Why does Arnold Bread have forty different kinds of bread?

by on February 4, 2012 at 12:22 pm in Food and Drink | Permalink

100% whole wheat, 12 Grain, 7 Grain, German Dark Wheat, Health Nut, Healthy Multi-grain, Honey Whole Wheat, Oatnut, Country Oat Bran, Country Wheat, Country White, Country Whole Grain White, Healthfull 10 Grain, Healthfull Flax and Fiber, Healthfull Hearty Wheat, Healthy Nutty Grain, Double Fiber, Double Protein, Grains & More Flax and fiber, Triple Health, Dutch Country 100% whole Wheat, Butter Split Top, Extra Fiber, Premium Potato, Premium White, Rye Everything, Rye and Pump, Pumpernickel, Rye Seedless, Melba Thin, Rye with Seeds, Soft Family 100% Whole Wheat, Soft Family Classic White, Soft Family Honey Wheat, Soft Family Whole Grain White, Brick Oven Whole Wheat, Brick Oven Premium White, Premium Italian, Stone Ground, Light 100% Whole Wheat.

Here is more, from William Gadea.  The hypothesis:

The motivator here isn’t making the customer happier, it’s the oft-neglected fourth ‘P’ of marketing: placement. Even if the supermarket carries only half the varieties that Arnold offers, all of a sudden they are hogging a big part of the bread aisle. Arnold is the bread that is most likely to be close to your hand.

For the pointer I thank William Gadea.

KLO February 4, 2012 at 12:52 pm

More important question: why do the 40 different kinds of Arnold Bread all have no taste?

Sandeep February 4, 2012 at 1:04 pm

May be people consume it in a hurry on weekday mornings, since they need to get to work, and during weekends they go for more elaborate breakfast fare than just bread.

Careless February 4, 2012 at 1:06 pm

Which is why the supermarket doesn’t give them enough shelf space to sell 40 types of bread in one store.

Careless February 4, 2012 at 1:06 pm

or 20.

Bill February 4, 2012 at 4:23 pm

Why?

Because of something called being what is called a Category Captain

You see, usually the firm with the largest share or the most shelf space competes for or qualifies for this status based on brand varieties and market share.

A Category Captain will “recommend” to the retailer the pricing and shelf space for its rivals, including when or if the rivals price or other promotions should be used or whether their timing conflicts with their own and should be delayed. Ever wonder why Coke and Pepsi both don’t promote on the same weekend, or why only one brand of ice cream is on promotion one weekend, etc.

Sometimes mergers have been promoted by the acquiring firm, such as was with Nestlé when it acquired one more label in the ice cream case solidifying its position in that category.

Arnold, pepperidge Farm and Continental vie for this position in bread.

Careless February 4, 2012 at 10:27 pm

See my comment on Coke and realize that there is no bread anywhere close to as strong as a brand. But I’ll. Withdraw if you can find lots of stores selling 40 or nearly 40 of their breads

William Gadea February 5, 2012 at 2:21 pm

Why don’t check your local grocer online? I get 63 returns on Arnold Bread, but of course that’s counting their buns, rolls, etc.

Careless February 7, 2012 at 1:53 pm

online “shelf space” is a very different animal.

Curt F. February 4, 2012 at 1:12 pm

Another hypothesis is that Arnold Bread, like many firms, is highly dysfunctional, i.e. rife with obvious inefficiencies that coalitions of within the firm protect in order to avoid losing status. (See consulting thread.)

asdf February 4, 2012 at 5:27 pm

Having some inside knowledge, yes.

asdf February 4, 2012 at 5:31 pm

I’m probably a bad super market consumer. This is how a typical decision by me gets made:

1) Look at all the toothpastes.
2) Hmm, this is another dollars then this one, but it claims to fight tarter or produce whiteness or something. Also, ones a brand and one is the store brand.
3) Do you really think there is not much of a difference? Probably not.
4) Even if the difference is very small, do you like going to the dentist? No.
5) Are you a young professional rolling in money who doesn’t even balance his checkbook because you have more money then you know that to do with (note, I’m not even close to the 1%)? Yes. The dollar or whatever means nothing to me.
6) Just get the “better” one.

Rahul February 4, 2012 at 1:38 pm

The hypothesis that a firm can hog more of an aisle simply by creating needless varieties assumes that the supermarket is a dumb passive player. Aisle space is scarce and a toughly contested commodity.

Careless February 4, 2012 at 2:07 pm

Correct. This is a very bad hypothesis if Arnold bread isn’t the name of a store selling its own product.

john personna February 4, 2012 at 2:20 pm

The top player probably can though, by offering cut rates for a popular item. It’s a feedback strategy. The restricted choice makes the brand more “popular.”

Careless February 4, 2012 at 3:07 pm

even when you’re coke, getting the shelf space you want isn’t trivial. The 2 grocery chains around here reacted to the introduction of Coke Zero by pulling Barq’s for it.

Urso February 4, 2012 at 6:45 pm

There would be riots in the street if they tried that around here

William Gadea February 4, 2012 at 3:28 pm

I think this is right. It’s a strategy that can only work for a leading player. Certainly no supermarket is going to make the decision to allot aisle space dumbly, but a new product is a way to argue for space. When it goes on the shelf, just by dint of it being an Arnold product placed next to the rest of the premium-positioned Arnold products, it will get more business than the weakest brand, so it will stay there. And that extra space will improve the Arnold market share. And on and on. (By the way, do we need 16 toothpastes from Colgate?)

byomtov February 4, 2012 at 5:41 pm

That’s what I think also. Shelf space is hugely valuable to a supermarket, and it is allocated carefully. Nobody says, “Well, we have to give Arnold’s more space because they just came out with their 41st type of bread.”

Better hypotheses, please.

My guess is that they have 40 names because some names sell better than others in different locations. How many different kinds of bread they have is another matter. Look at the list: country white, premium white, brick oven premium white, etc. Who believes there really are 40 different recipes?

Rahul February 4, 2012 at 11:30 pm

My hypothesis is that it is about maximizing Arnold’s coverage of the parameter-space of bread preferences. No one customer needs 40 types; but the tastes of millions of customers will map a large preference-matrix. With competition this becomes an arms-race; you try and capture market segments by offering a bread that’s a closer match to a segment’s taste than any other offered.

Scout February 5, 2012 at 4:21 am

I always had the impression that product placement was negotiated & possibly even openly paid for between the grocery store & the vendors…. Hence why mainstream brands that charge a premium tend to be more at ‘eye level’ and have larger selection (because they can pay for it). Though the grocer itself has an incentive to use this space as well for their own store-brand products…

Is this not the case?

i miss #41 February 4, 2012 at 2:00 pm

And yet they have doomed the mankind to rolling in his own squalor by discontinuing the delicious Country Potato.

Three Pipe Problem February 4, 2012 at 3:39 pm

First, the above comment is extremely awesome.

There is a Malcolm Gladwell talk about the guy who turned “tomato sauce” into many kinds of tomato sauce under one brand. He makes the guy out to be a major innovator.

What if selecting from a large catalog really is desirable for suppliers? Why is that so hard to believe?

Maybe a “health food” store wants to order 7 grain AND 12 grains (and Extra Fiber, probably) so customers can select a bread that reflects their level of granola flair, and so forth. So many different kinds of rye, for example, imply that people like to make fine-grained choices within larger categories. Many stores do seem to favor fine-grained variation over larger variation.

There is an overall trade off between space for variation in products and the overall number of product categories. Having plenty of variation could ensure that the if the supermarket wants x shelf space for bread, they don’t have to take less because of lack of product choices. At some point it seems silly to have vast quantities of a few products.

Walt February 4, 2012 at 2:08 pm

The placement game may change if delivery overtakes central shopping.

john personna February 4, 2012 at 2:19 pm

I used to like a smaller brand of electrolyte sports drink. It came in a 6-pack of small bottles. I’d drink one when I thought a hike or bike ride had been especially hot or long. Suddenly Gatorade expanded their offerings in sizes and flavors and my favorite disappeared. Gatorade used their market power against my choice.

JeffC February 8, 2012 at 3:13 pm

Had your local market not carried your small brand you wouldn’t be complaining about their market power and your “choice” … of course you can still buy your drink at other retailers right ?… your choice of drink does not include stocking it at your local market … that is the stores “choice” …

RH Sutherland February 4, 2012 at 2:57 pm

It could be an interesting heuristic – that producing a very wide range of something signals artisan production instead of mass-produced standardisation.

Not an unreliable heurstic, either. I would often rather buy bread from someone who loves bread than from someone who loves money. The creation of many variants of something is a fairly reliable indicator that the baker really likes baking stuff.

Home-made jams and preserves display the same tendency.

Hei Lun Chan February 4, 2012 at 4:01 pm

The amount of shelf space Arnold has on supermarkets is determined by how much Arnold pays those supermarkets for the shelf space. Nowadays supermarkets make most of their money on non-perishables from selling shelf space.

Bill February 4, 2012 at 4:29 pm

Yep, and the more variety, the more they will be a category captain.

In cereal, not only does variety proliferation make category management easier as between GMills and Kellogg, but brand proliferation at the edges of a brand blocks entry for a niche entrant. So you see Cheerios, Honey Nut Cheerios, and high fibre and frosted Cheerios. Where is there space for an entrant, and one with sufficient volume to be a low cost competitor.

Martin February 4, 2012 at 4:28 pm

My hypothesis: Arnold is an example of why capitalism does not work. Do we really need 40 brands of bread??? A report was published last week which showed that in Europe, for example, half of the flow of food is thrown away. Supermarkets throw away tons of food each year which is still eatable. That which is wasted, as I said, amounts to half of the commercial flow of food. There are people starving (as the 30% of Americans that live on or below the poverty line and need food stamps just to get by) but we need 40 different kinds of bread, half of which will never be eaten.

The Original Frank February 4, 2012 at 5:20 pm

Capitalism is an example of why Europe doesn’t work: Lot’s of variety there, too, one per locality! Drive from Duesseldorf to Normandy to get lots of good oysters. Supermarkets there and here throw away lots of food on account of inane “use by” dates, like on cans, a result of regulation. The rest of the food is thrown away by your US consumer, on account food is so cheap, it’s not worth thinking about economizing.

There’s too much money around! Let’s go back to old-time, pre-capitalist technologies in food production and distribution [local, but not fresh], and everything will be hunky-dory. Better yet, old time technologies in everything!

GiT February 4, 2012 at 6:06 pm

If some people have enough money such that throwing food away is fine, and other’s have so little money such that even in throwing nothing away they go hungry, then perhaps there just might be a problem with the distribution of purchasing power.

But nice straw man attempt to make this about luddism.

Bill February 4, 2012 at 6:35 pm

Original, Martin made a valid point. What he is addressing is a paradox of Marshallian competition– that competitors raise costs via product differentiation and still make normal profits. Prices are above a non differentiated competitive level.

maguro February 4, 2012 at 7:50 pm

It’s an absurdly overstated point. Capitalism does not work? Really? Compared to what?

The Anonymouse February 4, 2012 at 8:45 pm

Of the people in the world who are starving, I would posit that Americans below the “poverty” line constitute so vanishingly small a percentage as to be uncountable.

Careless February 5, 2012 at 11:39 am

yes, talking about starving Americans in 2012 is laugh-out-loud funny

tkehler February 5, 2012 at 10:02 pm

You aren’t even clear, but you opine on the need to replace capitalism? Are you saying half of Arnold’s bread types are never bought, or are you saying that half of all Arnold bread on the shelves get thrown out?

No, perhaps you don’t need 40 kinds of bread. But there are obviously many different kinds of people out there who want (buy) different kinds.

Perhaps after the revolution you and your Politburo will mandate one bread and one kind only.

Corey February 4, 2012 at 5:11 pm

It’s called SKU proliferation, it’s a long-discussed problem in marketing. (It’s absolutely not a play to monopolize the bread aisle, for reasons others have mentioned above.)

My personal hypothesis is a TGS-style one; with very few advancements in basic consumer and food products, firms are left to chase ever-smaller segments of eaters and buyers. At the same time those segments fragment more often, and faster, than before as people are subject to new influences and ideas on a more regular basis. That leads to 40 different kinds of bread, 9 or 10 varieties of toothpaste, etc.

Bill February 4, 2012 at 6:38 pm

Actually, it is related to gaining market power or protecting it. See my comments above.

There was a full day Econ conference at the FTC about this. Google category captain and FTC.

Scout February 5, 2012 at 4:24 am

I find it makes it easier to make mistakes. It increases the chances that if I don’t carefully read labels I could end up with something I normally wouldn’t ever buy (msg, preservatives, aspartame etc.)

GiT February 4, 2012 at 6:11 pm

Isn’t this theory thrown out in the movie Beer Wars? http://beerwarsmovie.com/

Haven’t seen the movie but I recall hearing that argument in relation to it.

Bob Knaus February 4, 2012 at 7:49 pm

????? All these comments seem inane to me, because I’ve known the answer since I was 15… when I assumed responsibility for the produce section at my family’s roadside farm and bakery outlet.

There is an iron law of retailing. The more variety you present, the more people will buy. They come in to your store intending to buy 1 thing. If you present them with enough options, they will buy 2, or 3, or 4 things. Variety is the best way to increase sales.

Like Forrest Gump, that’s all I have to say.

Bill February 4, 2012 at 9:46 pm

Yes, but that doesn’t mean that all of the variety would be from one producer, does it.

derek February 4, 2012 at 11:47 pm

No, but for the vendor maybe the cost of providing variety from one producer is less.

PQuincy February 4, 2012 at 11:22 pm

The Freudian version of this reality is “the fetishism of small differences.” A not inconsiderable number of consumers will pay more attention to a brand if they have to _make a decision_ among 6 or 8 or 40 closely-related but different varieties. I recall reading a piece recently — Scientific American, maybe, or Harpers — about how swamping our decision-making capacity results in less and less rational decisions. The initial example was the notorious Israeli study showing that in calculating the likelihood of parole for prisoners, the most heavily weighted independent variable was the time of day a prisoner’s case came to the judge. Early morning and just after lunch were good, the rest steadily worse. But the article also used marketing research showing that consumers faced with too many choices don’t do the rational thing (sorry, Tyler) of stopping, and postponing decision: they decide on impulse…and that impulse to choose can outweigh an initial inclination NOT to buy at all.

Brand-captaincy, exclusionary occupation of shelf space, etc. are no doubt games that are also played, but it’s pretty clear by now that marketing plays with our minds, too — not through conscious ratocination on the part of marketers, often, but by experience.

Careless February 5, 2012 at 11:41 am

given a grocery store of potentially infinite size, maybe. In reality, no.40 breads means less selection in other areas.

Matt Weber February 4, 2012 at 8:26 pm

Seems to me a better reason is that it isn’t really that difficult to make one variety of bread vs any other variety–they all have the same base ingredients and just add a few extras. So, offering 40 varieties of bread might make some stores think “hmm…some extra customers may be induced by the greater variety to buy more bread” and stock more Arnold bread as a result. If they don’t, then Arnold loses nothing.

Bill February 4, 2012 at 9:49 pm

That’s true, along with fixed delivery costs. However, that’s not the whole story, as every baker would be equally as well positioned.

Bill February 4, 2012 at 9:50 pm

By the way, if your grocery store is large enough, it is also making your private label bread.

Andrew' February 5, 2012 at 5:03 am

It’s what I call (as of 10 seconds ago) the scale/anti-scale of a business. I worked for a similar one but in a totally different industry. There is a scale to one part of the business, but not scale to the product production side. So, you get a proliferation of SKUs.

Andrew' February 5, 2012 at 5:04 am

In this business I was in, there was an impassioned white paper circulating around calling for a drastic reduction in the number of product designers that was rather compelling.

Steve Sailer February 4, 2012 at 11:33 pm

That was common knowledge when I was in the marketing research business in the 1980s.

In general, economists should try occasionally talking to people who work at corporations. You might find it enlightening.

Noumenon February 5, 2012 at 2:15 am

I eat three sandwiches a day and have tried nine of these brands: 100% whole wheat, 12 Grain, Health Nut, Double Fiber, Dutch Country 100% whole Wheat, Premium Potato, Premium White, Stone Ground. Sometimes consumers just want variety! If they sold German Dark Wheat in my region, I would buy it.

Andrew' February 5, 2012 at 5:00 am

This is really irritating to me. I find most variety to be kind of a sham. The first problem is there is probably one best bread. The second problem is consumers (or the government they select through several inefficiency steps) would never select it.

Noumenon February 6, 2012 at 9:43 am

The best bread is banana bread, obviously. But seriously, I have eaten about 5000 sandwiches since 2002, manna from heaven would have started to get boring by now!

ChargerCarl February 5, 2012 at 2:38 am

It’s all going the way of specialty breads!

http://www.youtube.com/watch?v=j9q7jUI8D84

oh how i miss MST3K

Andrew' February 5, 2012 at 4:58 am

Ezekiel Bread. The one bread to rule them all.

Noumenon February 6, 2012 at 11:08 am

The bread that quit competing with Arnold and moved into the freezer section! A very convenient backup bread when you don’t make it to the store.

zbicyclist February 5, 2012 at 1:31 pm

My first thought is “only 40?”

I’ve worked in CPG for a long time (some of those years with Steve Sailer): It’s all about space and everybody knows it.

Even if the main difference between “100% whole Wheat” and “Dutch Country 100% whole Wheat” is pan shape and the mix of food dyes, if you can get a store to carry both of these instead of your 100% whole Wheat and Pepperidge Farms’ 100% whole wheat, you’ve gained something.

Hal Duston February 8, 2012 at 2:08 pm

Just the other day I ventured into the grocery store for the first time in quite a while. I was only picking up some milk, some bread, and some cheese. Since I normally get the non-refrigerated items first, I went to get the bread. There were so many to choose from I was paralyzed with anxiety. ‘100% whole wheat, 12 Grain, 7 Grain, German Dark Wheat’, my palms began to sweat. ‘Health Nut, Healthy Multi-grain, Honey Whole Wheat’, my heart rate increased. ‘Oatnut, Country Oat Bran, Country Wheat, Country White’, my breathing became labored. ‘Country Whole Grain White, Healthfull 10 Grain, Healthfull Flax and Fiber’, what if I get the wrong one?!? ‘Healthfull Hearty Wheat, Healthy Nutty Grain, Double Fiber, Double Protein’, the aisle was starting to spin. ‘Grains & More Flax and fiber, Triple Health, Dutch Country 100% whole Wheat’ the loaves looked like they might leap from the shelf at any moment. ‘Butter Split Top, Extra Fiber, Premium Potato, Premium White, Rye Everything’, I’m never going to make it out of here! Just at that moment a young mother with two small children came down the aisle between me and the shelf, glanced at me oddly, grabbed two loaves of ‘Soft Family Whole Grain White’, placed them in her cart as was gone as quickly as she had appeared. I managed to catch my breath, collect myself, and placed a loaf of ‘Soft Family Classic White’ in my basket and fled while I still could. Next item, the cheese. Do you know how many choices for cheese there are? … … …

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