Pepperidge Farm, Inc. will continue to drive growth in snacks and baked foods behind a dual mandate of maintaining strength in core businesses and expanding into higher growth spaces, said Irene Chang Britt, senior vice-president of global baking and snacking at Campbell Soup Co. and president of Pepperidge Farm.
“For Pepperidge Farm, our core business is grounded in baked snacks and bakery,” Ms. Britt said during a July 25 analyst meeting. “Our baked snacks portfolio contributes around 55% of net sales and includes the iconic Goldfish brand and Milano cookie range. Our bakery portfolio makes up the balance. Its focus is around premium products, which have strong loyalty among quality seeking consumers.
“We have delivered consistent sustained growth on our core range and are well-positioned to continue to do so. This will be achieved in two ways. First, we will deepen, broaden and enrich our savvy consumer connection program. Second, we will invest in further developing our icon brands to delight consumers of all ages.”
Capturing consumers’ attention
Ms. Britt described several ways in which Pepperidge has sought to connect with consumers. The company’s Goldfish Fun Zone web site features games and apps that focus on active play, adventure and interactivity, and a Goldfish mobile game will be launched later this year that Ms. Britt said will be “perfect for busy moms with smartphones.”
Pepperidge also is connecting with consumers off-line. The company in February introduced customizable Goldfish packages. Ms. Britt said consumers have customized packs of Goldfish for a variety of milestone events, including weddings, graduations and proms.
A ‘sweet’ turnaround
Innovation across the entire Pepperidge portfolio will be important to growth going forward, and Ms. Britt particularly was pleased with the turnaround taking place in the company’s sweet portfolio, which she said has been challenged in recent years.
“We have returned to growth,” she said. “This turnaround is the result of carefully focused investment in three areas: refreshing our core range, evolving our leading brand, Milano, and launching innovation designed to attract new consumers to the category.”
Keying the turnaround was the introduction of the Dessert Shop range of soft dessert-inspired cookies as a limited-edition seasonal offering.
“The consumer response has been so enthusiastic that we introduced year-round varieties in fiscal ’13, starting with strawberry cheesecake and dark chocolate cheesecake,” Ms. Britt said. “To continue our successful seasonal product line, we will bring back our popular pumpkin cheesecake and caramel apple varieties this fall.”
Meanwhile, the Milano line of cookies received a boost from the launch of limited-edition holiday varieties: chocolate-dipped and candy cane.
Teens, Hispanics on the radar
Ms. Britt said Pepperidge is advancing the second pillar of its dual mandate strategy most aggressively within its snacks portfolio.
In an effort to capture consumers who have been with the brand since they were children, Pepperidge this month launched teen-focused Goldfish Puffs. The air puffed cheese snacks are available in several varieties, including mega cheese, cheddar bacon, buffalo wing and salsa con queso. The products, which will be sold alongside other Goldfish products in the snack aisle, are baked, not fried, gluten-free and contain 140 calories per serving.
“Initial customer and consumer response has been encouraging,” Ms. Britt said. “Today’s American teens are the Goldfish generation. They were young children when we brought our mascot, Finn, to life and began investing to make Goldfish a powerhouse brand. Our insight shows they retain a strong affinity with the brand.”
The Goldfish Puffs launch actually achieved two “firsts” for Pepperidge. Not only are the snacks the first truly “teen” Goldfish product, it’s also the first time Pepperidge has launched a new range that includes Hispanic-inspired flavors from the outset, Ms. Britt said.
She said Pepperidge plans to continue to reach out to the Hispanic market in other product lines as well, including in the base Goldfish Crackers brand, where the company has added Queso Fiesta and Kick-It-Up a Nacho varieties.
“We expect these ethnic-inspired flavors to appeal to a broad range of consumers, not just Latinos,” she said. In some regions of the country with a higher Hispanic population, Pepperidge plans to roll out Spanish language print and point-of-sale merchandising. All the new varieties will have a dual language packaging.
Pepperidge also expects to get a boost from entirely new categories. Earlier this year the company introduced Goldfish Mac and Cheese.
“We believe Goldfish Mac and Cheese will stand out from its competitors, not only because it has the friendly smile as always, but also because it is made with real cheese and leverages a strong brand equity that we have developed with children and families,” Ms. Britt said. “The goldfish-shaped pasta will be available in four varieties offering moms a quick and convenient simple meal that children enjoy.”
‘Unprecedented year’ in bakery
Shifting to its fresh bakery portfolio, Ms. Britt said Pepperidge Farm was well positioned in what she described as an “unprecedented year” for the baking industry in terms of competitive dynamics. The shutdown of operations at Hostess Brands, Inc. late last fall had an impact across many categories and companies, and Pepperidge was no exception, she said.
“With our traffic premium brands, Pepperidge Farm was well positioned in this uncertain environment, and we have expanded share and shelf space by leveraging product innovation, our agile distribution network and our relentless focus on delivering consistently outstanding customer service,” Ms. Britt said.
Hostess’ withdrawal from the market left about seven points of market share “up for grabs,” Ms. Britt said, and Pepperidge seized the opportunity.
“As a non-national premium player, our fair share should have been less than 0.5 percentage point, but we managed to achieve more than double that amount along with significant shelf space gains,” she said. “This achievement was a combined effort of our sales team and our network of flexible, dedicated, independent distributors, who make more than 5 million store visits per year.”
Ms. Britt also provided perspective on Hostess’ absence on the broader bread category.
“Hostess’ range of breads was largely value-oriented,” she said. “When these brands came out of the market, many consumers did not trade like-for-like. Instead, they chose to buy more premium varieties or private label offering. This drove up overall category value despite overall category volume declining slightly still.”
The shift also benefited retailers, she noted.
“Fresh bakery is one of the most profitable grocery categories for retailers,” Ms. Britt explained. “In the months after Hostess departed, retailers netted an additional 11c of profit per square foot. This equates to an annual incremental benefit of $1,500 for an average-sized grocery store. As the category continues to evolve, we believe we are well positioned to capitalize on these trends. We will continue to maximize the space gains we have made in the store, the relationships we have built with retailers and the appeal of our cut-above portfolio of quality bread.”
One way in which Pepperidge plans to maximize its position is by stepping up investment in its highly differentiated Swirl bread range, she said.
“During the past year, Swirl has performed very strongly,” she said. “Volume is up 11% and household penetration has increased three points. Importantly, these gains have expanded our reach in younger families with children.
“Traditionally, Swirl has appealed to older consumers so we are innovating to broaden its appeal and attract younger consumers to the range. This year, we launched the first non-cinnamon-flavored Swirl breads: strawberry banana and blueberry. These were limited-edition seasonal offerings. They proved to be family favorites and performed strongly. This year, we will continue with the program of limited-edition seasonal varieties, which will bring new and fresh taste to the breakfast spread category.”
