Milling & Baking News - April 14, 2015 - 28

Industry Activities

Standout organic growth a trend
Hale says bakers mustn't ignore
ORLANDO, FLA. - Even as supermarket sales overall have plodded along with
limited or no growth in total, the continued expansion in sales of organic food
products demands attention from the
baking industry, said Todd Hale, principal, Todd Hale L.L.C.
In a presentation March 30 at the annual meeting of the American Bakers Association, Mr. Hale discussed the current

Todd Hale

environment for the baked foods industry. His presentation, largely built on data
from Nielsen Answers, was delivered
during the general session of the meeting,
held March 29-April 2 at the Ritz-Carlton
Grande Lakes in Orlando.
At the retail level, all outlets, including convenience stores, Nielsen data
show that while overall unit growth in
all categories was flat (-0.1% over the past
year), organic claims have enjoyed 11%
compound annual growth over the last
four years and the five fastest growing
wellness claims (gluten-free, G.M.O. free,
low glycemic, natural and organic) have
climbed 13% over the past year.
"This is growth you really don't see
anywhere else in the store," he said. "You
need to take advantage."
Mr. Hale spent considerable time in his
presentation discussing Amazon and the
digital marketplace. He said Amazon and
its competitors are sorting through appropriate pricing models as well as trying
to figure out what kinds of inventories to
maintain. But the investment Amazon
has made in grocery sales has given the
company a formidable presence.
"When you look at a ranking of the
top 40 food retailers, Amazon is now
No. 9," he said. "In the last three years
Amazon has seen their revenue increase
by $40 billion. They may not be making
money, but they've increased their revenue dramatically."
Mr. Hale discussed a test concept at
Wal-Mart Stores allowing customers to
place their orders on-line and then drive
28 / April 14, 2015

Milling & Baking News

up to a kiosk to notify employees to
bring their orders.
Shoppers have about 10,000 items to
choose from under this program, including dairy, meat and produce.
Another on-line innovation Mr. Hale
described was Blue Apron, which provides shoppers with a package containing instructions and all the ingredients
to prepare a simple recipe for either a
couple or a family.
Similarly, at Fields Foods in St. Louis,
customers have the opportunity to make
their selections on-line and then sit down
in the stores for a beer when they reach
the store. Employees at the store will be
responsible for gathering everything
from the shopping list.
"What's better than that?" Mr. Hale said.
With the center of the store increasingly viewed as a "dead zone" at supermarkets, food and beverage companies
are looking for ways to showcase their
products toward the perimeter, Mr. Hale
said. He cited a promotion in which The
Coca-Cola Co. partnered with Wal-Mart
in a campaign letting consumers know
that when they stop to pick up a prepared
deli sandwich at Wal-Mart, Coke products will be available in special displays.
"So secondary locations are a way
some manufacturers are looking at opportunities to collaborate to drive growth
and inject some excitement back into center store," he said.
Another such example offered by Mr.
Hale was a refrigerated end aisle display

With center-of-store sales trends weak, Mr.
Hale encouraged bakers to look for promotion opportunities along the perimeter.

titled "BLT Made Easy" at a Mega-Coop
in Wisconsin.
"There's refrigerated, microwavable bacon," he said. "There is lettuce. There are

tomatoes. There is cheese. There is bread."
A similarly conceived display called
"Fajitas Made Easy" featured the appropriate array of products.
"I'd like to see more engagement around
complete meals, to make it easy for people
to buy and shop while driving some excitement in your categories," Mr. Hale said.
As he has in the past, Mr. Hale devoted
a part of his discussion to addressing issues of spending power and its effects on
supermarket spending.
Commenting on the wealth gap, which he
called the widest in decades, Mr. Hale said
upper income Americans, 21% of the population, have median net wealth of $640,000, a
figure that is up 101% from 1983, adjusted for
inflation. Their assets are seven times greater than middle income Americans (46% of
the population), a group whose wealth has
edged up 2.3% in real terms since 1983. Low
income Americans (33% of the population)
have net assets of roughly $10,000, which is
down 18% since 1983.
Calling these trends "alarming," Mr.
Hale said, "Part of the reason we're having issues with (supermarket) sales is
spending power."
Drilling into the effects of income disparity on baked foods sales, Mr. Hale
showed detailed figures indexing spending by income levels on particular categories. While bread sales hold up well even
at lower income levels (an index number of 96 for income of $20,000-$30,000),
the figure falls off to 86 at income below
$20,000. Still lower figures for sub-$20,000
households are crackers, 80; bagels, 85;
and cookies, 86. Cookies and crackers index at 91 for income of $30,000 to $40,000.
At that income level, bread buying indexes at 97 and hot dog buns index at 100.
He also identified wide disparities in
restaurant chain penetration by income
with Church's Chicken, Little Caesar's
and Domino's Pizza holding the top
three penetration positions among those
with income below $20,000; Chick-FilA, Hardee's and Arby's leading among
those with income between $50,000 and
$70,000; and Panera Bread, Chipotle and
Starbucks the top rankers among those
with income above $100,000.
Looking at how different baked foods
index between age groups, Mr. Hale said
there are a couple "watch out" warnings
for baked foods. In particular, English
muffins are popular among older consumers (indexing 133 with those above
the age 65), but did poorly among those
younger than 35 (index 79); 34-44 (79);
and 45-54 (80).
"If I were an English muffin baker, I'd
be concerned that younger people aren't
spending a lot on the category," he said. "As
Continued on Page 30
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