Retailers are learning when to say when.
The consumer drivers compelling retailers to stock high-priced diet items are causing a growing number of operators to wonder how much they can financially tolerate. After all, there's very little markup on these already high-priced products, and they offer less-than-stellar returns. For many, it becomes a matter of pure volume.
Certain categories like meat, seafood, butter and bacon, which are all high up on a low-carb dieter's shopping list, are less problematic because pricing models are a bit more flexible, and they are purchased by all consumers -- not just those on diets.
Yet when it comes to other categories like baked goods, retailers told SN they're pausing to examine demand more closely. Should an in-store bakery ride it out, or add lower-carb products? Even those who have added such items said there's a limit.
Kowalski's Markets, St. Paul, Minn., is a case in point. The nine-unit independent, which has a central bakery, partnered with ingredients suppliers to create a white bread, a wheat bread, a hamburger bun and two flavors of muffin that contain significantly fewer carbs than their traditional counterparts. Soon joining that group of products is a brownie scheduled to hit the ISBs. Next up is an oatmeal raisin-type cookie -- and that's it, officials said.
"We wanted to get the low-carb business. This was the first time since I've been with the company that we were seeing really flat bakery sales. We attributed it to the fact that people looking for low carbs were moving away from bakery. Now, with these products we rolled out the week of New Year's, we're back on track. We'll see where it takes us, but after the cookie, I think that'll be all. You could drive yourself nuts coming out with 100 different things," said Steve Beaird, Kowalski's bakery director and manager of its central facility.
Beaird emphasized that Kowalski's recognizes the market for such products as the niche it is.
"We did feel we needed to have products in each of the categories: the muffins for breakfast, the breads and buns, and then the brownie and cookies for dessert or a snack."
Beaird, as well as other retailers and manufacturers, explained that making low-carb versions is very expensive. In fact, the ingredients are so costly that, if retail pricing is within reason, the retailer's margin is miniscule. For example, Kowalski's uses a wheat protein isolate flour.
"We can get a 50-pound bag of regular wheat flour for $6.50, but a 50-pound bag of the wheat isolate flour is $65, 10 times the cost for that one ingredient," Beaird said.
For some bread manufacturers, like East Brunswick, N.J.-based Ecce Panis, it's not the cost so much as the image they're concerned about.
"We're not putting a focus on developing a low-carb product. We don't want to compromise our quality or our image as the maker of high-quality, all-natural artisan bread," said Matthew Rini, the company's director of research and development and quality assurance. "When you start taking out carbs, it can affect the volume and strength of the product, as well as the flavor. So, you see people compensating by using chemical additives. We don't want to do that."
Au Bon Pain, the bakery cafe chain, takes the same position. In fact, the concept has chosen this moment to start the rollout of a new artisan bread line. There's no mention of carbs.
In a just-completed move with shelf-stable, packaged products, Kowalski's is gathering low-carb versions together in eight-foot, walk-around "Carb Solution Centers."
Without government guidelines as to what can be called "reduced carb" or "low carb," most retailers are simply stating the facts. At Kowalski's, buns are labeled "4.2 net carbs per bun." Wild Oats Markets, Boulder, Colo., is helping carb-conscious customers locate products "with 10 net carbs or fewer," with a navigational map. In-store signs ask, "Are you carb conscious?"
"We informed customers about our new carb-conscious program when it first launched in January, but we're not promoting it beyond that," said Tracy Spencer, communications manager at 77-unit Wild Oats.
Meanwhile, some retailers, like West Point Market, Akron, Ohio, purposefully refuse to recognize the low-carb craze.
"We currently do not designate any products as low carb or zero carb at West Point, and we do not plan to in the future. I believe the diets are a fad that can be harmful to your health," said Rick Vernon, chief executive officer at the upscale, single-unit independent.
Though he doesn't believe in it, Vernon conceded the trend is pervasive. Indeed, he said he can think of only two other trends that picked up such momentum: the Scarsdale diet of the '70s and the Cabbage Patch doll trend, the latter "being the least dangerous."
Some industry experts talked about the opportunity the trend presents. While ISBs are taking a hit, meat and seafood departments are doing very well, but they could do even better, the experts said.
"I just don't see supermarkets, in their meat and seafood departments, capitalizing on the trend like they could. They could offer some meal planning with 'good carb' sides, for instance," said Sonny Dickinson, a longtime industry veteran and president of The Dickinson Corp., a Columbia, S.C-based consulting firm.
Mona Doyle, president of the Consumer Network, a consumer research group based in Philadelphia, echoed that sentiment.
"It's another opportunity for supermarkets. I think [retailers] just don't know how to respond to this," said Doyle, adding they'd be wise to take advantage of the opportunity quickly before the parameters of the public debate change or before there is a backlash against the diets.
Consumers, whittling away at their waistlines with strict high-protein/low-carb diets, are being forced to bulk up their grocery budgets, they told Doyle. The added expense of purchasing high-priced items, week after week, might eventually curb their enthusiasm.
