Over the past two years, a larger proportion of the US fresh bread baking production capacity has changed ownership hands than at any time in the industry’s history. Given these dramatic changes, together with an economic environment thought to be making consumers less adventuresome, it is hardly surprising that new product introductions in bread have lagged over the past 12 months. Still, innovation is hardly absent in the market for bread and rolls with particular attention devoted to niche and specialty products, including gluten-free.
The massive disruption in the bread industry’s structure was evident not only in the gains and losses of sales indicated for individual companies in data provided by IRI, a Chicago market research firm, but also in how the various baking companies were ranked. For instance, Flowers Foods, Thomasville, GA, was listed as the No. 1 baking company in the US with sales of $14 billion in the 52 weeks ending Jan. 26, down 15% from the year before. The figures appear to have merged Hostess Brands into the Flowers listing. In fact, Bimbo Bakeries USA (BBU), Horsham, PA, is the largest bread baker in the US, and Flowers achieved a sharp increase in dollar sales rather than a dollar decline.
Bimbo Bakeries was listed with sales of $931million, but IRI separately listed as vendors other companies that appear to be part of the BBU universe — Earthgrains Baking Companies, Arnold Products and a company listed by IRI as Orograin Bakeries Products.
Amid the confusion around the listing of the largest baking companies were two mature regional bakeries that appeared to enjoy dramatic sales gains during the year: Lewis Bakeries, Inc., Evansville, IN, and Aunt Millie’s Bakeries, Fort Wayne, IN.
John B. (Bohn) Popp, vice-president of marketing at Aunt Millie’s, described the bread market of the past year as extraordinary, likening what happened with the bankruptcy of Hostess Brands to a popular motorsport event. “After the exit of Hostess, it was like the start of the Indy 500,” he said. “All those cars going full speed for the first turn, getting everything they can. Then it all gets sorted out.
“The last 10 years have been busy for us, but the last 15 months, especially the time period from November 2012 until June 2013, were unlike anything I’ve ever seen. We picked up a lot of business with a lot of new customers. Then you make investments, and you have to perform.”
The exit of Hostess gave Aunt Millie’s the opportunity to enter the Chicago market where the company’s presence previously had been modest. The shifts also had implications for the company’s product development. “We are now full blown 100% in Chicago,” Mr. Popp said. “And that’s expensive. We went from 20% to 90% in less than three months, adding 50 to 60 routes. We had so many items down in our ‘war room.’ Purchasing teams were covered with new items new customers wanted. In many but not all cases, private label new product formulations were already being baked by Aunt Millie’s for other customers, but the company has introduced between 20 and 30 new bread products.”
Another company that noted share gain as a result of Hostess’ evacuation from the marketplace was Pepperidge Farm, Inc., Norwalk, CT. Chris Foley, general manager, fresh and frozen bakery, said the company benefited when consumers tried and stuck with items such as Pepperidge rye due to the absence of the Hostess Beefsteak rye line. “We’ve also worked very closely with retailers to ensure that they weren’t disadvantaged as a result of the Hostess departure, by offering a comprehensive selection in the bakery aisle and delivering excellent customer service,” he said.
Even as snack foods such as Goldfish and cookies account for an ever larger part of the business of Pepperidge Farm, Inc., bread remains core to the brand and a target for innovation.
“We are pleased with the performance of our bread portfolio and plan to continue to invest to ensure that the quality of our products meets our consumers’ expectations and we stay ahead of changing preferences and trends,” Mr. Foley said. “For example, we’ve recently introduced premium quality Bake at Home breads, which are inspired by artisan-style breads you see in independent bakeries and farmers markets, and we’ve extended our range of potato bread products to include hotdog, hamburger and slider buns in response to the growing popularity of that flavor.”
Pepperidge describes the Bake at Home bread line as produced from “hand-crafted dough” and “baked in a unique stone oven.” The product is finished with baking at home.
Varieties include Tuscan Boule, French Loaf, Semolina Loaf, Multi-Grain Loaf and Sourdough Boule.
A consistent hit in recent years for Pepperidge has been its Swirl line of breakfast bread. Mr. Foley said limited-edition launches aimed at young families were the chosen approach to innovation over the past year.
“New flavors were blueberry, French toast and gingerbread, and we reintroduced caramel apple and pumpkin spice, which are hugely popular fall flavors,” he said. “We have found that introducing these limited-edition flavors brings excitement to the bread aisle and interest from consumers who may not have tried our permanent flavors such as cinnamon raisin.”
A new product from Pepperidge that did not sustain initial success was its Goldfish brand thin bread. Mr. Foley said the company continues to offer it on its foodservice menu.
“However we discontinued it from retail sales in the middle of last year as after an initially successful launch we were seeing sales soften,” he said.
Several baking companies have taken advantage of growing interest in specialty baked foods, particularly gluten-free products. Going full throttle in the gluten-free baked foods market has been Rudi’s Organic Bakery, Boulder, CO. In addition to building out its portfolio of certified organic baked foods, the company more recently added to its line of gluten-free products.
“We’ve had an exciting year with 14 new product launches across three core gluten-free initiatives,” said Doug Radi, senior vice-president of marketing and conventional channel sales at Charter Baking Co., Boulder, CO, the parent of Rudi’s Organic. “The first is a heat-and-serve ciabatta roll line featuring two SKUs — Plain and Rosemary Olive Oil.”
Rudi’s also launched a deli-style gluten-free bread with caraway, modeled on traditional rye bread.
In addition to the bread varieties, Mr. Radi said Rudi’s will offer a gluten-free cherry almond cereal bar product. “It’s designed to be sold off the bakery table in a clamshell package seven per pack,” he said.
Mr. Radi said growth in organic baked foods overall is in line with the aggregate organic market, with growth in the low double digits.
“We’re seeing growth in bread keeping up with the market,” he said. “What’s most promising is the traction organic is gaining with more conventional retailers, whether it’s the big national guys like Kroger or Safeway or the regional retailers. We’re getting more and more calls about interest in organic. What had been a relatively underdeveloped market relative to milk, dairy and produce is really beginning to pick up steam.”