Theresa Cogswell: Finding Balance
March 1, 2011
The recent headline “Wheat price volatility reflects concerns over Australian floods” forced me to pause and read the rest of the story. But the statement that really got my undivided attention was “ADM, the US-based commodities trader, has recently issued a warning that there is a ‘significant global shortfall’ of high-quality wheat suitable for bread manufacture.”
OMG! Alert! Potential crisis situation for flour quality! (Thank goodness availability is Purchasing’s problem. R&D has enough to worry about.)
How do we ensure that our bakeries will receive the best flour possible and make the consistent-quality branded products our consumers demand? The status quo is not going to cut it. Higher prices, lower quality, possible limited availability and finished product expectations that do not change — such conditions mark just another day in the life of the baker working to compete in today’s environment.
The first thing many consumer package goods companies do when ingredient costs increase is to cut corners. You need look no further than the candy aisle or ice cream case in your local grocery store to see how some companies deal with rising costs of commodities and other ingredients. That candy bar is now 2.07 oz instead of 2.25 oz, and the half-gallon of ice cream, well, it shrank too. It is now 1.75 qt. (I even have one package in my freezer that is just 1.5 qt.) But to the consumer, it still looks like a half-gallon. Even the once ubiquitous 5-lb bag of sugar, both branded and private label, now weighs 4 lb in most retail establishments today. (Aldi still sells a 5-lb bag. Go figure.)
However, in the baking business, scrimping on or changing the net weight of the loaf of bread is not an option. Believe it or not, there are “bread pan” laws — mostly state laws — that stipulate the legal net weight for a loaf of bread. For example, you can sell a 1-lb (16-oz) loaf of white bread, but if you wanted to reduce the net weight by 10% to help cover the increase in commodity costs and, thus, sell a 14.4-oz loaf of bread, it would not be legal, even if you labeled it as 14.4 oz.
The same would be true if you wanted to reduce your 100% whole-wheat, 24-oz, wide-pan loaf to 21.6 oz yet use the same baking pan. Less weight in the same pan size means you change the current loaf to a “more expanded” loaf of bread. Some folks would say you are selling more air. Some consumers would say, “You changed my bread.” Those consumers would be right. When you bite into a more expanded loaf of bread, you don’t get the same texture, substance or mouthfeel.
Don’t kid yourself; consumers are smart, and they speak with their purchasing power. They may not know why the product is different or be able to explain it to a focus group, but they know something is different. So, they start purchasing a different brand. Choices abound in the bread aisle, and we all know it is easier and more economical to keep and maintain a satisfied brand-loyal consumer than to try to convert a new one. Maybe we should be thankful for small favors like the “bread pan” laws, which may keep us from making decisions we might regret.
Why, then, is this discussion important in the current environment of potentially limited supply and higher commodity prices? Don’t play your consumer for a fool. If you must scrimp, save and make changes, do not do it in obvious areas. Consumers will notice.
One example that I will forever remember affected the piece count in a single-serving package of a bite-sized snack. (I have concealed the brand and variety to protect the innocent.) The original single-serving package contained six pieces. Because sales increased but no more line capacity was available, Operations decided to delete one piece from each serving pouch. The new pouch contained five pieces.
The unintended consequences of this action were many. The toll-free customer service line lit up with complaints. You see, a 6-piece package can easily be shared among two people, and five pieces … well, not so much. It may not seem like a big deal to you, but Mom typically purchases a package for her children to share. All of a sudden there is one less, and they cannot be split evenly between the children. I don’t know about you, your brothers and sisters, but mine did not always share well, and the typical bickering (in my case, hitting and fighting) would commence.
Now, fast forward six months. Remember the production line that was full because sales were so good? Not anymore. In this instance, there was ample time on the line, and sales were down. Life goes on. Shoppers forget their earlier preferences. At the bakery, the unintended consequences are never discussed again, and unfortunately, no one learned from their mistakes.
Remember, consumers will notice.
So, as you work to keep your costs in line during this difficult time, be creative in your ways to reduce cost and expenses. Ask your employees to help. They live the bakery life every day. They see where opportunities exist for additional savings and profit.
For example, a leak may be wasting 10 lb of flour every shift. That small leak adds up to 30 lb a day or 900 lb of wasted flour a month. At 20¢ per lb, the loss comes to $180 per month and $2,160 per year. If you run 10 bakeries with the same issue, that comes to $21,600 annually.
Make cost savings into a contest, and recognize the best ideas in the company newsletter or with a gift card. We all want to make the place we work better. Ask the questions, listen to the answers, and work to implement potential cost savings — ones that do not affect our brand-loyal customer bases.