Bakers Journal

Features Business and Operations
Private Labels — Saving Our Dough?


November 5, 2007
By Barbara Lauer

Topics

It’s no wonder that more and more shoppers are turning to private label baked goods over national brands

barbara-lauerIt’s here, it’s there — the States, it’s everywhere – according to Nielsen surveys of EU member countries – private label bakery products hold a strong market position, as consumers choose quality options at a reasonable price. You might as well visit a palmist to estimate the price movements on commodities these days, let alone retail bread prices. Listening to the news, or reading it over the Internet, Russians are paying 50 per cent more per loaf, Italians just got socked with a 30 per cent increase, with promises of 20 per cent more within the next month, and baking companies are being buffeted by the sharply rising input costs – one of which is flour.

Canada Bread explained sluggish earnings as a result of commodity prices recently, laying it directly on the 17 per cent increase in wheat costs. Of course, the diversion of land into corn production for ethanol, and resulting increased prices for both corn and wheat is a good part of the escalating witches’ brew. 

That being said, while other countries – like the aforementioned Russia – have jacked up bread prices accordingly, here at home, the price of a loaf has certainly not kept pace with the price of its main ingredient, up more than 20 per cent over the same period in 2006. In the U.S., consumers dug into their pockets for an additional nine per cent for a loaf of white bread in June this year – a lot less than the cost to create it.

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With the stress of biofuel production reflecting across the board – at the gas pump, the heating bill, the cost of milk – it’s no wonder that more and more shoppers are turning to private label baked goods over national brands, expecting equal quality while saving at the check-out. Of course, consumers seeking unique attributes, such as health benefits, or organic, will continue to be brand loyal until a baker crafts a premium, private label product that delivers the unique, differentiated baked goods meeting the individual’s requirements. Is it any wonder that in the U.K. market alone, private label bakery products account for 58 per cent of sales by value?

The Hartman Group conducted a recent survey with consumers on private labels, concluding that one-third found “no difference” between private label and national brands. About one in 10 consumers find private label “better” than national brands, and almost half (49 per cent) say private label are “close, but not as good” as national brands. Laurie Demeritt, president and COO, of The Hartman Group, says there is little doubt that consumers are seeing any gaps closing between private label and national brands.

The emphasis on biofuel, with the resulting commodity price pressures, has exacerbated an evolving marketplace where the food culture has changed. New consumers emerging onto the scene are no longer as brand loyal as their parents or grandparents – who held iconic brands in esteem – and as such, do not find them as relevant to the lifestyles they are living today. Just as established, national brands differentiate themselves from one another through unique attributes, and, in short order, the gen X and Yers, have indicated they expect the same from private label.

Oddly enough, premium private labels are soon going to be facing the same “branding” or marketing challenge that the national brands have been managing for years: nurturing brand loyalty, to the extent possible, as dictated by the retailer’s choice of ingredients, and the apparent “uniqueness” of such products, while simultaneously introducing shoppers to an entirely new class of lifestyle products. Oh, and yeah – profitably.

That being said, this year’s recipe collection could be just what bakers – large and artisan – are seeking. All new recipes, tried and tested, featuring functional ingredients that deliver specific health benefits to your customers, in commercial format, this book will help each and every one of you profit from the success of not only your colleagues, but a trend without end. Good baking!

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