It's not a low-carbohydrate issue!

By now, most people are sick and tired of hearing about low-carbohydrate diets and the impact this trend is having on the bread industry. Fortunately for them, the low-carbohydrate buzz appears to be slowing down, and its mention in news casts and newspapers has dramatically declined in the last few months.

So how does this affect bakers that currently market low-carbohydrate breads? According to the bakers interviewed for this story, low-carbohydrate bread sales are still reasonably performing despite the crowded marketplace and dying buzz. However, these manufacturers believe that future low-carbohydrate sales will not necessarily come from Atkins followers, but from specific segments of customers that view low-carbohydrate breads as a necessary health need.

"Consumers who are limiting their carbohydrate intake are doing so for a number of reasons, some of which have nothing to do with weight reduction," Janice Anderson, Flowers Foods Bakeries Group's vice president of marketing, says.

Matt Hall of Sara Lee Bakery Group agrees. When the company launched its line of low-carbohydrate breads, it did not mention carbohydrates anywhere in the name of the product. Instead, the company placed the products under the Sara Lee Delightful brand name. "We didn't put 'carb' in the name because we look at this product as a long-term, viable product. So, we didn't want to tie it to a fad or trend."

By viewing their products beyond the low-carbohydrate diet, both Sara Lee Bakery Group and Flowers Foods expect their new bread introductions to have staying power on the fickle bread aisle.

Where to begin? After a long affair with white bread, America has fallen out of love with this standard food product. Diet-of-the-day books are lambasting carbohydrates as the cause of America's expanding waistlines. Excess capacity and shrinking volumes are causing bakeries to shutter plants. Skyrocketing commodity prices are threatening to obliterate the bread industry's already razor-thin margins. Employee-related costs are spiraling out of control. Unions are organizing and making it difficult to even keep a plant running. The United States Department of Agriculture is threatening to move grain-based foods from the base of the Food Guide Pyramid. A changing retail landscape has made it even harder to make money off a $2 loaf of bread. Did I mention that a lot of people think carbohydrates are really bad for you?

It would take an extreme optimist to look at the current state of the bread industry and see something positive. However, the bread industry is chock full of optimists, and many of these bakers are capitalizing on the changing marketplace.

"In my view, the issue that food manufacturing faces, it's not one diet or the other; it is the obesity of our nation and the increasing recognition of this issue will force change faster than one can imagine," Gary Prince, Weston Foods' president, said at this year's American Society of Baking (ASB) conference. "This will eventually be very good for our nation and our industry."

On the last day of ASB's conference, Prince; Pat Callaghan, Pepperidge Farm's senior vice president of strategic business development; and Mike Marcucci, Alpha Baking's chief executive officer, participated in a panel discussion titled "Leadership in Uncertain Times." Although their discussions mentioned the current woes facing the bread industry, the main focus of the presentation was change.

"You're either going to survive and thrive and you're going to have to change to get there, or you're not going to exist anymore," Callaghan said. "That's scary, but it's also refreshing because it does provide us, as an industry that has basically been slow to react, a catalyst to actually change the industry."

Marcucci echoed this theme of change when he spoke about how Alpha Baking plans to adapt to the fluctuations in the bread industry. "It didn't take long to recognize that we would have to make significant changes in the way that we were operated if we were going to survive in the changing marketplace," Marcucci said.

Notice the theme here? Bakeries throughout the country are learning how to adapt to the changing marketplace. And, change is everywhere. Consumers are changing their preferences from white bread to premium whole wheat and whole grain products, and baby boomers are seeking breads that not only taste great, but also provide a slew of healthful ingredients.

Evidence of change
 The numbers are not good. For the 52-week period ended May 16, fresh bread dollar sales have fallen 2.3% and unit sales have dropped 4.1%, according to statistics from Information Resources Inc. Even worse, fresh white bread unit sales (see brand chart on page 27) have plummeted 6.2%, and none of the top-ten selling brands recorded positive numbers for the 52-week period ended May 23.

Conversely, fresh wheat bread sales are positive, with a 2% increase in unit sales. Seven of the top-ten sellingbrands reported increased sales for the 52-week period ended May 23 (See brand chart on page 22).

These diverging categories symbolize a paradigm shift occurring in the bread industry. Consumers are shifting their bread preferences from traditional white bread to premium whole wheat and whole grain varieties. "It's clear and easy to see," Richard Lan, Canada Bread's president and chief executive officer, says. "White bread sales are going down, and wheat and whole grain and multi-grain sales are up. The customer perceives that if I'm going to eat bread, I'm going to eat bread that's better for me."

Although this evolution in bread tastes has been occurring for many years, recent industry woes, such as low-carbohydrate diets, have amplified this change.

"We have been seeing a shift from white to soft variety bread since the mid to late 1970s," Janice Anderson, Flowers Foods Bakeries Group's vice president of marketing, says. " When premium or specialty breads came along, they were originally a small niche market, but since then they have grown to be a significant part of the bread category."

The two biggest trends dominating the current bread industry are the rise of premium breads and the importance of manufacturing breads that cater to specific dietary needs. Fortunately, bakers can satisfy both trends by creating premium whole wheat and whole grain products and promoting the health attributes of these products.

Whole wheat/Whole grain
 Not long ago, the whole wheat and whole grain bread category existed as a niche segment that appealed to a small number of consumers concerned with deriving healthful benefits from their bread. However, many of these products garnered a reputation for tasting like cardboard and tree bark, which turned off all but the most dedicated consumers.

Advancements in ingredient and processing technology have improved the taste and texture of whole grain products, and turned a new wave of consumers on to these premium loaves. Whole wheat and whole grain breads also provide bakers with an increasingly important selling point: health.

"Promoting health benefits is an excellent selling point, and it's becoming more so with the consumer trends," Matt Hall of Sara Lee Bakery Group, says.

For example, when Sara Lee Bakery Group (SLBG), St. Louis, introduced its Sara Lee brand of fresh breads more than a year and a half ago, two of the original five stock keeping units, Sara Lee Classic Wheat and Sara Lee Homestyle Wheat, were 100% whole wheat and whole grain products. This ingredient makeup qualified the breads for a Food and Drug Administrationapproved health claim regarding whole grain products.

"I told the marketing department that whole grains seemed like a nice selling point, but we had it nowhere on the bread," Hall says. According to Hall, the company did not publish the whole grain claim because its consumer research showed that the "Sara Lee brand connotes great taste, and consumers felt that if we put a whole grain claim on the package, it would be a turnoff to some mainstream consumers because they would think that the taste would be compromised."

Less than 18 months later, the company conducted more consumer research. "In December 2003, we redid the research and consumers had really shifted, where they were recognizing the whole grain benefits," Hall says. As a result, the company repackaged these two loaves and they now carry a whole grain claim. "It's amazing how in an 18 month period, how attuned consumers have come to the whole wheat and whole grain message."

SLBG has turned the FDA-approved whole grain claim into a marketing tool to promote the health benefits of some of its products. The company's line of "Heart Healthy" breads contain a logo that informs consumers that the "bread may reduce the risk of heart disease and certain cancers as part of a low-fat diet."

Currently the company carries three products with the Heart Healthy logo, including Sara Lee Heart Healthy Multi-Grain Bakery bread. This 24-oz. wide pan loaf is made from 100% whole grain flour and has a suggested retail price of $2.39 to $3.19. According to the company, the product is a good source of fiber, low in fat, and contains no trans fat, artificial colors or flavors.

Product mix
 Consumers speak with their dollars, and their money is going toward premium whole wheat and whole grain products. And, bakeries with a portfolio of these products are finding success. More than ever, product mix has become an essential aspect of successful bread baking.

For example, Flowers Foods' bread business has thrived in the last two years despite industry trends. One of the company's strong points has been its product mix, which spans from private label white bread to its premium line, Cobblestone Mills. In between this spectrum is Nature's Own soft variety bread. Flowers Foods has taken its Nature's Own brand, which was launched in the 1970s, and turned it into one of the best selling brands in the country, despite the fact that it is only available in the Sunbelt States.

Canada Bread also has been able to weather the downturn in the bread industry due to its solid product mix. "Canada Bread is in a great position because most of our brands are brands that are centered around healthy wheat breads," Lan says.

SLBG recently turned in positive results for its third quarter due to the strength of its Sara Lee brand of fresh bread and its strong product mix.

"We're really well positioned because we have always played in all the bread segments," Hall says. According to Hall, the company has a very strong white bread franchise that is balanced out by whole grain and whole wheat loaves sold under the Sara Lee and Earth Grains brands.

Conversely, Interstate Bakeries Corp. (IBC), which in the last two years has been plagued with declining sales and volumes, has suffered due its weak product mix. "The industry declines affected us more than most other baking companies. We have a larger exposure to the white bread segment than the overall industry." Jim Elsesser, IBC's chief executive officer, said in an analyst conference in April.

"It's clear and easy to see. White bread sales are going down, and wheat and whole grain and multi-grain sales are up. The customer perceives that if I'm going to eat bread, I'm going to eat bread that's better for me."
- Richard Lan, Canada Bread

The company is trying to improve its product mix, and recently launched a new line of premium breads under the Baker's Inn brand. These premium products include 100% Whole Wheat, Raisin Wheat, Honey White, Seven Grain, Honey Whole Wheat, Harvest Multi-Grain, Healthy Potato with Grain, and Wheat & Fiber.

What about white bread?
IBC's heavily tilted toward white bread product mix has resulted in declining sales for the company. And, many bakeries throughout the country are in the same position. Fortunately, despite white bread's falling numbers, it's still a solid business that millions of consumers turn to daily. "White bread is alive and well in the 21st century," Anderson of Flowers Foods says. "We are pleased with our white bread sales and we know that, at least for the foreseeable future, a large part of the population is very loyal to their favorite brand of white bread."

So, how can white bread manufacturers reverse declining sales and boost white bread's image to consumers?

Similar to the trend toward whole grain and whole wheat breads, many high-volume bakers say that white bread manufacturers need to capitalize on the health properties found in the product. According to Sara Lee's Matt Hall, the rise of health-oriented breads has created a two-pronged dynamic in the bread industry. "The positive is that consumers have recognized that whole grain/whole wheat breads are a very healthy, important part of the diet, and always have been," Hall says. "The negative side is that we still need to bring consumers along to improve the image of fortified white bread."

Improving the image of white bread has proven difficult in today's business environment. The best sellers list is chock full of diet books that all appear to carry a unified message that the carbohydrates and sugars found in white bread are extremely unhealthy. Although concrete scientific evidence to prove this point is lacking, the public relations hit has already affected white bread sales.

To reverse the negative publicity of white bread, Hall says that the industry as a whole need to begin promoting the benefits of white bread. "Just because whole wheat/whole grain breads are nutritious, that doesn't mean that white breads are not," Hall says. "White bread delivers a lot of important nutrients, in particular folic acid, which has been a huge success story with reducing neural tube birth defects."

And folic acid is just one nutrient in white bread that bakers could promote. Other important vitamins and minerals, such as niacin, thiamin and riboflavin, are found in white bread, and represent an essential part of a healthful diet.

"We need to do a better job of communicating that white bread is still complex carbohydrates," Hall says. "It's not the sugar you get in a soft drink. It's a complex carbohydrate that is an important part of delivering energy that you need for a healthy, active lifestyle."

Change is possible
The consumer shift from white bread to premium, more healthful whole grain and whole wheat products may make many bread bakers uncomfortable. Manufacturing upscale loaves of bread that rely on whole grains instead of enriched white flour represents a different process with new challenges and manufacturing needs.

However, it is not an impossible task for a white bread manufacturer to formulate and market premium whole grain and whole wheat loaves. Butterkrust Bakeries, Lakeland, Fla., noticed softening white bread sales a couple of years ago and decided to broaden its business by launching a line of premium, wide-pan breads. The introduction of these new products by a primarily white bread producer was difficult, and required countless hours spent on formulation and retrofitting an existing traditional bread line to manufacture these premium products.

Despite the headaches involved in such an undertaking, it is essential for bread bakers to change to meet consumer preferences. "There's a whole wave of consumers that are moving out of white bread and into wheat bread," SLBG's Hall says. "Certainly the growth in wheat bread, and in particular whole wheat and whole grain breads, is very strong and pretty remarkable."