BUFFALO, N.Y. -- The single most important issue facing in-store bakeries today is category management, according to Dennis Lanning, president of the International Dairy-Deli-Bakery Association, Madison, Wis.
While it is the key to future successful sales and profits, in-store executives must figure out how to make category management work for them, and also where to get essential marketing intelligence when scan data aren't available.
"It's the old 80-20 rule. Category management will show you how 80% of your profits should be coming from 20% of your products," Lanning said. "The trick is in figuring out which products to drop and for what reasons. A good plan can help you do that."
In an interview with SN, Lanning pointed out that IDDA is developing such a plan for in-store bakeries and delis. Besides presiding over that trade group, Lanning is also senior vice president of worldwide bakery development for Rich Products Corp. here.
He stressed that in order to understand and manage any bakery category, it's crucial to know what the customer wants, expects and is willing to pay for. Lanning's background in bakery manufacturing makes him an informed source when it comes to matching product to market.
"If retailers aren't doing in-store focus groups and marketing surveys, they're missing a big chunk of consumer data," Lanning said.
Lanning spoke with SN about category management, among other topics.
SN: As IDDA president, how have you addressed the issue of category management that's so important to retailers?
LANNING:Well, I voted an enthusiastic yes when the idea of putting together a category management planner for in-store bakeries and delis was presented to the board of directors. That was and is a big project for us. We're in phase two of a three phase project that will cost upwards of $300,000. We will make that planning tool available to our members for less that 1% of the development cost.
As part of the development committee I've had a firsthand look at how the project is shaping up and, I have to tell you, it's good. Really good.
The biggest problem that retailers have in developing a category plan for bakery and for deli is the lack of good scan data. The random weight scanning system makes it incredibly difficult, if not impossible, to collect exact matching data, not only from region to region and chain to chain, but store to store.
Until the system has been totally modified to embrace new technology and new systems, that won't change. What retailers can and should do is to use the standardized Universal Product Codes that have been developed by IDDA and other trade associations. They exist for every perishable or random weight category.
The other thing retailers can do is to start thinking outside their cube or market space and use all the sources available to gather indicative -- not exact, but close -- data that will help 'build' the category picture.
We have two sessions scheduled [for the IDDA seminar program] on this extremely important topic. One is by Dr. Robert Blattberg, who, along with Lynn Chaney, has developed IDDA's new category planner and template.
The second session is a panel discussion led by Diane Austin on where and how to get data in these data-poor categories. If I can mix my sports analogies, it's a one-two punch that sets the stage for a home run.
SN: What trends will affect manufacturers and retailers the most in the next year?
LANNING: Home-meal replacement is going to stay on the front burner for a long time to come. The ultimate winner is the consumer. The retailers who understand their consumers will win big and will customize their operations to deliver market by market, store by store, neighborhood by neighborhood and even family by family.
Whether you're talking "three squares" or "day parts," the reality is that people are demanding food that is flexible, convenient and lifestyle-driven.
SN: How does the in-store bakery fit into the HMR trend?
LANNING: You know, Roseanne, I think almost every writer I've talked to has asked that question. They seem to think that bakery is a forgotten child because it's not "center of the plate." Well, it's not taking a backseat.
As supermarkets look at HMR, they're discovering that there's a lot of life left in a "loaf of bread and a piece of pie." Just look at all the creative merchandising that includes bread bowls for salads and soups, stuffed pitas, and the excitement over wrapped sandwiches. Desserts will always be a winner. In fact, I predict that single-serve portions will become a mainstay in every HMR program.
SN: How can the in-store bakery be used to fullest advantage in delivering the "fresh" message?
LANNING: The answer is in your question -- it's fresh! What is fresh? Yesterday's bread? Doughnuts with a two-week shelf life? Or something that I can smell before I see it coming out of the oven? If it's still warm when I get it home, that's fresh! Retailers have to do whatever it takes to adjust their [baking] schedules to the customers' schedules.
SN: Aren't supermarkets missing out on an opportunity to cross merchandise cakes as well as breads and rolls in the meals department or the deli?
LANNING: That's a pretty broad statement. It applies to a lot of retailers, but if you look at the ones who are doing a brisk business, they understand the customer's buying habits and know how to push the buttons that open their pocketbooks. Cross merchandising isn't just setting up a display with cakes and a sign that says, "Take me home." It's creating special sizes or flavors or packaging that's going to get the product home looking as good as when it was put in the cart. It's no fun scraping the meringue off a lid because it wasn't packaged as the fragile dessert it is.
If you're careless about the little things they can see, it makes the customer wonder about the things they can't.
SN: Is there a consumer segment that in-store bakeries are routinely missing in their marketing and merchandising? Such as kids?
LANNING: The kids' market is probably the most obvious because it's the loudest. However, I think most bakeries do a pretty good job of creating specialty items and old favorites that keep bringing them back. Just look at the cookie clubs, the decorations and the theme packaging and you'll see what I mean.
When we're talking "consumer segment," I think that retailers have got to stop thinking demographics and start thinking lifestyles. If you look at all the data on "cohort" groups that cross multiple age lines and share a common interest -- such as those who want low-fat foods or "clean" organic foods -- then you'll quickly see where opportunity lies. If you focus on the attitudes and triggers for the buying decisions, you'll get the sales.
SN: How is the in-store bakery evolving, as you see it?
LANNING: Most of the evolutionary changes will come in new stores or retrofits. It's a combination of new technologies and the lack of skilled help that are going to be the drivers in the future.
There's a whole new world of technology out there that will improve production, increase efficiency, and provide top-quality baked goods. The new ovens are so automatic that they even have sensors to check the color on the product and turn the oven off, release the steam, and open the door when the product is finished.
We don't have the apprentice programs and career development in the United States like they do in Europe. Most of our bakers either grew up in the business, and those numbers are dwindling, or are "accidental" bakers; they needed a job and this is what was available.
Customers expect quality and they expect the filling in their eclair to taste the same today as it did yesterday. You get that quality standard by either having master bakers or mass-produced bakeoff products that match your standards.
In terms of product, we've seen the pendulum swing from giant-sized to mini-sized. The fun part is that as tastes change, so do the products. You can go into almost any major chain or independent in-store bakery and see exotic-looking, fabulous-tasting products that are more than just signature items. You used to have to go to Europe to see products like this -- not any more. It's here and it's going to stay.
The words part-baked and pre-proofed will become the buzzwords of the new millennium just like scratch/mix and bakeoff were in the '50s and '60s.
SN: Is profitability in the bakery being addressed adquately by retailers?
LANNING: That sounds like one of those questions that no matter how you answer it, you're in hot water. Some are doing a great job; some have a lot of room for improvement.
Two things are changing and helping to focus attention on what is profitable. First, as management gets a better handle on product movement, historical sales, the competition's market share and what their own customers want, the profitability will go up. That message will pyramid down.
The second thing is that associates, as well as department managers, are getting training on management issues and concerns that lead to better margins, higher sales, labor, inventory, scheduling, etc. We know that's true because when the IDDA developed our bakery training and certificate program, the course on profit center management was deemed a "must have" by our retail review panel. This message pyramids up.
Put the down pyramid and the up pyramid together and eventually they'll meet and create a solid column. This is one pyramid scheme that benefits everyone, including the consumer.
SN: What can retailers do to make sure the execution of programs at store-level is up to par?
LANNING: I don't want this to sound flip, but they have got to stop worrying about doing things right and start worrying about doing the right things. That doesn't mean they should stop paying attention to details like food safety, sanitation and profitability, etc. It means that if they focus on doing the right things it would mean the difference between baking 100 products every day and baking 40 or 50 products that are top sellers.
There are reasons for every action, or at least there should be. Some folks are still baking the same way they did last year or even five years ago. If that's what your customers want and you're making money, then great, keep it up. But if they're searching for new customers they should stop and examine what they're doing -- most importantly, why they're doing it.
Retailers can make sure the execution of programs at store-level is up to par by teaching associates what the right procedure is, what the purpose is, checking to make sure they understand and execute correctly, and most importantly, make sure they're doing the right things. The things that their customers want.
One tactical idea is something that Harold Lloyd [one of the seminar speakers at IDDA] suggests. In fact, he had three top retailers do it and report on their experience at a recent IDDA management conference. It's simple. Just spend four hours once a month working in the department. That's it. We guarantee you'll change the way you feel about the job, motivating the associates, and testing the process.
SN: How has the relationship between retailers and their suppliers changed in the last couple of years?
LANNING: Well, first of all, there are fewer of both. Spiraling costs, competition and consolidation have narrowed the market on both sides.
What we're seeing is a new openness as relationship selling, technology and partnerships are being developed. Retailers are looking to manufacturers and brokers to help with category plans and data analysis. To do that, they have to open their records and share what used to be closely-held secrets. You can't have that kind of openness without trust and a joint commitment.
For example, a simple category plan can take 80 or more hours to develop. That's for one product. Multiply that times however many products you want to track and you can see where it's important to join forces.
There's not enough money, time or talent to go it alone anymore; the best partners are those who thoroughly understand the other's business and have a shared commitment to making it successful.