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Sweet Endings

April 15, 2010
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When times are tough, consumers are forced to make tough decisions. But in the case of their dessert choices, that decision is simpler than most. Apple or cherry? Chocolate or vanilla? Sherbet or slow-churned ice cream?

According to data from Chicago’s Information Resources Inc. (IRI), despite a tough economy, consumers still are opting for dessert, sometimes for their families and often for entertaining at home. IRI sales figures show a nearly 4 percent dollar sales increase in the total pies and cakes segment during the 52 weeks ending Jan. 24, reaching $950.7 million in food, drug and mass merchandise outlets (excluding Walmart).

What’s great news for private label manufacturers, and for retailers working to develop stronger dessert programs, is that private label dessert sales now account for more than 60 percent of the total segment. Dollar sales in the private label desserts segment rose 5.2 percent in the 52 weeks ending Jan. 24, according to IRI. Here, private label ice cream topped $1.1 billion in sales, up 2.9 percent; and private label frozen desserts (including cheesecakes, pudding/mousse, sweet goods and whipped toppings) grew more than 14 percent (while the total subcategory remained flat).

Sources of Comfort

The data show that consumers indeed are buying dessert items when they grocery shop, but they are making extremely deliberate and simpler choices, thanks to the challenging economy.

“The major trends in private label are somewhat analogous to some of the broader market demographic and economic trends,” says Josh Harris, president of Distinctive Foods, Wheeling, Ill. “There’s a movement toward comfort foods and old-time favorites, especially in this environment where customers aren’t going to take a lot of chances buying something they may not use up completely.”

Desserts also need to be "accessible" because consumers are not willing to experiment a lot, Harris says, pointing to traditional favorites such as pineapple upside-down cake and apple pie.

There is more to comfort foods than just the taste and experience, however, as today’s consumers also need to be comfortable with a product’s price and value. And although baked goods from club stores and in large family-sized packages have a place in the market, Harris says it’s important for retailers to include a value twist beyond simply an increased size or item count. Retailers could boost packaging’s convenience and ease of use, for example, or promote the use of desirable ingredients (such as Granny Smith apples in store brand apple pie). High-quality ingredients, in particular, can make a traditional private label product stand out among its branded competitors.

Jerry Smiley, a partner at Strategic Growth Partners, Roselle, Ill., believes consumers still do have an interest in trying things that are “different.” And as North American demographics change, so do “ethnic-inspired” food preferences.

“Mexican cookies (conchas), sopapilla (puff pastry) and tres leches cakes are all gaining in popularity,” he says. “These trends are driven by the increased Hispanic presence in the U.S.”

Restaurant trends also are strong indicators of consumer preferences in the desserts sector. And even though sales data suggest consumers often play it safe with their retail dessert purchases, cuisine-inspired desserts at foodservice locations can be great examples of innovation.

But other channels are influencing the dessert market as well.

“In the past, dessert trends in retail (in-store bakery and freezer case) were driven by the restaurant industry,” Smiley says. “However, given the softness of foodservice over a sustained period of time, I think there has been less channel crossover.” Retailers have been looking to higher-end retail bakeries for ideas, Smiley says. The recent burst in the popularity of cupcakes has affected the dessert segment across various retail channels. Whether they are from in-store bakeries or high-end cupcake boutiques (which are popping up all over major metropolitan areas), cupcakes reflect the “small indulgences trend” that has been around for years.

“Consumers like to treat themselves within their budgets,” he adds. “Cupcakes allow them to do that. Plus, they are portion-controlled.”

Furthermore, some industry observers say finished goods from in-store bakeries and retail shelves, refrigerator cases and freezer cases are not the only opportunities in the dessert segment. Sometimes consumers still desire the home-cooked, tradition- and cuisine-inspired dessert, yet without the hassle and cost.

“More customers are taking home components or ingredients in order to prepare their own desserts, as they have cut back on dining out in restaurants,” says Dave Beach, vice president of sales at Red Lodge, Mont.-based The Kings’ Cupboard.

“Finishing a home-cooked meal with an easy-to-prepare, elegant dessert has become more common as consumers try to replicate the fine-dining experience at home.”

And for the more creative types who still don’t want to bake from scratch, Beach says he sees a trend toward finishing store-bought desserts with dessert toppings as “a way for the consumer to easily customize the dessert and make it appear more homemade.”

Just a Sliver or a Bite

When major branded players in the snack food industry launched 100-calorie packs of well-loved cookies, crackers and candies, portion-controlled packaging took center stage. Consumers accepted slightly higher pricing per unit in exchange for the convenience of pre-portioned items. That diet-friendly packaging trend now spans food categories ranging from produce to candy.

“Portion-control and bite-size products have absolutely changed the dessert segment,” Harris says.

However, he emphasizes that in many dessert subcategories, portion-controlled products are not necessarily only one portion. Often, he says, it’s as simple as pre-cut pie or individual servings that are packaged in bulk to help prevent waste. Shoppers are more concerned than ever about paying for product they don’t use, so a sliced pie or individual packages inside a larger box or bag helps extend the life of a product.

“It won’t end up with plastic wrap around it,” Harris says. “You’re not going to buy a 10-inch pie with the off chance that some of it won’t get eaten and get thrown out.”

Demographic changes also have contributed to some of the packaging trends in the dessert segment. Family sizes have gotten smaller in recent years, so the need for large desserts has diminished. Also, families are less likely today to sit down to a formal meal that includes dessert because their on-the-go lifestyles continue to pull them away from their kitchens and dining-room tables.

The Cherry on Top

Although private label desserts have performed well recently, retailers still will find opportunities to grow, especially given private label’s strength in today’s weakened economy. Harris says retailers can bolster their dessert programs by focusing more closely on regionalization in product assortment.

“The real brand managers are the category managers at retail, he says. “They know their market the best and know what’s going on.”

Costco Wholesale, Issaquah, Wash., does a great job in “knowing their markets,” he says, pointing out that the retailer’s stores have “brands you haven’t heard of, but people trust Costco.”

Key lime pie, for example, is a dessert that appeals differently to geographically diverse markets.

“On the East Coast where everybody vacations in Florida, you can sell authentic key lime pie that is a little yellow,” Harris asserts. “However, in the Midwest, when people see key lime pie, it has to be green. In the South, your pecan pie has to be a certain way, too. Regional differences are important.”

Harris also adds that retailers can grow private label dessert programs with a bigger commitment to quality.

Beach agrees.

“Retailers need to emphasize the quality of private brands by calling out premium ingredients so that the customer understands the true value proposition.” PLB

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