Private Label Buyer

Deserting Desserts?

April 24, 2008

Merriam-Webster’s online dictionary defines dessert as a noun that is “a usually sweet course (as of pastry or ice cream) usually served at the end of a meal.”

Children, and those who do not go around classifying words by their function, would define dessert as the sweet treat you (usually) get after dinner when you (usually) eat all your peas and carrots.

By the way some people get so soupy-eyed when they think of cheesecake or chocolate cream pie, you’d think desserts would have a kung-fu grip on consumer spending. But these days, apparently not so much.

According to Chicago-based Information Resources Inc. (IRI), for the past 52 weeks ending March 25, 2007, sales of a variety of dessert products, both national brand and private label alike, have been as flat as a depressed soufflé. While the total frozen pies category, for example, may have raked in $453.5 million in sales, that was a mere 3.4 percent increase, and private label contributed only $37.5 million to those numbers, with a slight 2.7 percent growth, and grabbing a scant 8.3 percent of the category’s dollar share. In overall categories, the only category that showed a ray of good hope was pies and cakes. For the past 52 weeks, dollar sales increased 7.9 percent, and private label even chomped down a bit of that, snagging 55.7 percent of the dollar share.

If asked, consumers will say they’re nutty for desserts; but when shopping, their purchases speak otherwise. The disconnect between the two is forcing retailers and manufacturers to keep their ears to the ground listening for ways to get consumers buying sweet treats again.



A Moment on the Lips...

Unfortunately for desserts, when a consumer decides it’s time to buck up and eat more healthful, the sweet treats usually are the first to get the boot from the daily diet. And with constant reminders that we are in the middle of a national obesity crisis, there is some strong thinking-twice going on before anything is put into the grocery cart. Thankfully, to save us from a lifetime without chocolate goodies or sugary confections, manufacturers are listening and reaching out with new products that speak to the healthy-living-dessert-eater inside all of us.

“We are getting an influx of requests for trans-fat-free desserts,” says Mike Lawler, vice president of Humble, Texas-based Lawler Foods. “Whether they be new desserts or conversions of existing desserts that we’re selling to our customers, this one isn’t just a fad like the ‘beware of saturated fats,’ and ‘beware of the big, bad carbohydrate,’ because trans-fat content has been recently added to the reporting requirements on nutritional labels, and most consumers are tuning into labels more and more.”

Healthier desserts, in various forms, are definitely making some headway into the land once easily described as everything-that’s-bad-for-you-with-a-cherry-on-top.

“A lot of chains want to have their own organic labels, and many major retailers are looking into that,” explains David Edelstein, director of sales for Mr. Cookie Face, Lakewood, N.J. “Organic is one end of it, but there’s also been a turn toward the better-for-you category, and that seems to be stronger with all of the obesity issues going on.”

For private label desserts, better-for-you doesn’t just mean healthier ingredients; it also means smaller offerings. Since Americans can’t seem to get a handle on the idea of portion-control, dessert manufacturers and retailers are taking matters into their own hands and doing it for them.

“People are turning toward a more boutique, single-serve product,” explains Brooklyn Soft, director of marketing and advertising for Beatrice, Neb.-based Beatrice Bakery. “We used to make 3- and 5-pound ring cakes for our customers, but now they’re asking for 3- and 6-ounce single-serve or double-serving sized products.”

“Companies are trying to hit 70 to 150 calories [per serving],” Edelstein says, “depending on the particular product.” He notes that in ice cream novelties, “especially in round sandwiches, that’s where people especially want to see lower fat.”

“We’re seeing a push this year for small, individual-serving desserts,” Lawler adds. “It seems that everyone is asking in the same year to hit the market with handy desserts for a quick-serve or after-dinner indulgence.”

Indulgence is the key word. While consumers want to have their (healthy) cake, they want to eat it too, and as they may be scaling back on portion size, they won’t settle for scaled-back taste.

“We’ve had an overwhelming request for organic desserts,” notes Steve Dejohn, vice president of sales and marketing for Lehi, Utah-based Lehi Roller Mills. “As opposed to the sugar-free days when people didn’t really care [about taste] and just wanted sugar-free products, today they want the organic baking mixes, but they want it to taste good.” Dejohn says that in developing new organic products, the company has gone through several rounds with research and development “because the taste profile has become so important. Although everyone wants organic, it has to taste really good.”



How Sweet It Can Be

When it comes to the sweet stuff, taste will always reign supreme, but a close second in the dessert dilemma goes to price.

As one manufacturer notes, one of the problems with private label dessert sales is that currently retailers are not showing a great enough price differentiation between private label dessert products and national brands to grab consumers on price alone.

National brands also are running rampant with promotions of their products, forcing the private labels into increasingly narrower margins. If consumers are looking to private label solely from a price perspective, only to find it to be not that much of a deal, well, it’s a bit of a pie in the face.

“One of the challenges private label is having is that major companies, like the Unilevers of the world, are always putting their items on sale,” Edelstein adds. “A lot of times they’re promoting their ice cream so well it’s going below the private label ice creams. And that’s why the private label guys are getting hurt, and that’s why you’ll see [various supermarket chains] lowering the amount of private label items they have - they’re getting so much money from the national players, they have no requirement to build their own brand.”



There is one caveat, however, in that desserts are predominantly viewed as an indulgence. Because of this, there is some flexibility in private label dessert pricing, if the product is up to snuff. More and more retailers are challenging price points as they implement a tier system in their private label portfolio, offering more gourmet products, for example.

“Pricing has changed a little bit,” Dejohn says. “It used to be that you had to have the national brand standard at a lower price, but more retailers have gourmet offerings. I’m finding that although price is still important, it doesn’t have to be the most important thing on the shelf, so long as the product has a gourmet profile, and that it’s value-added to the consumer from that perspective.”

“Pricing used to be king,” Lawler agrees. “There is finally a trend toward higher-quality indulgence at a higher price rather than ‘no matter what, we have to be under $X.’ Retailers are becoming more willing to put out the best dessert, not just the cheapest.”

Higher-quality products at a higher price will no doubt boost private label sales in the dessert category, but only if retailers are willing to put their money where their (consumers’) mouths are.

“The only way the category can grow is if retailers really put more of an emphasis on private label and stop taking all the me-too products from the general market,” Edelstein notes. “The retailer itself needs to make a commitment to [private label], and if they do that, they can grow. Consumers also need to push their retailers to offer them more in the private label venue. The private label market is a perceived value that a customer should be getting, and they should be getting the top-quality product through their own store brand.”

“The push for higher quality is a great step in the right direction,” Lawler says. “Consumers are going to want to return to that indulgence rather than just look for the obligatory ‘anything’ to serve as a dessert. [For example], look at the premium ice creams. They’re charging a considerably higher ring, and no one is complaining because they taste that much better.”

Lehi Roller Mills’ Dejohn adds, “Retailers [can grow the category] by being a little bit more adventurous, and take the lead from the national brands.