Milling & Baking News - March 18, 2014 - 16

Business 

Pepperidge president confident
company will sustain share gains
BOSTON - Last July, Irene Chang
Britt, president of Pepperidge Farm
Inc., said the company had managed
to capture a surprisingly large share
of the bread business that opened up
with the November 2012 bankruptcy
of Hostess Brands, Inc. In comments
last week, Ms. Britt expressed confidence Pepperidge would keep those
share gains, even as Wonder and other
Hostess brands have returned to the
market.
Ms. Britt offered several comments
about the bread business as part of a
panel discussion of executives of Pepperidge parent Campbell Soup Co.
March 12, participating in the RBC Retail Conference. Ms. Britt also is senior
vice-president of global snacking and
baking at Campbell.
In the July 2013 comments, Ms.
Britt said Pepperidge, based on its
size, could have expected to gain
about half a percentage point of bread
market share from the 7% share held
by Hostess at the time of the bankruptcy. Instead, the company gained
more than a full percentage point. In
her comments last week, Ms. Britt
put Pepperidge's gains into a broader

perspective, suggesting that an ailing
Hostess in 2010-12 may have been
holding back the entire bread category.
"In the past year and a bit
since they came out of the
market, since those brands
came out, the category actually grew more than it had
in the most recent three years
before that, which is very
interesting," she said. "Underlying that was a bifurcation. Consumers in the face
of choice actually traded up
to premium, us particularly,
and some of the other premium products on the market, and down to private
label. And the knock-on
effect from that is that the
retailers benefited from additional margin."
It is because retailers benefited, Ms. Britt said Pepperidge has
cause to be optimistic it will sustain its
share gains.
"As we cycled that and went back
out to talk to the retailers about maintaining the shelf space as the (Hostess)

Starbucks still in 'early days' of
La Boulange roll-out
NEW YORK - Food remains the biggest "near-in opportunity" for growth
at Starbucks Corp., the company's
chief financial officer told participants
at the Bank of America Merrill Lynch
Consumer and Retail Conference held
March 11 in New York.
"If you can just look at the
scale of transactions coming
to the store that don't attach
food, (you would see) 30
million out of 40 million
transactions a week don't
have food attached," said
Scott Maw, c.f.o. "Food
has grown nicely over the
last 10 years or so, to about
20% of our revenue. But we
still think there's big opportunity to
increase that percentage."
A lot of the opportunity in increasing that percentage rests in the ability
of Starbucks to integrate the La Boulange brand. Starbucks acquired San
Francisco-based Bay Bread, L.L.C. and
its La Boulange bakery brand for $100
16 / March 18, 2014 Milling & Baking News

million from management and an investment group, Next World Group,
in 2012. Since that time, Starbucks has
been steadily introducing La Boulange
across its outlets.
"We're about 50% rolled out with the
bakery program within La Boulange,"
Mr. Maw said. "And the bakery
program is about half of the
food in Starbucks. So we've
impacted about 25% of the
overall food platform in
La Boulange. And that's
why we continue to say
it's 'early days.'
"But what we see in the
results of La Boulange - the
customer reaction, the pride
that our partners have in an
elevated food experience - has well
met all the expectations - rather lofty
expectations - we had at launch. And
we're doing some things to adjust and
improve the food program. We've had
some things that have gone far better
than we thought, where we see things

brands are coming back in, the retailers
have primarily agreed with us about
the benefit that they got from the premium bread," she said. "Velocities were
so great that they actually are standing
behind that decision to increase the
shelf space for premium bread, and we
are very, obviously, happy about that
decision."
Another cause for optimism at Pepperidge is
progress the company has
made in what Ms. Britt described as a particularly attractive demographic: parents
with young children. Inroads
among this segment, a threepoint household penetration
gain, were attributed largely
to the success of the company's Swirl bread line aimed at
the breakfast market.
"And that was young families, young forming families,
actually coming into the franchise because of the innovation that has been brought
there," she said.
Overall Ms. Britt discussed the important role of fresh bread as an "anchor" at Pepperidge. Offering fresh
bread creates "quite a wholesome halo
across" the company's entire product
portfolio, she said. MBN
like croissants that have doubled sales
from pre-La Boulange levels. And
we're adjusting some things in the operations as well to get at some of the
expected little hiccups we've had in
the roll-out."
Mr. Maw acknowledged La Boulange
has been "an enormously complex rollout." Specifically, he mentioned the operational challenges within the supply
chain, from buying the correct supply
to implementing a successful warming
routine for the products.
"We went to an all-frozen supply chain
where we're making these great products, flash freezing them, and then shipping to the stores, and buying them," he
explained. "So getting that routine right
with the supply chain, buying routine
right in the stores, was something that
we investigated, invested in, and we
think we've got right now."
Another level of complexity includes educating consumers on the
warming routine for the baked goods.
"We knew we'd have some little
wrinkles, and we're ironing those out
as we move forward," he said. "So
overall, we're very happy with the
sales result in La Boulange." MBN
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Milling & Baking News - March 18, 2014

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