Baking & Snack - July 2010 - 10

FROM MY PERSPECTIVE

The

Naked

TRUTH
O

nce in a while, I can't help feeling like the court
jester who everyone in the crowd laughs at until
he tells the king: "Dude. You've got no clothes
on. What's that all about?"
Usually, that prompts a response like "Don't listen to
him. He's just the village idiot."
Well, stupid ol' me has been on a rant lately about the
ridiculously low prices and silly deep discounting that
runs rampant in the retail channel. It's one thing for private-label producers to slash their prices, but it's crazy for
premium branded manufacturers to be practically giving
their products away.
Fortunately, I'm not alone in seeing this naked truth.
In an interview that I recently updated with Katie Kelsey,
the director of marketing at La Brea Bakery, she bemoaned how media hype and misinformation about the
economy and the state of the consumer have prompted
detrimental knee-jerk reactions on the part of retailers.
Specifically, she's frustrated by the proliferation of
commentaries from pundits preaching about a permanent "new frugality" that consumers have adopted as a
result of the recession.
"Analysts continue to give the impression that their
incredibly thrifty behavior is here to stay forever," Ms.
Kelsey said. "This has caused retailers to panic and to
immediately begin shifting the entire paradigm of their
positioning from quality value, convenience and service
to one of low prices. Period."
Such dramatic price-cutting occurs not only in the
snack and bread aisles but also in the in-store bakery
channel, where La Brea Bakery is one of the nation's
largest premium branded players. Ms. Kelsey said it's
incredibly dangerous for every supermarket chain to try
to compete with the Wal-Marts of the world, which continue to slash "everyday low prices" to levels even lower
than before the recent recession started.
"Today's grocery retailers would be much better served
if they were to hunker down and stick to their proverbial
guns, so to speak, when it comes to their original philosophies and points of difference" she explained.
Yes, Ms. Kelsey added, spending behavior did change
during the recession just like it did during previous

BAKING & SNACK / July 2010

economic slowdowns throughout
history, but there is no evidence that consumers have permanently cut back on what they
are willing to pay for premium snacks and baked foods.
In fact, according to archived Federal Reserve data,
she noted, consumer spending since 1976 has trended
upward while their savings steadily dwindled despite
four recessions during that period.
"While these two trends stray ever so slightly from
their trajectories during periods of recession, they
have always returned to their trending lines. Always,"
Ms. Kelsey said.
Once the recession officially ends and economic recovery takes hold, Ms. Kelsey believes that retailers will be
faced with what she calls "a serious identity crisis," and
she doesn't mince words on that topic.
"For some, the fallout might be fatal," she said.
"Sure, they were able to sustain or somewhat salvage
sales rates during the worst of it by lowering prices
across the board, but at what real cost? As consumers
start spending again and seeking out higher-end, quality retail experiences, they may feel that they have very
few places to turn. There will be significant confusion
about formerly premium players who turned solely to
low prices and, at times, inferior products. As a result,
those retailers and brands who maintained their commitment to quality throughout the recession will be
the ones who come out on top."
In many ways, the market is not a perfect place. If it
were, Ms. Kelsey said, companies wouldn't be pandering
to the so-called new consumer mindset.
"In an ideal world, retailers would be able to make
thoughtful, truly analytical decisions based on longterm growth and success as opposed to potential
short-term gains," she said.
Now that's the naked truth.
- Dan Malovany, executive editor
dmalovany@sosland.com

Baking & Snack - July 2010

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