BRED TO RISE

ROSEANNE HARPER Additional reporting: AMY I. STICKEL

Variety breads, which had their first big year in supermarket bakeries last year, appear poised for more growth.

That is according to nine bakery executives representing different marketing areas who were interviewed by SN about changes in the growing category.

All the retailers SN surveyed said they see a good future for specialty or variety breads in the supermarket bakery. So does Peter Houstle, executive vice president of Laurel, Md.-based Retail Bakers of America.

"Surveys show there's growth there. Bread carries a wonderful nutrition profile, and that's what consumers are looking for," Houstle said. And the category represents an opportunity for supermarket bakeries

because independent or stand-alone bakeries generally focus on sweet goods, he said. Houstle doesn't see the specialty bread shops that are appearing in some areas to be a threat to supermarket bakeries. "They have two different customers. Those bread shops I know of are in areas that are quite upscale, and they're selling a loaf of specialty bread for $4, $5 and $6. Jane and Joe America aren't going to buy bread at $6 a pop," Houstle said.

By contrast, prices for specialty breads in supermarket bakeries range from $1.29 to about $3.99, depending on the type and size of the loaf. Retailers told SN they keep margins about the same whatever the type of bread and the gross margin can be as high as 75%, one said.

"Sales of our crusty, European-style breads have increased dramatically in the past year and they continue to grow," said William Vitulli, vice president of community and government relations at A&P, Montvale, N.J. He added that the breads are good impulse items, and strong displays are particularly important to move them.

To take advantage of the breads' continuing growth potential, bakery executives said they're adding varieties and smaller-sized loaves and are thinking of new and better ways to merchandise the category. But they're also keeping an eye on costs.

"We've added seven or eight varieties in the past year. The most recent is pesto, and we've expanded our European, crusty bread line. People want more variety," said John Schnepp, in-store bakery sales manager at 31-unit Big Y Foods, Springfield, Mass.

"As consumers become educated to the fact that bread is good for them, we're telling them about the varieties we carry so they'll know we're the place to shop for bread," he said, adding that the breads have become a regular in the chain's ads.

The breads appeal to health-conscious shoppers, many of whom are developing an awareness of variety breads through specialty bread shops and restaurants, retailers said. "More people are eating at home these days, and they want to eat the same good bread at home that's available in restaurants," Schnepp said.

Abby Fox, bakery director at West Point Market, a single-unit, upscale independent in Akron, Ohio, which makes its breads from scratch, has put new emphasis on variety. "The growth for breads is unlimited if you have quality and variety. We're going to rethink our whole product line because of the volume. It's gone crazy. We're experimenting with filled breads. Those have a French bread type dough and will be filled with caramelized onions or olives or possibly a goat cheese, something with kick. We're also going to introduce a single-serving size," Fox said. Some retailers said the goal of expanding variety is a worthy one, but too much variety can cause problems such as excessive shrink.

"The tendency is to bake the same every day, but you've got to get tight control on production. Especially with bread because it involves so much handling," said a bakery executive at a Southwest chain.

Gooding's Super Markets, Altamonte Springs, Fla., is concentrating on a limited variety of breads at a newly launched scratch bakery operation in a remodeled unit in Orlando.

'We're concentrating on just a few varieties we do well," said Jonathan Gooding, chief executive officer of the 18-unit chain, in a recent interview with SN. "It's crazy to have 20 kinds of bread. Why bake four different types of wheat bread when you can have a really great six-grain that could become a signature item?"

Elizabeth Little, president of V. Richard's, Brookfield, Wis., a single-unit, upscale independent, cautioned against moving too fast with new varieties. V. Richard's breads are made from scratch.

"You have to have a plan. You can introduce a product too early. You'd better make sure, for instance, that all your associates are familiar with the product when you first put it on the shelf. If a customer asks if the bread can be frozen and an associate doesn't know, it can kill a sale," Little said. Another retailer has decided to add variety in a less painful way, by adding a bake-off line.

"Anytime you add variety it costs more, so you'd better manage it well," said Dan Kallesen, director of bakeries at 28-unit Harp's Food Stores, Springdale, Ark.

"Last year, we just got our toes wet. Now it's time to get serious. We found that people will pay the price," he said. "Probably the best example for us is our signature Martha Harp dinner rolls, at $2.49 a dozen. They're a dollar more than our other rolls, but nobody blinked an eye. They're outselling the regular rolls two to one. It shocked us," Kallesen said.

"We didn't realize the potential, but we'll pay more attention to breads this year. Now we use bases or mixes, but I think we'll try some bake-off breads, and maybe some parbaked, in order to add variety," he added.

Even at Melmarkets/Foodtown, Garden City, N.Y., where scratch bakeries are a point of pride for the 17-unit retailer, mixes were added last month to expand its bread selection to include some trendy items such as pesto and sun-dried tomato bread.

"We're at about 20 varieties, double what we had a year ago. People get tired of the same thing. You've got to offer something new," said Jerry Happ, Melmarkets' director of fresh bakery.

After testing crusty, European-style breads in selected units in upper-income and lower-income areas last fall, Brookshire Bros., Lufkin, Texas, rolled out an expanded variety to all its bakeries last month. The chain had previously carried a few types but had not put a tight focus on merchandising.

"I think 12 to 15 varieties is ideal. We may substitute some for ones that move slowly, but we'll keep about that number, and offer them all every day now. It's important to be consistent with the selection every day so customers don't have to think about whether it's the day of the week we have sourdough, for example," said Jim Weiser, bakery-deli director for the 63-unit chain.

At D&W Food Centers, Grand Rapids, Mich., varieties have been trimmed back somewhat to allow for bigger displays.

"We've subtracted some of our traditional loaf-type breads such as pumpernickel and sourdough. We either deleted them or put them on the optional list because they just weren't doing as well as they used to," said Ed DeYoung, bakery director for the 25-unit chain.

"Instead we're concentrating more on upscale, Old World-type breads. By reducing our varieties, we can mass one type of bread on a table. It's created better looking bakeries," DeYoung said.

"It may appeal to only 50% of our customers now, but the margin is good and it gives us a competitive point of difference," he said.

"We've also started offering half-loaves. Smaller families and single-person households are buying those. And we've begun to work on cross-merchandising with other departments," he said.

Jeff Ruple, bakery director at 54-unit Harvest Foods, Little Rock, Ark., also offers half-loaves and slices of the chain's best-selling garlic bread and Italian bread, with good sales results.

Even though Ruple said European crusty breads make up only a small percentage of bakery sales, he believes they and value-added items like garlic bread should be offered in a full-service bakery. Ruple said it would be "foolish" for an in-store bakery to focus just on white and wheat bread and consequently compete with the grocery department.

At Harvest, choices of crusty breads are rotated, but kept to three or four varieties a day, Ruple said. He estimates that only about 10% of his bakery customers buy them.

"But I haven't given up on the category. We've had more ad activity and as a result sales are up about 5% over last year. We'll continue to promote a bread of the week," he said. Harvest uses a bake-off product. Though it may not be the hottest item in his marketing area, which he said is more geared to sweet goods, Ruple believes specialty breads such as crusty, European varieties have terrific potential in general.

"If a retailer loses sight of bread sales it's his own fault, because the consumer is ready, at least on the East and West Coasts. It all depends on how it's merchandised. "One thing that's important is to keep the smell of baking bread in the store. You don't have to bake much at a time when you're using frozen dough. You could just bake four at a time all day long. Three out of four customers will buy a hot loaf if you point it out to them," he said. He added that besides spurring impulse buys, the aroma makes customers think of the store as a place to buy fresh baked bread. A bakery executive at a Southwest chain said what's most important in merchandising variety bread is to set it off by itself. And Weiser at Brookshire Bros. agreed. In that regard, he stressed the necessity of selling one's own bakery managers on merchandising ideas.

"When I came here, they [the chain's store-level managers] told me specialty breads wouldn't sell in east Texas, and they were right, at first. But it was because the breads were so hidden we were the only ones who knew we were offering them. They got lost among other bakery items," Weiser said. "Now we've just started put-ting them on tables alone and we'll call attention to them with signs," he said. Suggestive selling and cross-merchandising are spurring bread sales at V. Richard's, Little said.

"We have signs that say our breads go well with our soups and salads, for example," she said. And sampling has become paramount at V. Richard's. "For us, there's competition from independent bread stores springing up around here. They do a tremendous amount of sampling, offering customers a whole slice of hot bread with butter. So we've stepped up ours from three or four days a week to every day, and we bought better looking, black trays with domes for the samples," Little said.

V. Richard's also has just added slanted wood bread racks to replace less upscale metal racks, Little said.

Happ at Melmarkets has found that micromarketing is particularly applicable with the bread category, possibly because some ethnic groups have definite favorites.

It didn't surprise him that rye sells in Jewish areas and Italian bread in Italian neighborhoods, but what did surprise Happ is that the shape of the loaf can make a difference in sales.

"We tried sourdough in the shape of an Italian loaf and it didn't go. Then we tried it in a loaf pan and that sold. I don't know the reason, but maybe people like to make sandwiches out of it, and the pan loaf is easier to slice," Happ said. While most retailers told SN they're looking for new ways to pair breads with other products such as dips and spreads, West Point Market's Fox said some of her customers find specialty breads so appealing they're centering their meals around the bread, Fox said.