Product innovation in bread picked up in 2009, according to executives interviewed recently by Milling & Baking News. While increasingly sensitive to consumer concerns about value amid the most difficult economic environment in decades, product innovation generally remained focused on health and wellness.

On the surface, the bread market over the past year was relatively stable. Bread unit sales in supermarkets in the 52 weeks ended Jan. 24 were 3,017,022,000 units, down 0.56% from a year earlier, according to data from Information Resources, Inc. The year-to-year change was not out of line with what had been typical in earlier years, and private label did not gain much share, with unit sales slipping 0.52% during the period.

Despite the flat aggregate changes, wide swings were evident in the bread market on the company level last year with unusually wide shifts in market share and widely varying pricing policies.

“If you look at the basic I.R.I. numbers, they are flat, but there’s always a lot going on underneath that flat number,” said Tim Zimmer, vice-president of marketing for Sara Lee North American Fresh Bakery, Downers Grove, Ill.

Between the ups and downs of commodity prices in 2007-09, the complicated impact of the economic downturn, structural changes in the baking industry and ebbs and flows of product innovation, measuring how leading trends in baking are evolving may be particularly challenging.

Janice Anderson, vice-president of marketing at Flowers Foods, Inc., Thomasville, Ga., said that even as the better-for-you trend remains “alive and well” in core Flowers markets, consumers have demonstrated heightened interest in value.

“Products that offer consumers both health benefits and value have an edge,” she said.

Even as bakers fine-tune their product portfolios based on evolving trends, they remain keenly aware of the shifting sands of market share. After prices were raised broadly in 2008, pricing strategies varied widely in 2009.

Market share changes over the 52 weeks among the largest baking companies ranged from gains of 7.7% at Hostess Brands Inc. and 0.7% at Flowers to declines of 6.9% at Sara Lee and 2.6% at La Brea Bakery. Figures for Bimbo Bakeries USA were not presented on a consolidated basis, but each of the company’s subsidiaries sustained market share declines — George Weston, down 1.1%; Bimbo, down 0.4%; and Stroehmann, down 0.7%.

The shifts largely, but not perfectly, lined up with how aggressive products were priced in 2009. Hostess average prices were down 5.8% and Sara Lee was down 2.7%. Flowers average prices were up 0.4%. At B.B.U., prices were down 3.7% at George Weston, 6.8% at Bimbo and 5.3% at Stroehmann.

A good snapshot of the 52 weeks, the I.R.I. data hardly offer a complete picture of the marketplace. While Flowers was able to gain share even while advancing prices, the company’s sales in 2009 fell shy of its expectations. As the year wore on, the company lowered guidance for sales growth. And while Hostess scored an impressive sales gain in 2009, the advance followed precipitous declines in prior years — 18.9% in 2008 alone.

Activation, innovation at Sara Lee

While adjusting to a challenging market environment for bread, Sara Lee North American Fresh Bakery is holding firm to a strategy focused on two key elements, Mr. Zimmer said.

“As has been the case in the past, you will see going forward a balance of innovation and activation from Sara Lee,” he said.

If activation, through targeted marketing programs, notably a Disney partnership, stood out in Sara Lee activity in 2009, new product innovation is emerging to the forefront again in 2010. Since the beginning of February, the company has announced two significant introductions in the bread category. First, the company said it was revamping its line of Earthgrains 100% natural and 100% whole grains bread with the incorporation of Eco-Grain wheat. Last week, the company said it was expanding its Sara Lee Soft & Smooth bread line with the introduction of Sara Lee Soft & Smooth Plus Bread Made with DHA Omega-3.

The Eco-Grain program represents a partnership with Horizon Milling L.L.C., and EarthGrains bread is the first product including Eco-Grain wheat on the market. Eco-Grain wheat is grown with innovative farming techniques Sara Lee described as promoting “more sustainable use of land.” Initially, flour in the bread will be milled from at least 20% Eco-Grain wheat, a figure that could rise over time, Sara Lee said.

Mr. Zimmer said the process culminating with the EarthGrains Eco-Grain launch dates back a year, when Sara Lee conducted an evaluation of broad marketplace trends.

“One of the largest trends was around sustainability,” he said. “When we looked at the brand equity of EarthGrains and the profile of its consumers, which are 45-year-old-plus empty nesters, we looked at ways we could connect to the sustainability trend to the brand.

“Looking from an agricultural standpoint, we approached Cargill (the managing partner of Horizon Milling) and began conversations with them about what sustainable technologies they have. We saw a wonderful opportunity to bring precision agriculture with EarthGrains, to monitor the fertilizer and other inputs growers put on the field. What started us down that path was leveraging that precision agricultural technology.”

Another partnership is at the core of the other introduction, Sara Lee Soft & Smooth Plus breads Made with DHA Omega-3. The DHA omega-3 for the product is supplied by Martek Biosciences Corp., a company that has specialized in the development of DHA omega-3 products and partnering with food manufacturers.

Mr. Zimmer said the new product is aimed at a very different demographic than the EarthGrains line — mothers between the ages of 25 and 34 with children aged 10 months to 5 years.

“As mothers transition their toddlers from liquids into solids, bakery products are not always top of mind,” he said. “We thought there was a great opportunity to step in and make moms aware that bread can play an important role in their child’s diet as they make this shift. DHA omega-3 is enjoying significant growth, and when we did research with moms, brain health and development, which are helped by the ingredient, was a concern. Research shows 92% of mothers are aware of the benefits of DHA omega-3.”

This high level of awareness among young women reflects the success infant formula makers have had adding DHA-omega 3, he explained.

The new bread varieties are offered both in 100% whole wheat and made with whole grain white varieties. Breaking from the signature red, the packaging’s blue color is meant to have “visual impact in the bakery aisle,” Mr. Zimmer said.

Sara Lee’s marketing program is oriented toward helping with the transition to solid foods, he explained. For instance, marketing materials show bread slices cut up in quarters, making the bread easier to handle.

“We focused carefully on how a mom would interact with her child, hand to mouth,” Mr. Zimmer said. “We spent a lot of time trying to understand that from the consumer standpoint.”

The decision to offer a product targeting toddlers both in a white and whole wheat variety also reflects marketplace changes, Mr. Zimmer said.

“More and more mothers in that age are introducing whole wheat bread as a first product for their children,” he said. “In the past, it was always white, and that has evolved.”

Asked whether the “Plus” in the Soft & Smooth Plus brand will be a platform for other functional benefits, Mr. Zimmer said, “Our consumers, moms, will dictate if and how we evolve Soft & Smooth Plus. We find when we listen to her closely, we succeed.” New, value-added products aside, Mr. Zimmer acknowledged that the competitive environment in baking at present is very challenging.

“The overall white bread market remains soft, down about 6.5% in the latest 12 weeks, as measured in pounds,” he said. “Dollar sales are 10.5% down. We believe there is an opportunity underlying white bread, driven at a top-line level by making sure you have value-priced white bread in tough economic times.

“We have wanted to protect our pricing in the marketplace, and there is a lot of pressure on this category from a value standpoint. We believe that over time we will be able to protect pricing by offering innovative solutions in the marketplace. What’s happening right now is part of the transition in the category, moving from a price, commodity-driven category to one with consumer solutions and variety within the aisle.”

Without abandoning this approach, Mr. Zimmer said Sara Lee is well aware of and is responding to the challenges posed to baking in a difficult economic environment. Still, he said the company is taking a “Sara Lee” approach toward offering consumer value.

“Yes, we continue to evaluate our pricing, but the way we have adjusted through a wide range of in-store activities — programs around couponing and value meal deals,” he said. “For instance, we offer consumers the chance to get a dollar off milk when they buy Sara Lee bread, driving value across the market basket, not just through prices discounting.”

By mixing the value and innovation approaches, Sara Lee will generate positive results in 2010, Mr. Zimmer said.

“You will see a much improved I.R.I. performance next year,” he said.

Rudi’s sees rebound for organic

Difficulties in the bread market cut across nearly all segments, including one that had appeared immune to such swings — organic food products. But the recent slowdown in the rate of growth for organic food products will not endure, said Douglas K. Radi, vice-president of marketing for Charter Baking, Boulder, Colo. Charter owns three baking businesses: Rudi’s Organic Bakery, Vermont Bread Co., and The Baker.

“I don’t think the long-term growth prospects have changed at all,” Mr. Radi said. “I think we’ve hit a small bump in the road with economic issues of the past 18 months. Those issues have been compounded by higher pricing in the category overall, for bread and all organic products, because of the commodity price rise that preceded the recession.

“It’s clear that the health and wellness revolution is still strong.”

Mr. Radi certainly was not brushing off the challenges, though, which he said began with the higher pricing in 2007-08.

“My hypothesis is that the organic committed have stayed in the category, but the ‘trial,’ and ‘transition’ consumers fell out a little,” he said. “We went from growing 15%, year after year, to low single digits in 2009.”

Mr. Radi’s optimism is based on his assessment of how trends unfolded in 2009, when demand was falling at an annualized single-digit rate early in the year and improved to single-digit growth later in 2009.

“It was an eight-point swing, over the course of a few months, so our view is that the long-term growth prospects are very positive,” he said.

Mr. Radi believes the underlying potential for organic bread is as good if not better than other major categories. He estimated organic’s share of the bread market at 1.8%, versus roughly 3.5% for all food.

While leading baking companies have experimented in the organic category, Mr. Radi said most have backed away.

“Whether it was bread made with organic wheat or certified organic products, they don’t seem to have been successful,” he said. “They sell huge, conventional brands, which doesn’t work well with niche products.”

Over the past year, Rudi’s has introduced two new wide pan sandwich bread varieties, a double fiber bread and a nut and oat bread.

“Fiber is something consumers are seeking out,” he said. “It’s become a real nutritional buzzword. Nut and oat bread have been successful in the category, and we wanted to be sure to have an offering there, too.

“Our real strategy is that we are trying to offer products for that organic mom, organic solutions for her family.”

For Rudi’s, a key initiative for 2010 will be a relaunch of the brand with new packaging and identification. The rebranding will be phased in between May and July. Mr. Radi said the change is aimed at better aligning the brand with consumers’ perceptions as well as overall changes in the bread aisle over the past decade.

“The Rudi’s consumer tells us our brand is very different from the rest of the category,” he said. “It’s a bright, optimistic and progressive company that has been doing things its own way for a long time. It’s a value system they share about being purposeful, passionate but fun and optimistic.

“We found that our design didn’t meet the consumer’s expectations. It’s a challenge to stand out in a 60-foot bread aisle with 300 feet of shelving. We might only have 12 or 14 linear feet of shelving. Our brand needs to pop off the shelf, which is our No. 1 ad impression. It needs to work much harder than it has..”

Mr. Radi described that packaging as a “new, bright and optimistic look for our brand, signaling the our brand is different — made with wholesome, simple and organic ingredients.”

Flowers expands Nature’s Own

Over the past year, Flowers introduced three new bread varieties, all under its Nature’s Own brand: Nature’s Own Whole 100% Whole Grain Bread (soft variety); Nature’s Own Cinnamon Swirl Breakfast Bread; and Nature’s Own sandwich rounds.

Ms. Anderson said the Nature’s Own brand represents an excellent vehicle for Flowers to introduce products that fall under the health and wellness mantle.

“The Nature’s Own brand is all about ‘good-for-you’ breads,” she said. “When we looked at the entire Nature’s Own lineup we saw an opportunity to offer 100% whole wheat buns and 100% whole grain bread. Not only do these items fit the healthy eating trend, but the product descriptors include that ‘100%’ which seems to be a trigger for consumers. People see ‘100%’ and think ‘this is good for me.’”

Ms. Anderson described the 100% Whole Grain bread as “a bit sweeter” and softer than the 100% whole wheat variety that has been a Nature’s Own mainstay for decades. As its name implies, the new loaf is baked from a multi-grain recipe.

“We’ve been very pleased with how this loaf is performing,” she said. “It seems to have found a niche with consumers who want whole grains but don’t like the stronger taste of 100% whole wheat bread.”

Introduced in 2008, the Nature’s Own Special Mornings breakfast line now includes 13 items, including four English muffin varieties, seven types of bagels, and two breakfast bread varieties.

While innovation may be key to growth in baking overall, traditional varieties have remained the leaders in breakfast bread, Ms. Anderson said.

“Cinnamon and cinnamon raisin bread are the most popular breakfast breads on the market,” she said. “It’s somewhat refreshing (and slightly frustrating, too) to have such traditional flavor varieties continue to hold the lion share of the breakfast bread category. These are the two varieties we offer under Nature’s Own. We tried a cranberry raisin bread, but while it had some die-hard fans, the sales were just not on par with cinnamon raisin.”

New markets entered by Flowers in 2009 included portions of Illinois, Indiana and Pennsylvania, chose because of proximity to Flowers’ baking plants, said Brad Alexander, president of Flowers Bakeries.

“We were able to expand our reach farther north into Illinois and Indiana through our new bakery in Bardstown, Ky., which gave us needed capacity,” Mr. Alexander said. “Our Lynchburg, Va., bakery is handling the southern Pennsylvania markets.”

Whole grains and portion control are the hottest trends in the bread category in 2010, Ms. Anderson said. While the impact of whole grains has been apparent for some time, she said the portion control trend is still emerging.

Sandwich rounds, thin-sliced bagels and mini-bagels are among examples of the new trend she cited.

“I think we’ll be seeing more products in the bread aisle that fit one or both of these trends,” she said. “While there was a bit of an organic wave a few years ago, that seems to be dying down a bit as consumers begin to show an interest in natural foods.”

Nature’s Pride keys growth at Hostess

For Hostess Brands, Inc., Irving, Texas, the introduction of the Nature’s Pride bread line was the centerpiece of new products activity in 2009.

“The launch was a significant milestone for the company as the first post-bankruptcy emergence product launch as well as the first complete line of bread products to be introduced in several years,” said Stephany Verstraete, vice-president of bread marketing at Hostess Brands.

The introduction proved pivotal in the overall 7.7% gain in unit sales for Hostess in 2009, as measured by I.R.I. Unit sales of Nature’s Pride totaled 31.2

million, equating to 12% of the total Hostess bread supermarket sales of 238 million units. Sales of Wonder bread, at 95.2 million units (36% of the company’s total) was down 7.6% in 2009, and Home Pride sales of 39.7 million (15% of total) were up 11% from the year before. In its first year of production (less than 11 months, actually), Nature’s Pride was the 13th most popular bread brand in the United States.

Highlights identified by Ms. Verstraete for Nature’s Pride first year on the market included recognition by Fitness magazine as “best tasting sliced bread.” In March 2009, a Nature’s Pride variety was the only bread to receive an excellent taste rating from Consumer Reports among both all natural and conventional bread.

More recently, the company extended the Nature’s Pride line in November with the introduction of Nature’s Pride Nutty Oat, with a hearty texture and nutty flavor.

“We look forward to continuing to leverage the increasing strength of the Nature’s Pride all-natural portfolio to a variety of new bread products as we plan for the launches of several new multi-product sub-lines over the course of this year,” Ms. Verstraete said.

In the white bread category, the tension between taste and health concerns continues to be an innovation catalyst for baking companies, Ms. Verstraete said.

“Families across the country are conflicted,” she said. “Many prefer the taste and texture of white bread, but they also want the fiber or whole grains that traditionally are provided by wheat bread. This trend has sparked heightened interest in the healthy white bread segment.”

In October Hostess introduced reformulated versions of two of the company’s top varieties: Wonder Classic and Wonder Classic Sandwich. The new formula provides the same amount of calcium as eight ounces of milk in each serving and is a good source of vitamin D. 

In January the company launched the Sandwich Wonder-izer, and shortly thereafter, the Sandwich Wonder-izer iPhone app. 

“The Wonder-izer is a tool that enables consumers to create unique sandwich combinations from a list of more than 120 ingredients while calculating the sandwich’s nutrition values in real time with each added ingredient,” Ms. Verstraete said. “The Wonder-izer presented us with a unique opportunity to extend our current digital strategy and allow us to connect in a relevant way with today’s consumers. Specifically, we know that moms struggle to balance their family’s nutritional needs with the food they like to eat. As we continue to introduce new products that help make achieving this balance a little easier, we also want to provide moms with tools that will help her. The web version of the Wonder-izer is a great way for her to get sandwich ideas that meet her nutritional needs and the iPhone version creates a fun, engaging way for her to teach her family about making healthy choices.”