Baking industry leaders discuss the factors influencing innovation at their respective businesses in this tough economic climate.
On behalf of Bay State Milling Co., Quincy, Mass., Baking Management and Modern Baking magazines brought together several industry leaders from key segments of the baking industry to discuss the current state of business and how bakeries and their customers can work together toward collaborative innovation.
Communication and education are key elements of the relationship bakers have both with their suppliers and their customers, particularly when it comes to healthful eating. Bakers need to feel free to have an open dialogue with their suppliers, no matter if they're small or large.
One common thread voiced throughout the discussion, from large consumer product goods manufacturers, such as Sara Lee Corp., to smaller retail bakeries, was how bakers have been affected by the current economic situation. Many bakers have reacted to the economy through margin enhancement, minimizing waste and developing baked products with a “retro” feel.
Modern Baking: What drives innovation in your organization?
Nicole Coady: The economy drove it for us. It's made us focus more on our concept — who we are and what we're representing to the public. We're trying to be friendly and more approachable. There's pudding on the menu. We haven't had pudding before, and there's more whipped cream, things like that.
MB: How has the economy affected your business in the way you approach innovation?
Flora Lau: We have a very large audience and being a publicly held company listed on Wall Street, what we do gets a lot of attention. Within Sara Lee, we have meat, we have bakery and then we have coffee and tea. So, the reason we are very focused on innovation within the company is because we want to grow our top line. With this economy, it is tough. We have to take care of our bottom line, so we have a large number of projects focusing on margin enhancement.
For us, it's not only developing new products. We also are very focused on developing products that have an insulating competitive advantage so we can be ahead of our market. Technology becomes a key driver for us. We leverage technology from ingredient, processing and packaging standpoints to create this competitive insulation. That's how we look at innovation.
However, we also believe that when the economy grows again, if we don't have a pipeline of products in our system ready to launch, we will be left behind. We are really focusing on having a pipeline of innovative products — whether it's bread, bakery, buns, coffee, tea or meat.
MB: You mentioned that you focus on margin enhancement. Can you explain how you do that?
Lau: From margin enhancement, we have a margin cost improvement. We always look at opportunities to improve operations. Is there opportunity to consolidate so that we can volume purchase without sacrificing the quality of the product? When we talk about margin enhancement, in our view, it's different than cost savings. With cost savings, you have a connotation that you're going to cheapen the product, but when we look at improving our margins, we look at every aspect of our business to improve our cost. And often times, we are quite successful in bringing the cost down, and at the same time, improving the quality of products. So it's not one or the other; most of the time they go hand-in-hand.
MB: How has the economy affected innovation in other businesses?
Fred Langford: Our name is Buy for Less, and now we're really living up to our name. I mean, we drive a bargain, keep our prices low and that's really starting to pay off for us.
Scott Florence: Our customers are looking to reduce SKUs, and don't want to look at new items too often, especially since ours is a niche product. So, I'm having a tougher time finding ways that my customers are going to help me drive innovation. In the past, they've been much more aggressive. They'd say, “What else do you have? Can I have guava pie?”
We have the same strategic emphasis that drives all organizations, such as margin enhancement.
Our consumer research drives innovation, but we've got the hole in the middle. Our retailers are not making decisions right now. Because of the economy, they won't try new stuff.
David Okapal: I noticed on our end of it, the universities don't have the money that they used to have, especially because the states are cutting funding. The ones that do have the money don't want to flaunt it anymore. They're not having the big lavish parties they were having before, but they still want the good food. Now we have to come up with something that's tasty, usually retro-looking at this point, like pies and cakes or whatever, but that appeals to [students] without looking like we're spending too much money. It doesn't matter if we actually spend money, but we don't want it to look like we're spending because we don't want to make it appear as though we're wasting what little money the university has.
MB: You threw out the word “retro.” What is retro in terms of baked products? How do you define it?
Okapal: It's a lot of the stuff that you might have grown up with or your grandmother might have made. Red velvet cake is big all of a sudden, in like the last year and a half. I did a red velvet parfait for an event one time. They like the idea of having something new, but that feels like something old.
MB: How is the push toward sustainability affecting your businesses?
Okapal: We're getting killed on that. The university wants everything to be recyclable and sustainable, but it's not big on paying extra for that stuff. As an example, I cater, and most of the catering is drop off. So we pay a person to go drop of the catering order. Well, now they don't like bottled water. They want their water in these containers. Well, that means we have to go pay someone to go pick it up again, too. So it's not cheaper to use water out of a tap. I don't have a problem with it. I think it's great. It's just one more component of what's happening with the economy.
Catherine Reinhart: The economy has affected us in a lot of positive ways. The distaste for waste in a poor economy helped to drive home the whole sustainability thing. We tried to combine both of these simple things — let's reduce waste as much as possible, but also give the customer value for their money.
But just as far as the waste goes, with the economy and trying to save money, we said, “Where is our waste coming from?” And one of the areas, for example, was that when we decorate our cakes, we cut the tops off, then ice them and decorate them. So, we take all these cake scraps and we re-circulate those cake scraps back into a bar. We call it variety of things. And when we cut our brownies, we also end up with a lot of walnuts and chips falling off. So, we took all that, added a bunch more sugar and butter and repackaged it in a really big bar. Our cost is so minimal, and people love it. Ideas like that, reusing things and giving people a better, cheaper, bigger product, have worked really well for us.
MB: In terms of healthful products, what are people asking for?
Christy Timon: People are finally trying to figure out why our nation is so big because it's affecting our health and longevity. I think we're making food they'd be making if they could do it at home.
Abe Faber: And then this whole other weird thing we hear, “Oh, we'll get them to eat the whole grain bagel if we put chocolate chips in it.” To me, that's just doing a massive disservice to people. The reason people don't want to eat things they perceive as healthy is because there's been a lot of [misinformation]. A lot of the time healthy has meant that it will taste bad.
Lau: Should we be developing whole wheat chocolate chip cookies? It becomes a point of reference. When you consume chocolate chip cookies, it should be in moderation. I think from an industry standpoint, we have the responsibility in terms of providing the accurate, truthful, scientific-based information to the general public.
Reinhart: Truth changes, though. Thirty years ago, trans fat was not a problem, and back then margarine was better than butter. Now, it's reversed; we're always getting thrown different information about what's true.
Lau: Sara Lee is one of the companies that uses [white whole grain] flour. We have to act responsibly for our customers that buy our products and we understand the need to increase whole grain consumption because of the benefits of whole grains.
The majority of the population likes white bread, so how do you increase the whole grain consumption? Using the [white whole grain] flour is a way to increase the whole grain consumption for kids who tend to like white bread.
But we also have a line of what we call earth grain product, all natural, 100 percent whole grain with no preservatives. It's having the ability to provide a range of products that begins to migrate the population from white bread, just like whole milk to skim milk. Some people will never drink skim milk. They will go to two percent or one percent. And that's how we approach it in terms of delivering the product and increasing whole grains.
MB: What does value mean in this tough economy?
Okapal: I think with this economy, value doesn't mean that it costs less. It means that when you're finished, you feel like you got what you paid for. I use butter in my pound cake and I make buttercream with butter. So, they might pay $35 or $40 for a 10-in. cake from me and feel fine with that, but spend $15 or $20 at a grocery store and be upset because it tastes [bad].
MB: So what you're talking about is customers want “clean labeled products,” for lack of a better term?
Reinhart: They want real food.
Okapal: That's the hip term now, but that is the term — real food.
Coady: At Finale, my philosophy is that it's about quality ingredients. It's butter; it's cream; it's sugar — there aren't chemicals in them. Everything starts with a simple quality ingredient, and then it's how you build [the formula].
Lau: We are a high-volume producer. Our products can be affordable for the general public because we're able to buy a large volume of flour. We have less labor involved.
As I said, we have a range of products. We also have a hundred percent whole grain, no preservatives, all natural, clean label — as close as what I would say a handmade product would be.
But we continue to look at what can we do to take out our artificial ingredients and still deliver the product. That's where technology comes in. As nutrition science advances, we are able to understand what products we should be eating more or less. As food science and food technology evolves, there are additional ingredients that are considered to be natural, that have the same benefits as the ingredients that are not natural today.
MB: How can you work toward a more collaborative approach with your ingredient suppliers?
Lau: We constantly search for partnerships with our ingredient suppliers to deliver the benefits of the performance of functionality in our finished products.
We search for suppliers that have state-of-the-art technology, but also the best in class in terms of the investment. They're willing to commit to the technology that's under development.
Faber: We're actually having some issues with our flour, and I was on the phone with the head of quality control with [a major flour supplier]. And I would just encourage everyone else out there, no matter how small your business, find the phone number of people who are flour mill techs or quality control people at a chocolate company. They're thrilled to talk to you. They're thrilled to talk to the end user of the product.
Go visit the mill. Visit the place making your butter. Visit these facilities because these companies want to know what's good for their customers.