the business of carbs or is it the conspiracy or carbs?
- From: "TC" <tunderbar@xxxxxxxxxxx>
- Date: 14 Jun 2006 14:25:44 -0700
http://www.kansascity.com/mld/kansascity/business/14695154.htm
Whole grains are hot
But are they food trend or food fad?
By JENNIFER MANN
The Kansas City Star
Interstate Bakeries Corp.
American Italian Pasta Co.
MGP Ingredients
"Different consumers have different needs. ... So now in addition to
classic Wonder, we have three other products that satisfy other
segments of the white-bread category."
Richard Seban, chief marketing officer for Interstate Bakeries Corp.
On a roll with its whole-grain bread formulated to appeal to
white-bread devotees, Interstate Bakeries Corp. this month started
stocking grocers' shelves with similarly healthy hamburger and hot
dog buns.
The rollout comes as the summer grilling season starts to sizzle and
just months after it introduced its Wonder White Bread Fans 100% Whole
Grain. The recipe was developed to appeal to eaters interested in the
health benefits of whole-grain foods while mimicking as closely as
possible the taste, and texture, of the No. 1-selling bread in America,
classic Wonder.
IBC officials also predict it is a recipe that will boost sales at the
company that's one of the nation's largest wholesale baking
companies but which filed for bankruptcy reorganization in September
2004. Faced with a long-term decline in white-bread sales, baking
companies are looking for new products to keep consumers' interest.
Officials won't say what sales of the new products have been but say
they are pleased.
Locally based Interstate is not alone in this quest. Competitors Mrs.
Baird's and Sara Lee also are chasing a growing group of consumers
who say they want healthier choices but still demand a certain taste
- including die-hard white-bread fans who can't imagine a BLT made
with anything but that squishy reminder of their childhoods.
Indeed, for the 52 weeks ended April 22, industrywide sales of bread
with whole-grain claims on labels were up almost $200 million in the
past year, or 19.6 percent.
While early results are promising, chasing any trend can be risky
business, say food industry experts who note that of the 16,000 new
products that find their way to grocers' shelves each year, only one
in 10 will be around three years later.
In assessing the financial pitfalls involved in trying to capitalize on
consumers' eating habits, one need look no further than another
Kansas City-based food company, American Italian Pasta Co., which is
dealing with a host of financial and accounting problems. Three years
ago, it spent millions of dollars to develop a line of low-carbohydrate
pastas during the peak of Atkins diet-fueled craze, only to see it
bomb. And it wasn't alone - hundreds of products for carb-conscious
customers were rushed to market, many of which have since disappeared
from shelves.
"At the time, there was enough evidence to suggest the whole low-carb
craze was going to have legs - there were a lot of companies that
jumped into that fray," said John Stanton, professor of food
marketing at St. Joseph's University in Philadelphia.
"But in my opinion, there are two trends that have been with us
forever - convenience and taste. You look at the really successful
products, and they have at least one of those attributes."
Discerning the difference between a fad and a trend can be tricky, said
Christy Brinnehl, an analyst with Mintel Custom Solutions, a
Chicago-based global consumer research and consulting company.
"A fad will skyrocket in popularity, spike and then quickly fall
off," said Brinnehl, "whereas if it's a trend, you'll see slow
steady, upward growth."
But not jumping in when a food fad is wreaking havoc with sales can be
hard to resist. Interstate did not chase the low-carb craze, but when
it filed for reorganization it placed some of the blame for its
faltering finances on the diet fad in which adherents shun products
such as bread and pasta.
American Italian was whipsawed by the diet fad. In a financial filing
for the three months ended April 1, 2005 - its last SEC filing before
it stopped reporting because of accounting problems - it reported
that sales of its low- and reduced-carb pastas dropped more than 89
percent from the previous year. It later wrote off $5.2 million of low-
and reduced-carb inventory. Conversely, getting a ride on the wave up
-at least in the short term - was Atchison-based MGP Ingredients,
which saw a brisk demand for its products that allowed food companies,
including American Italian, to cut carbs from its products.
In February 2004, MGP noted in an earnings release that the
"popularity of various high-protein, low-carb diets continues to
build momentum, which many industry sources believe may not level off
for possibly two to three years."
Just 10 months later, in December 2004, after lowering its earnings
guidance for the second time, to less than half of its previous
forecast, it noted that demand for low-carb products had started
slowing in the summer, and the company saw no signs of recovery.
MPG's stock rode the wave as well, hitting $43 in May 2004 from $10
in December 2003, and then fell back to less than $10 a share after the
low-carb bubble burst. Its shares are now trading around $28, fueled in
part by demand for its ethanol.
Brinnehl said trends primarily start from consumer demand or government
push.
"The whole carb issue caused a lot of concern in the health-care
field - it wasn't viewed as healthy," Brinnehl said. "But I
think what it did was get people to think about what kinds of carbs
they consumed. I don't know of anyone who wouldn't agree that whole
grains are good-for-you carbs."
The whole-grain trend received a huge boost in January 2005, when the
Food and Drug Administration unveiled the new food pyramid, which
recommended significantly greater portions of whole grains because
research suggests they can lower the risks for heart disease and some
cancers. That, in turn, provided the impetus for a flood of new
products.
After the new pyramid was a published, a 2005 survey by GfK NOP Global
Food, Diet and Wellbeing Monitor found that globally 43 percent of
consumers planned to increase their whole grain intake.
Data from ACNielsen backs up assertions by consumers that they're
interested in a healthier versions of bread and pasta.
For the 52 weeks ended April 22, unit sales of bread without any
whole-grain claims were down 16.7 percent compared to four years ago.
While sales of bread with healthy whole-grain claims make up only 15
percent of the total category, unit sales were up 47.1 percent in the
same four year period.
The trends for pasta were even more pronounced. All data excludes sales
from Wal-Mart, which doesn't provide dollar or unit sales of its
products.
Even before the new FDA recommendations were published, food companies
knew whole grains were going to be a big part of the story, giving many
the opportunity to get a jump on new product development. That trend
was evident earlier this month at the Food Marketing Institute's
annual convention, where hundreds of new whole-grain products were
introduced.
Among them were about a dozen from Kraft, the world's second-largest
food and beverage company, which unveiled 60 new products, including
DiGiorno Harvest Wheat Crust Pizza in five varieties, and four
varieties of 100 percent whole-grain Nabisco crackers and cookies.
"How we look at things, we put the consumer first," said Renee
Zahery, a Kraft spokeswoman. "Are we developing things that are
relevant to your life, what are the things that motivate you as a
consumer and then look for the intersection of their needs and what we
can provide - we think these products do provide what consumers
want."
Hedging its bets, Interstate has created three new brands for the
category. One is all whole grain, one a fortified blend of about 30
percent whole and 70 percent refined grains similar to what Sara Lee
has in the marketplace, and one fortified with extra fiber and
vitamins.
Richard Seban, chief marketing officer for Interstate, while declining
to give specific numbers, said sales of its new products have all
"done very well - they've exceeded our expectations."
"Different consumers have different needs, and we're now able to
fill key gaps in the white-bread category, which is so segmented,"
Seban said. "So now in addition to classic Wonder, we have three
other products that satisfy other segments of the white-bread
category."
American Italian also jumped on the trend earlier this year by
introducing a line of whole-grain pastas, but only after an exhaustive
process of determining what products to create.
A couple of years ago, the company had a brainstorming session that cut
across all departments. At the end of the process, more than 500 ideas
were on the table. Those were whittled to 27, and from there eight made
it to the concept stage, where products were developed and tested with
consumers.
Drew Lericos, vice president of marketing at American Italian, joined
the company just as it was introducing its low-carb products.
"Over 85 percent of households use pasta, and when you ask them what
more they want from their pasta, they're pretty happy," Lericos
said. "But one issue that did come up was 'I'm concerned about
the whole carb issue,' and consumers mentioned whole grains."
There have been whole-wheat pastas on the market for more than 10
years, Lericos said, but many consumers have been dissatisfied, finding
many bitter and chewy.
Two years ago, American Italian set out to find a better recipe for
multigrain pasta, creating one that uses whole wheat, brown rice and
other whole grains. One serving gives consumers 48 grams of whole
grain, a full days' recommendation.
To get from concept to grocers' shelves took 18 months.
Lericos declined to say how much American Italian invested in its new
product line or give specifics about sales but said the company is
encouraged by initial results.
"Obviously, we did a lot of testing with consumers, and we've had
quite a bit of press where people tried it and liked it," Lericos
said. "But really, no matter how much testing you do, at the end of
the day this is more art than science."
**********
TC
.
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