Private Label Buyer

Category review: Rolling in dough

March 28, 2012

Consumers are looking for new flavors, ethnic styles, shapes, and healthier offerings

When it comes to private label bread and baked goods, Calling something white bread has been an insult for decades. It became synonymous with something that’s bland and uncreative. America finally has taken the hint.
Last year, for the first time, whole-wheat bread surpassed white bread in retail value sales. This year, the trend has continued with manufacturers increasing their whole-wheat varieties and experimenting with new flavors, ethnic styles, shapes and healthy offerings. High-fructose corn syrup is out, sodium levels are down and consumer demand for healthy options is on the rise.
“Whole grain has taken on a life of its own as people are realizing the nutritional benefits,” says JR Paterakis, vice president of marketing and sales of Baltimore, Md.-based H&S Bakery. “We’re trying to do as much as we can with more items now. You hear about products that are 10 percent or 30 percent whole grain. We’re looking at products that are 100 percent whole grain. That’s the direction we’re going in now.”
This increase in product innovation and quality has translated to higher sales.
Packaged/industrial bread, already the largest category in the baked good industry, is expected to outperform the overall category in 2011, according to a report by Euromonitor International. Baked good sales are expected to climb 2 percent to $46.8 billion in 2011. Packaged/industrial bread will rise 3 percent to $14.8 billion, or more than 30 percent of the total market.
Despite an increase in wheat prices-which were expected to rise 2 percent in 2011 and up to 8 percent over the next five years-Euromonitor expects the retail value sale of baked goods will continue to grow. The economy still may be in bad shape and bread doesn’t always get the best press (low-carb diets are still around), but baked goods continue to be a staple in people’s lives, even if the look and shape of the product is evolving.
The consumer demand for whole grains has caused bakers to be more creative in their offerings. No more are the selections “white or wheat” when it comes to sandwich bread. The broad category of whole grain has exploded, with people looking for a wide variety of styles, including rye, oat and mixes of grains for added flavor and health benefits.
“People get tired of just whole wheat, so there’s a spinoff of this and a spinoff of that, with people getting more choices,” Paterakis says.
The other visible change in the bread aisle is the size and shape of the bread. While the low-carb craze certainly has died down, an increased demand for lower-calorie bread has helped popularize slim sandwich thins.
“People are looking for a 100 calories or less on a per serving basis,” Paterakis says. “That’s why you’re seeing all of these sandwich thins. How do you cut down on calories? You make the size of the slice smaller and thinner.”
Demographics are playing a big role as well. With the size of the family shrinking-and Baby Boomers finding themselves home alone without kids-there’s a demand for smaller loaves and serving sizes.
The changing population is also influencing bread choices. The rise in the Hispanic population has brought about an increase in breads that reflect their taste and heritage. More corn-based breads are marketed with bilingual labeling. They have the texture of traditional sliced bread but a flavor and texture of a corn bread. Popular south-of-the-border flavors like jalapeno and sweet vanilla are being added to breads. Right now, they’re targeting a mostly Hispanic audience. But it may not be long before they follow other Hispanic staples that have gone mainstream.
Other ethnic foods have had success as well, as people look for greater variety in their baked goods.
“People are always looking for something with good flavor,” says Paul Vadevoulis, president of the Metsovo Baking Company, Bloomingdale, Ill. His company had a breakout success with an individually-packaged Greek yogurt cake, but it also bakes artisanal style sandwich breads, like croissants and its own crobatta Italian-style bread.
The influence of artisanal baking has helped grow the demand for more exotic-and expensive-flavors. Packaged/industrial bread is growing faster than unpackaged/artisanal bread in part because packaged bread has closed the gap in quality and now offers consumers more options.
Finally, that focus on healthy eating is slowly reaching down to the nation’s largest consumers of white bread-children. While parents can (at times) control what their children eat, school systems have been slow to adopt the healthier but sometimes more expensive whole-grain options. That’s changing, as many school systems look to offer children healthier alternatives to white. Now they just need the children to buy in.
“We’re developing breads that fit the nutritional needs of whole-grain,” Paterakis says. “But we have to make something that kids will eat.”
While gluten-free eating has commanded lots of media attention over the past several years, it hasn’t made many inroads into traditional grocery baked goods. According to Euromonitor, some in-store bakeries like Whole Foods and regional bakers like Glutino, Rudi’s and Udi’s have found success with gluten-free baked goods. But for the majority of bakers, it isn’t a market they’re willing to enter.
“It’s a totally unique manufacturing process, so there aren’t many people who do it,” says Vince Mannese, the national retail sales manager for Lawler’s Foods, Humble, Texas.
The National Institute of Health estimates that 1 percent of the population suffers from Celiac disease, which causes a gluten intolerance.
Paterakis thinks it will be at least three to five years before gluten-free baking reaches beyond the small, regional level, if it ever does.
“For us, as a large wholesaler, we just don’t have the facilities,” he says. “It will remain a small part of the industry until there’s a huge technical process that occurs. The quality and texture still aren’t there yet. For people who need to eat gluten-free, they’ll go to the natural store and buy it there.”
Euromonitor speculates that gluten-free eating may benefit from a “halo effect” of perceived healthiness. In other words, people who don’t have a gluten aversion may still seek out gluten-free products if they think they’ll provide health benefits. The Nature’s Own brand from Flower Foods tested a line of gluten-free bread in the Atlanta area in May 2010. But the line was discontinued by the end of the year because of formulation and spoilage problems and lower-than-expected consumer demand.
Organic breads also are underperforming for major bakeries. While the consumer demand for whole grains continues to rise, the perceived health benefits of organic bread hasn’t translated to sales. In a tough economy, consumers aren’t spending the extra money.
Unlike in the bread category, unpackaged/artisanal cakes are expected to grow faster than packaged industrial cakes. Both in-store and independent bakeries have launched more unique products to take advantage of the current pop-culture renaissance of cupcakes and baking in general.
According to Euromonitor, a strong rise in at-home dining and entertaining has helped grow the market for creative desserts.  The one exception to this is in products designed for the morning.
Sales of unpackaged/artisanal pastries baked for the morning actually are expected to decline, according to Euromonitor. This is due largely to foodservice outlets increasing their assortment of breakfast products. Now places like Starbucks offer low-calorie pastries, which are drawing dollars away from the grocery store.

Eye on the national brands

Like private label, the national brands have moved to a focus on whole grains, a focus on health and diet-conscious serving sizes. Pepperidge Farm features small sliced bread in both 15-grain and whole-wheat varieties. Whole grain, 100-calorie sandwich flats are becoming ubiquitous in most grocery store aisles, with offerings like Pepperidge Farm’s Deli Flats, Nature’s Own Sandwich Rounds and Arnold’s Sandwich Thins. Pepperidge Farm even makes a goldfish shaped flat bread targeted at kids and a 100-calorie bagel flat.
Nature’s Pride from Hostess was the first natural line of bread available across the country, with no artificial flavors, preservatives, colors or trans fats-and no high-fructose corn syrup. This year it introduced the Hearty Wheat with Flax bread, the first brand to use pure olive oil in a 100-percent natural bread. Even Hostess’ Wonder brand introduced a 100-percent whole wheat bread featuring stone-ground flour this year.
Thomas’ makes a 110-calorie bagel thin with zero trans fat and 100 percent whole grain, and introduced a blueberry flavor this year. It also launched Mini Pretz-a-bagels, a combo bagel/pretzel bread that’s now available in the Northeast and some Midwest states.