March 20, 2014
by Eric Schroeder
To best understand the changing face of the bagel category, one need only follow the path of Lender’s over the past decade.
Ten years ago, Lender’s was the runaway leader in terms of the bagel brand most often eaten by consumers. Founded in 1927 in New Haven, Conn., by the Lender family, the company was sold to Kraft Foods in 1984 and has been part of Pinnacle Foods since 2003. Under Pinnacle’s ownership, though, Lender’s has seen its bagel dominance dwindle.
Total U.S. multi-outlet (supermarkets, drugstores, mass market retailers, military commissaries, and select club and dollar retail chains)
According to a recent report from Packaged Facts, a Rockville, Md.-based market research firm, Lender’s accounted for 12.9% of all bagels consumed during 2013, down from 16.2% in 2008 and off from its 10-year high of 19.9% in 2004.
Several reasons stand out for Lender’s loss of share. First, private label has made a strong push, narrowing the gaps in quality and variety that existed a decade ago.
In the 52 weeks ended Jan. 26, dollar sales of private label fresh bagels totaled $124,840,000, up 9% from the same period a year ago behind an 18% increase in unit sales to 56,574,710, according to Information Resources, Inc., a Chicago-based market research firm. In the same timeframe, dollar sales of refrigerated private label bagels were $15,209,590, up 7% from the prior 52-week period, and frozen private label bagel sales were $8,908,732, up 14%.
Examples of companies leveraging private label into booming business include Target Stores, Inc., through its Market Pantry line, Wal-Mart Stores, Inc., through its Great Value brand, and Trader Joe’s, through its Trader Joe’s brand.
The increase in the frozen private label bagel business is particularly noteworthy in that the frozen bagel business in general has been in a slump. As the leader in the category with more than 43% of the market share, Lender’s has given up quite a bit of share to private label. Dollar sales of Lender’s frozen bagels fell 14% in the 52 weeks ended Jan. 26 to $11,916,210, while unit sales fell 13% to 6,708,296, according to I.R.I. Meanwhile, the second-largest frozen bagel brand, Ray’s New York Bagels, experienced a 12% drop in sales during the period to $2,922,189. Overall, dollar sales in the frozen bagel category were down 6% in the 52 weeks ended Jan. 26 at $27,547,930.
Another reason for Lender’s loss of share is the shift away from frozen to fresh. According to the Packaged Facts study, bagels are eaten by 61% of U.S. adults, a rate that has held relatively steady over the past 10 years. But the percentage of people eating fresh bagels has risen, climbing to 54.1% in 2013 from 49.1% in 2004. By comparison, the number of people consuming frozen bagels has dropped to 6.8% in 2013 from 12% in 2004, Packaged Facts said.
David Sprinkle, research director for Packaged Facts, said bagel manufacturers have responded for years to consumer demand for healthier fare with products that are more nutritious, including items reformulated to reduce sodium, sugar and fat, to be more natural, organic, gluten-free, and deliver higher levels of fiber, among other nutritional concerns that are similar to trends related to packaged fresh bread. Whole wheat, whole grain and multi-grain products are filling shelves, he said.
One company that has capitalized on this shift is Bimbo Bakeries USA, Horsham, Pa. In 2002, Bimbo Bakeries acquired the Western U.S. baking business of George Weston Ltd., adding the Thomas’ bagels brand. When it was acquired by Bimbo, Thomas’ bagels generated about $150 million in annual sales. Today, the brand is nearing $500 million and growing. In the 52 weeks ended Jan. 26, dollar sales of the Thomas’ base bagel brand were up 11% from the previous year on a 12% increase in unit sales, according to I.R.I.
Overall, Thomas’ bagels accounted for about 12.9% of consumer bagel consumption in 2013, according to Packaged Facts, on par with Lender’s but up from 9.7% of consumption in 2004.
Despite the dents to its dominance in the overall bagel category, Lender’s remains the most formidable player in the refrigerated segment. Overall dollar sales totaled $82,561,350 in the 52 weeks ended Jan. 26, up nearly 6% from the same period a year ago, according to I.R.I. The growth has come from the base Lender’s brand, where dollar sales increased nearly 10% during the period. Meanwhile, sales of Lender’s Cinnabon bagels were down 32% during the period, while sales of Little Lender’s fell 16%, Lender’s Healthy Grain tumbled 80%, and Little Lender’s Cinnabon fell 79%.
New bagel to ‘sprout’ up on Panera menu
ST. LOUIS — After a successful test, Panera Bread Co. earlier this month announced it will introduce a sprouted-grain bagel made with rye, spelt and oat groats to its U.S. cafes in May.
The new bagels will be marketed as high protein options geared toward nutrition-conscious consumers.
Other bagel options at Panera include an Everything bagel, French toast, Asiago cheese, cinnamon crunch, whole grain, chocolate chip, blueberry, cinnamon swirl and raisin, sesame and plain.