Seeking insights from a rare success

by Josh Sosland
Share This:

Because of both difficulties created by the uneven economic recovery and challenges within the industry itself, success stories this year among makers of grain-based foods, as measured by quarterly financial results, have been as rare as at any point in memory. Against this backdrop, special attention is merited when an industry player declares it is achieving its objectives.

One such positive episode has been recounted in recent days by Pinnacle Foods Group, whose portfoilo of brands includes Duncan Hines, Birds Eye, Wish-Bone and Van de Kamp’s. In a presentation in early September, a Pinnacle executive described a template for success he said was broadly applicable to the diverse categories in which the company participates. One segment in which the company said it has reversed a downward trend for the business is the cake mix category — about as mature a business as any in food today.

In the presentation at the Barclays Back-to-School Consumer Conference in Boston, Robert J. Gamgort, Pinnacle’s chief executive officer, described efforts to reinvigorate both the company’s Duncan Hines cake and Birds Eye vegetable businesses.

In his presentation, Mr. Gamgort identified two keys to the reversal. First is taking a thoughtful and selective approach toward competitive pricing and second is ensuring products are offered that appeal to a consumer base that is steadily becoming more economically diverse. The pricing intelligence is critical for building sales while also protecting profitability, Mr. Gamgort said.

“It’s about knowing where you have to be price competitive and where you don’t, and innovating to allow yourself to margin up and drive a better profit mix across the entire business,” he said.

The need to be “sharp on your price point” recognizes that brand loyalty in cake mixes is not as great as any of the branded manufacturers would like.

“If you let your price points get out of line with competition, people will switch, because this is the more commoditized segment of baking,” he said. “But baking is not a commoditized category, in total. There’s a tremendous amount of interest in these reality baking shows, there’s a lot of interest in young people around baking, and they invest a lot of time when they bake. So if you can give them a slightly better result, or I should say a much better result at a slightly better price, they gravitate toward that.”

Beyond taking care when it comes to ensuring that pricing is not out of whack in the market, Mr. Gamgort described a tiered approach to the company’s line of mixes. Duncan’s classic line includes basic cake mixes, such as classic yellow and devil’s food. Middle-tier Signature varieties include French vanilla and fudge marble, and products in the Decadent line, added several years ago, contain frosting and pastry bags.

Attention to pricing alignment and offering different product strata is hardly unique to Pinnacle, but in focusing so powerfully on these areas the company appears to be taking a page from the playbook of leading retailers. The ability of Kroger Co. to thrive in recent years has been credited to a significant degree to deep analytics aimed at, in the words of one company executive, understanding at “what price points does it drive the most optimal customer penetration in that category.” Similarly, Wal-Mart in recent days broadly has launched a Price First private label line, a deep value private label line to be paired with the company’s Great Value brand.

For Pinnacle, scanner data indeed suggest the company’s approach in the bakery mix category has been working. Unit sales of Pinnacle cake mix in the 52 weeks ended Aug. 10 were estimated to have risen 9.8%, according Infoscan Reviws, I.R.I. Over the same period the company’s top competitors saw declines of 4.8% and 6.9%. The company was somewhat more aggressive on pricing than its rivals, with unit prices down 4.4%, versus 3% and 1.6%.

Established as Aurora Foods in the 1990s, Pinnacle’s path has not always been easy, and it remains to be seen whether the gains achieved will be sustained. Still, the achievements to date suggest the company merits attention from others in grain-based foods.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

The views expressed in the comments section of Baking Business News do not reflect those of Baking Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.