofit organization whose mission is to connect people across the globe by lending to small businesses to alleviate poverty.
“In celebration of our new Super Seeded and Sprouted Breads, we partnered with micro-funder Kiva.org to seed money to aspiring entrepreneurs who have businesses in likeminded areas to Rudi’s, such as farming,” he explains. “Recognizing that Rudi’s Organic started as a humble local bakery more than 35 years ago, we wanted to take time to help others here in the U.S. and across the world achieve their goal of building a business with like-minded values. When we came across Kiva.org and saw the success they’ve had in growing small, sustainable businesses across the globe, we knew it was the right opportunity to spread our love beyond our backyard, helping others achieve their goals.”
Cruising for cleaner labels
Radi says he also observes a major need for cleaner, healthier snacks. “Historically, the snack category has been defined by brightly colored packages filled with higher calorie, sugar- and salt-laced, indulgent options,” he continues. “Today, shoppers want smarter snack choices made with more natural ingredients that provide nutritional value. We’re seeing an interest with consumers for snacks that are made without ingredients like high fructose corn syrup and GMOs. This inspired Rudi’s Organic to leverage our experience in baking bread in a brighter way to introduce our first-ever snack, Rudi’s Organic Bakery Soft Pretzels, made with organic ingredients and featuring only 170 calories per serving.”
Designed to provide a cleaner, healthier snack, the pretzels were launched in April. They’re available in Plain and Multigrain, and offer a simple snack solution, full of organic ingredients and, of course, no GMOs or high fructose corn syrup. “The Plain variety is made with five simple ingredients and offers 6 g. of protein, while the Multigrain variety offers 8 g. of whole grains and 5 g. of protein,” explains Radi. “The Soft Pretzels are a simple snack solution found in the freezer aisle, but a choice moms can feel good about when feeding their families.”
Edington points out that sourcing local ingredients is becoming the way of the future. “Trucking products all over the country no longer seems to make sense,” he says. “Local sourcing and local sustainable sourcing are becoming major players in the category in expanded organic sections for all major retailers.”
Ready to roll
In the fall, T. Marzetti Co. launched Sister Schubert’s Homemade Rolls oven-baked rolls in two new varieties: Sweet Hawaiian Rolls; and Mini Loaves. The Columbus, Ohio, company says the two products contain no preservatives or artificial flavors and have zero trans-fat. “We aim to introduce exceptional products, unique to the market, with new flavors and innovative varieties that not only excite our customers but offer convenient solutions for their lifestyles,” says Karen Bailey, senior marketing manager for Sister Schubert’s Homemade Rolls. “Both Sweet Hawaiian Rolls and Mini Loaves are the first products of their kind to be available in the frozen food category and bring the homemade quality and convenience of Sister Schubert’s from the freezer to table in minutes.”
The Sweet Hawaiian Rolls have a subtly sweet, fruity flavor with the signature softness of a Sister Schubert’s roll. They’re made with juice from pineapples to inspire a true island taste. The Mini Loaves offer the taste of a warm, bakery fresh loaf of bread that can be enjoyed at home, anytime, and are ready to bake; there’s no thawing or rising. The Mini Loaves come in twin-packs, allowing for portioning and individual baking.
And with sweet potatoes cropping up in everything from snack chips to tortillas, Alexia Sweet Potato rolls answer the call in the rolls category. In December 2012, Alexia Foods, Eagle, Idaho, which offers frozen potatoes, breads and side dishes, introduced its first sweet potato gourmet artisan breads: Alexia Sweet Potato Rolls. The new chef-inspired rolls are made with American-grown sweet potatoes that offer a natural sweetness.
The indulgent rolls conveniently go from freezer to table in less than 20 minutes. Later this summer, Alpha Baking will introduce white-wheat hamburger and hot dog buns made with 51% whole grains. The new buns capitalize on the trend toward healthier eating while maintaining the characteristics Marcucci says customers are looking for in hamburgers and hot dogs. “People want to eat healthier, but they don’t want to have to feel they’re giving up what they love to do so,” he says.
Ancient grains gaining ground
In addition, Radi notices the movement toward ancient grains and seeds. More consumers are interested not only in generally healthy products, they want products that offer an additional boost of nutrition.
“Ancient grain and seeded breads are hearty and provide a rich taste profile, texture and greater nutritional content,” he says. “Rudi’s Organic leveraged this trend to introduce a new line of Super Seeded and Sprouted Sandwich Breads.” The new products were created in response to these trends to ensure the brand continues to meet evolving consumer demands.
Rudi’s second new product, Rudi’s Organic Seeded and Sprouted Sandwich Breads, speaks to the movement to include more ancient grains and seeds in products. Launched in March, the Super Seeded breads, available in Super Seeded Bread and Mighty Grains are certified organic with the U.S. Department of Agriculture (USDA), according to Radi, have 4 g. of protein, 15-17 g. of whole grains and 2 g. of fiber with Omega 3. The Sprouted versions offer 17-19 g. of whole grains, 3 g. fiber and 5 g. of protein, plus 120 calories per slice.
Marcucci points out that as ancient grains like quinoa, amaranth, spelt and others become more commonplace as side dishes and in dinner recipes, they will show up in commercially available bread in greater numbers. “Just as breads labeled ‘whole-grain’ have recently risen in popularity, those boasting ancient grains will spread beyond health food stores to grocery stores and traditional restaurants,” he says.
Flatbreads, ethnic items on fire
Some say consumers feel that “sliced bread” is boring, so they’re seeking more interesting ethnic bread choices. One way to achieve a point-of-difference is to drive into the Mediterranean trend. An example from Kontos Food, Inc., a Paterson, N.J., manufacturer and distributor of traditional Mediterranean foods, is its new Kontos Greek Lifestyle Flatbread, a relaunch that replaces the SmartCarb flatbread brand. The hand-stretched Greek Lifestyle Flatbread is specially formulated to appeal to protein-seeking, carb-conscious consumers who want to enjoy satisfying sandwiches, elegant appetizers and Mediterranean-style meals as part of a healthy diet.
“With this flatbread, we invite health and weight-conscious consumers to welcome bread back into their kitchens,” notes Steve Kontos, vice president of Kontos Foods. “Kontos Greek Lifestyle Flatbread represents a new category of healthful foods that promote wellness and enjoyment of life and eating. We formulated the Greek Lifestyle Flatbread with higher protein, lower carbs and fewer calories.”
Packaged in a four-color bag in a Greek blue color scheme with Greek-style lettering and a large photo of a delicious-looking Mediterranean-style sandwich, the new Kontos product has 15 g. of protein, 21 g. of carbs, 2 g. of sugar and 190 calories per serving. The product is available for both retail and foodservice in a four-pack, 10-oz. package.
Kontos says the world is getting smaller, thanks in part to ideas shared on social media. Globalization is big. “Consumers are becoming more aware of delicious ethnic foods,” he says. Customers have moved beyond rolls and baguettes to Indian naan bread, Mediterranean flatbreads and even breads found in Central Asia. Tastes are becoming more sophisticated, and products are more available. At the same time, consumers are looking for ‘better-for-you’ ways to enjoy bread.”
The Internet has allowed consumers to gain more knowledge and seek out more interesting new ethnic foods, Kontos adds. “Consumers are hearing about new foods and recipes on Facebook, Twitter, Pinterest and other social media platforms,” he says. “Good meal ideas travel like wildfire, particularly when those meals are delicious and have a better-for-you nutritional profile.”
Could a French influence return as the next big thing? Kontos recently expanded its plant capacity to address demand from retailers and restaurants for fillo dough products and crepes. “We opened a new 45,000-sq.-ft. facility in Paterson to manufacture French-style traditional and savory crepes, a Lite, Elegant Skinny Wrap and several varieties of Kontos Fillo Dough and related Fillo products,” Kontos adds. Last January, the company rolled out its French-Style Traditional and Savory Crepes.
“With less than half the carbs of a plain wrap, and one-third the carbs of a hoagie roll, the crepes offer a healthier alternative to create a delicious sandwich wrap, an impressive European-style meal, delicate hors d’oeuvres or unique desserts,” Kontos says.
Checkered flag wish list
Radi says he wishes for the continued growth and prosperity of organic breads, buns and rolls. “We feel we are truly improving the health of families by offering delicious, healthy bread and baked goods that remove chemicals from Americans’ diets and eliminate the need for pesticides, herbicides and other dangerous chemicals from the environment,” he says.
Harrington says she’d like to see more schools introduce the art/science of baking to young candidates. “It will impact our future for the years to come helping to keep the industry alive with talent,” she says.
Marcucci says he’d love to produce multiple varieties of products as efficiently as possible. “Any company can efficiently run white sandwich bread 20 hours a day, but that will no longer satisfy customers,” he explains. “Multiple varieties demand allergen changeovers, organic changeovers and much shorter production runs. The challenge lies in continuously finding ways to run as efficiently as possible under these circumstances.”
The bakers agree, the industry needs to keep breads, buns and rolls on track as a major segment of the diet and as a food source. “If bread isn’t a major part of the world’s dietary desires, the rest doesn’t matter,” Marcucci sums up. “I think back to engine distributor caps. One day, the guy who made the world’s best distributor caps found that he just wasn’t needed any more as fuel injection took over. The industry needs to make sure bread continues to be part of the world’s nutritional lifestyle if we don’t want to go the way of the distributor cap.”