'Premiumization' opportunities abound for baking

by Josh Sosland
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Wal-Mart has experienced great success with its Patti LaBelle sweet potato pie.

PHOENIX — Bakers willing to notch up their game to create differentiated products will find opportunities for success. That was the message of executives from leading retailers and a quick-service restaurant chain speaking at the annual meeting of the American Bakers Association.

Representatives of Wal-Mart Stores, Inc. and Wendy’s Supply Chain Co-op, Inc. offered examples of major successes attributable to taking generic products and enhancing them in ways that captured the imagination of consumers.

Emblematic of this success has been what Wal-Mart has experienced with its Patti LaBelle sweet potato pie, an extraordinary hit for the company, said Kerry Robinson, vice-president, bakery and deli.

A critique by a Wal-Mart employee of the company’s existing pie prompted the company to explore a reformulation, Ms. Robinson said. Kinna Thomas, a new Wal-Mart employee, in March 2015 baked a sweet potato pie based on her family’s recipe to demonstrate her point that Wal-Mart could improve its product. Ms. Robinson had suppliers try to recreate the recipe and also teamed up with Patti LaBelle, who added personal touches such as cinnamon and a thicker crust.

An expletive laced but very enthusiastic on-line video endorsement of the pie by the singer James Wright Chanel was credited with sending sales through the stratosphere and made supplies of the pie difficult to find at stores for a lengthy period.

As Wal-Mart looks to raise the quality bar of its product selection, a mindset change may be needed from suppliers, Ms. Robinson said. A raw nerve is struck when customers pitch the Bentonville, Ark.-based retailer with products would-be sellers describe to Ms. Robinson as “suitable for your customers.”

“We want your best product,” Ms. Robinson said. “We’ll figure out the right price — maybe a premium price.”

Wendy's is moving to 100% premium with a new formula for a glazed 4-inch bun.

At Wendy’s, the bun represents an opportunity for offering consumers a premium, differentiated product, said Joe Schechinger, vice-president of non-protein foods, Wendy’s Q.S.C.C. (Wendy’s Supply Chain Co-op, Inc.). The company currently operates 23 baking plants in the United States and Canada, producing fresh and frozen fresh with a mix of direct-store delivery and channel delivery.

Depending on location, stores may receive fresh baked product deliveries five days per week or frozen fresh deliveries every 7 to 18 days.

The company bakes about 1.6 billion buns per year. Historically, the company’s mix of buns had been what Mr. Schechinger described as “value” (60%) and “premium” (40%).

Joe Schechinger, v.p. of non-protein foods, Wendy’s Q.S.C.C.

“We just had a few small changes in the basic bun over the years,” he said.

Driven in part by successful limited-time offers (L.T.O.s), the company is moving to 100% premium with a new formula for a glazed 4-inch bun with what he called “a very different formula.”

“We’ve seen a great result from the change,” he said. “It’s the first thing you see when you open the package, it has a great appearance. Our bakery partners went over and above to get it done in such a short time frame.”

L.T.O. sandwiches have featured a wide range of baked products, including a “true brioche bun,” featuring cheese, butter, eggs, glazed imprinted and incorporating ghost peppers and jalapeño.

The latter ingredients create particular challenges for bakers as did demand, which was nearly twice as great as projected, Mr. Schechinger said.

Other varieties for L.T.O. sandwiches have included ciabatta, pretzel and an eight grains and quinoa bun.

“Consumers are very excited about inclusions and more challenging ingredients,” Mr. Schechinger said. “When we look at ancient grains, quinoa, sprouted grains, the sophistication of the consumer at retail and quick-service restaurants continues to be elevated.”

Wendy's has offered several L.T.O. sandwiches, including ciabatta and pretzel buns.

Discussing the clean label movement, Mr. Schechinger said consumers care about ingredient origins and sustainability but warned that the food industry must educate consumers not to become fearful of polysyllabic words on food labels.

“We should be driving that,” he said. Similarly, he questioned whether consumers truly were widely willing to pay up for organic products. “Again, it’s our responsibility to educate consumers,” he said.

The change toward 100% premium was made fairly abruptly but reflected gradual changes in consumers tastes, Mr. Schechinger said.

“For years it was ‘This is our bun, and we’re going to put in a different protein with a different sauce with a different cheese,’” he said. “We reached out and gave our consumers a little more credit. We realized that 25 years ago Julia Child’s was the only cooking show on television — PBS every other week. Now there are multiple channels devoted to food. People are seeing these challenging ingredients, and they want to try it. It’s all across the country. So matching the bread character to the protein to the sauces makes is a more holistic experience. It’s visually impactful. It gives you a lot to talk about.”

Mr. Schechinger said the greatest successes Wendy’s has achieved with its sandwiches (and buns) have been the result of supplier collaboration. The products aren’t developed in a vacuum, and the commercialization challenges are daunting.

Wendy's multi-grain bun features eight different grains.

“We need to give our customers the same eating experience in over 6,200 restaurants,” he said. “When our partner bakery brings in an ingredient supplier, they can talk about a grain. That multi-grain bun has eight different grains in it. He can tell us where each of those grains come from, where each one is sourced, processed and handled.”

He specifically cited a relationship with Ardent Mills in connection with risk management and information about specific farms from which wheat is sourced.

Mr. Schechinger said a premium bun plays a crucial marketing role as Wendy’s looks to appeal to consumers.

“If you have 36 seconds while they look at a menu in the drive-thru lane, how do you make it enticing?” he asked. “How do you make it something that really shocks or stands out? Especially for L.T.O.s, the visual impact is key. And again, that hamburger patty is the same in every single sandwich. What differentiates it, what makes it stand out is that bread piece. The bun is the foundation of every sandwich we sell at Wendy’s.”

Kevin Davis, president and chief executive officer of Bristol Farms, said baked foods have been growing at just over 6% per year. He offered a breakdown of baked foods sales across the Carson, Calif.-based chain of upscale stores – bread/rolls/buns, 31%,; desserts, 28%; breakfast (muffins, bagels…), 19%; cookies, 16%; miscellaneous, 5%.

This growth has been achieved in part by not looking at the in-store bakery in isolation but holistically.

Kevin Davis, president and c.e.o. of Bristol Farms

“We see perimeter as a destination,” he said. “Seventy five per cent of sales at our stores are on the perimeter. We don’t look at baking as a driver. We look at the whole shopping experience of perimeter fresh.”

Mr. Davis and the other panelists discussed the opportunities and pitfalls of social media for their businesses.

Ms. Robinson noted the potential for real-time marketing to discuss product availability at individual stores.

Mr. Davis discussed the risk of a viral video showing a problem at a checkout line.

A viral video can make or break a brand, as evidenced by the skyrocketing sales of Wal-Mart's Patti Labelle sweet potato pie after a video endorsement of the pie by the singer James Wright Chanel.

“It forces you to be better,” he said. “You can’t afford to have a bad day. If someone communicates that, it goes viral. If someone had a bad experience in a store, someone might be videotaping that. You can’t afford to be off your game. It forces us to be better all the time. People aren’t inherently mean, waking up in the morning and asking themselves, ‘How do I undercut some retailer?’ We create those circumstances.”

Mr. Schechinger emphasized the impossibility of “controlling the message” when it comes to social media.

“Trying to control what goes viral is like trying to hammer Jell-O to a tree,” he said.
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