Welcome to Season Seven of the Troubleshooting Innovation podcast. Joanie Spencer, editor-in-chief for Commercial Baking, speaks with Richard Charpentier, CMB, and CEO of consulting company Baking Innovation. Their conversation explores the technical aspects of creating high-quality, premium baked goods on a commercial scale. Sponsored by Puratos’ Sunset Glaze.

In this episode, Spencer and Charpentier take a look at the demand and opportunities for premium baked goods in today’s market. Charpentier shares his insights on how consumer preferences have evolved over time, which product categories lend themselves to premiumization and beyond.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify, Google and Stitcher.

Joanie Spencer: Hi Richard, thanks so much for joining me again.

Richard Charpentier: Hey, Joanie. Good to be here. How are you today?

Spencer: I am doing great. I’m excited about this one, because as I mentioned in last week’s episode, I feel strongly that there’s a great opportunity for commercial bakers to create premium items and be profitable. So, I’m excited to dive into this with you.

Charpentier: Same here. That’s a favorite subject of mine, how to bring quality and premium products into the bakery world. And thank you for having me.

Spencer: Awesome, let’s jump right in. You have been in this industry for a long time. I’m interested in your vast experience. How have you seen consumer preferences evolve when it comes to demand for premium baked goods? Do you see an ebb and flow for demand over time? Are there certain factors that come into play like demographics or geography? How do you see the landscape of the market when it comes to the demand for premium?

Charpentier: That’s a great point. I think in recent years, there’s been a growing demand, where I live in Philadelphia, for locally produced, high-quality breads and baked goods. I see consumers are increasingly interested in supporting small businesses and seeking out unique experiences. Again, going back to what we talked about last week on premium, consumers are looking for those artisanal types of products that are made with high-quality ingredients and traditional production methods.

There is a business here that sells pickles. They started selling them right around COVID. And now people love their homemade pickles. So, we’re going back to that artisanal thing. Personally, I think it’s a trend that’s similar to the craft beer movement, where consumers are seeking out locally brewed and unique beers with distinctive flavors. As a side note, when I was traveling years ago, I met a gentleman who was almost ready to retire from the brewing industry. He said that if you want to see the trends of the baking industry, look at the brewing industry. If you look at the pattern, it is true. There was a time in the 1980s when Budweiser and Pabst Blue Ribbon were the beers, and all of a sudden, it shifted to Sam Adams and local breweries. And now, if you look at almost any town in America, you will find breweries as a popular place. And they are charging $5 to $10 for local brews. And similarly, it shows with trends, consumers are willing to spend more if they think it’s premium.

In addition, there’s a big demand for better-for-you bread options. We’re seeing sourdough has been popular. COVID revived people baking bread at home. But I have seen bakeries here in Philadelphia make their sourdough, put everything out there and once everything sells out, they close shop. It’s selling for $10 to $15 for a loaf of bread, like the beer industry.

Consumers today are, in my opinion, more health conscious than ever before due to COVID. They are looking for things that are made with organic whole grains, natural ingredients, no additives or preservatives. So, they’re starting to separate how they connect. I think a big driver for that is the younger generation. I have three children, and they all fall into what we call the Gen Z category. It’s interesting because when I talk to them, they’re very interested in quality and authenticity. Even though my son is 21, and he has a disposable income, they’re willing to pay more for premium products, as long as it meets their standards. And to me, that’s a great opportunity for bakers to develop and market premium breads and baked goods to meet that demand in this growing consumer segment. I heard that by 2030, the Gen Z population is going to be the most dominant consumer group.

And to your last point about geography, and whether that comes into play? I think it certainly does, I think geography can play a role in the demand for premium baked goods. Consumers of certain regions, or cities in the US may have specific preferences for certain types of breads and baked goods. It’s based on local tradition, cultural heritage and availability of certain ingredients. I think it is similar to my past of making barbecue sauces for CPG brands, but it’s the same thing. And I remember learning that a barbecue in Kansas is different in Texas versus the East Coast. So, I think geography will play a role in terms of what people want in their preferences.

Spencer: For sure. And I’m in Kansas City. So, I can say with 100% certainty that there is a difference in barbecue between Kansas City and Texas. But on that note, I think that you’re right, with the geography, about the preferences for the experience that you get based on where certain products come from or where they’re made. And using the beer analogy, Sam Adams, like you said, used to be a local craft beer, and now you can find Sam Adams on tap in any bar in the country. And I think that, just like you said, that bakery trends sort of follow the brewing industry. There is that trend where Americans really love a hometown hero. So, while there’s a product that might be distinctive to a region, there’s still opportunity for the interest to grow outside of that region. Again, like we talked about last week, premium isn’t solely for the artisan baker. Premium can be on a commercial scale. Dave’s Killer Bread, for example, was in the Pacific Northwest, and it’s such a great story of that brand. And now, it’s widely available anywhere in any grocery store in the US. So, I think you’re right that there is an opportunity for these regional flavors and varieties to grow and become available anywhere.

Charpentier: Yep, that is a great point. Consumers are looking for premium, and I think there’s a strong parallel between craft brewing and baking, which both use fermentation to develop the flavors.

Spencer: So then, if we look at product categories, do you think that there are specific categories that lend themselves more to premiumization? Is there a better market for premium sweet goods vs. breads or other products?

Charpentier: I will say from my personal experience, I don’t have data in front of me, but from what I have experienced over the last 35 years, I would say sweet goods. Sweet goods, cakes, cookies, cupcakes … I think they do have a broader appeal to consumers. And they often, in most cases, command a higher price for premium or artisanal versions.

There’s a local bakery I love, and I get a lobster claw, the classic with all the cream, but it is $8 for one small thing. But it’s okay because it’s an experience. It’s premium to me. However, if there’s also a market for premium breads, particularly for those with high-quality ingredients, traditional production methods and unique flavor profiles. Ultimately, I think the success of premium products will come down to quality, and we talked last week, quality and consistency of the product, regardless of the category.

I think with bakers, if they want to look at it, they should focus on developing products that are unique, delicious and made with premium ingredients and then drive for consistency in the product line. Additionally, bakers can consider local market demand and consumer preferences. It is important when deciding which products to focus on for premiumization to understand your customers, and maybe you’ll find out that, in their region, people are more into bread versus sweet goods. But overall, I think whether it’s a good quality artisanal ice cream or a good quality bakery with good products, people love sweets, and so do I.

Spencer: Do you think that there are specific products that are sort of paving the way? I am seeing croissants really have a moment right now. Are you seeing croissants leading the charge with premium? Or are you seeing any other specific products that are doing well?

Charpentier: I think America fell in love with croissants, and it’s funny because I grew up with croissants. As a side note, I talk to a lot of people in Europe, and especially in France, to see what’s going on in the market. There was a gentleman who found out that for the French, they’re sort of getting tired of croissants and baguettes because they have it all the time. Now that gentleman is bringing, if you heard, Martin’s Potato Rolls all the way to France, and people are paying premium for it.

And then in the US we’re paying premium for croissants. It’s sort of like the world is turning around. But focusing on the on the US, I see a lot of sourdough. I saw it a lot when I was in Chicago during BakingTech. We’ve seen the James Beard Award baker making beautiful all sourdough based, no yeast, very simple type of bread growing in popularity. I have also seen a trend in brioche growing, as we’ve seen in the news, it’s a lot of interest around high-quality brioche or brioche buns. And macarons. We mentioned Laduree last week. It’s a good product that people love. I think, as you said, it’s the story behind it. You see smaller brands, but they’re selling in grocery stores and in different locations.

For cookies, people will say, sea salt, jalapeno or matcha shortbread. They’re using very unique ingredients that you don’t see every day and ingredients that are more expensive. Cheesecakes, tarts and fruit tarts can also command premium prices. But overall, I think the key to success in developing premium baked goods is how unique are the flavors and ingredients and the production method. It is offering different products from what consumers can’t find everywhere else. That, to me, is what will create the demand for premium products.

Spencer: Yeah, and you say the experience… Last week, you mentioned how COVID heightened consumers’ awareness of health and wellness, but also their mental and emotional well-being. It seems like people are making room for indulgent, quality baked goods in their everyday diet. Even when they’re focused on health and wellness, they’re also focused on a good eating experience.

So, I think it’s giving premium baked goods a moment, because consumers are permissing themselves to enjoy something. They’re focused on their health and wellness, but if they’re going to indulge, people are going to spend the money on a premium item. Would you agree with that?

Charpentier: 100%. I’ve helped a smaller customer in the state of Arizona — they do wholesale premium — and we created a keto bread. And the key to making a good quality keto bread is the cost of the ingredients. It is unusually high compared to traditional baking. They started with two loaves per week. Now they’re selling about 15 to 20 loaves per week for $12 per loaf. It’s remarkable that basically what I’m finding out, if consumers like it, they will get repeat buyers because they’re thinking they’re getting a value and that bread is unique enough that it’s almost like personalized bread. That’s almost like gluten free. It’s like we’re talking about that premiumness, which is a nightmare for bakers. How can you appeal to everybody and still be unique?

Spencer: So, I want to talk about channels for a minute. What are some of the things that bakeries should consider when they’re creating premium products for different channels? Let me give you a couple of examples. How should a bakery consider premium bread production for a foodservice establishment versus a retail outlet?

Charpentier: So that’s an excellent question. When creating a premium product for different channels, they need to consider the needs and expectations of the customers they are dealing with and each channel that they want to go in. For foodservice, it’s basically it is what it is. It  has to be a product that they can get, that  can be prepared quickly, and it’s consistent in their small commercial-type kitchen setting. What we’re thinking of, I think baking bread, frozen dough, things that people can do themselves, it can minimize the waste and work if it isn’t in the foodservice, which I’ve done in my past and have worked closely with chefs and restaurant owners, because they’re the ones that will take that bread and make it when you get a burger. The burger was made with a local brioche bun made by bakers, and they put it on their menu.

Those custom products have to both fit the needs of the foodservice restaurant, and also the bakery, breads and pastry, to complement the restaurant menu. It’s a good solid collaboration in my mind. And if it’s in retail outlets. I think bakers will have to focus more on their product than shelf life if it makes sense, because then you have channels and distribution because it’s different. And artisanal bread loaves, again, could be frozen for retail outlets. And I’ve seen some quality bread sold into the frozen aisle, or individually wrapped cookies or cakes. Maybe the shelf life, the distribution, is where the local kid can help out. But packaging, especially in retail, must be eye-catching and communicate to customers who are not used to the product that it’s premium quality, and you’re willing to buy it.

Bakers need to focus on creating products that meet the needs and expectations of their channels they’re targeting, while at the same time still maintaining the high quality and the characteristics of their premium products. It’s a balancing act to do both. I think it’s not just one size fits all. It’s going to require some thinking through it.

Spencer: I’m listening to you and I’m thinking, “Wow, there are really challenges and benefits for retail customers and foodservice customers.” I mean, if you’re producing for the foodservice sector, you have that opportunity to ideate when your product is developing. You get to ideate with your customer and really dial it in. But on the same note, that’s a lot of work, especially if you have several foodservice customers that are different types of channels, fast-casual versus a full service or white tablecloth.Then, you have to figure out how to be all things to all people and still produce at scale efficiently, whereas you don’t have those specificities necessarily from customer to customer, if you’re selling into retail, but then you have to figure out how to be all things to all people with one or two product lines, right?

Charpentier: Yeah, and I’ve seen bakeries trying to do it all. And it’s a big challenge, because, as we talked last week, there’s training of the employees and organization as a bakery owner. But how bakers make their money is, the good sellable units going out of the door and making sure they have the proper shelf life. That’s a key, because if once you do premium, I think your waste is even more crucial. It’s tough. As we talked last week, rethinking around “Can I use my current line and do premium?” Yes, but it has a lot of points around it.

Spencer: Do you think that it’s possible for a bakery to build a roadmap for innovation and premium product development? If they can, what would you say that roadmap should look like? For instance, should bakeries be looking at the competitive landscape? Or should they just be sort of responding to what their customers or consumers are asking for? Or is it possible to even sort of take the Apple or Tesla route and dive in with blind innovationand say, “We’re just going to do something that nobody has seen.”

Charpentier: Good question. I think the first thing that bakers should start thinking about is: know your local market and competitive landscape. Be able to identify any gaps and any opportunities for innovation in premium baked goods. What can you do differently? Pay attention to consumer trends and feedback. Try to better understand and talk to your customers about what type of premium products would be most appealing to them. They might say, “We want a multigrain sourdough” and so on. But in addition to those bakers, take more of an innovative and experimental approach by exploring new ingredients, techniques and flavors. I think each approach has risk, but an innovative approach. Who’s leading your innovation? And is everybody aligned with the innovation?

I’ve seen it many times. You come up with really innovative products, but then if you have a big team, and people will say, “No, it’s too expensive and we can’t do it.” You can’t work your innovation in a silo. The example of Tesla and Apple. It’s basically a core group of people who were thought leaders and thinking of innovation first. In New York, I’ve seen a bakery, where they took an innovative approach to create premium where now they’re doing a croissant in a cube. This is almost like the cronuts. They said, “We want a redesigned croissant.” It took years of research to perfect the product and train the employees around it, but that’s the approach of innovation. It’s great, but it’s time consuming.

And the bakery industry has been, to me, relatively slow in terms of innovation compared to other food industries. And while we’re seeing a lot of advancements in technology and ingredients, I think we still have a lack of groundbreaking products and techniques being introduced. Because again, we tend to stick to what we know. Why change things when it works? I’m the devil’s advocate here. If you want to grow, we need to grow through thinking differently. And we need to invest in R&D. We need to invest in training the bakers, which will lead to creativity and innovation in product development.

Lastly, in the baking industry, we have a lack of master bakers and trained bakers, like in the brewing industry, master brewers. And as we see the demand for premium baked goods growing, it is important to have bakers with a solid foundation, with knowledge and skills. If not, we’re just repeating the same thing. You can’t take people who’ve been playing baseball for years and say, “Now we’re playing football,” because it takes time. How do we as an industry work together and scale up production to meet the demand of premium?

Spencer: And I think once we unlock that, that is where the innovation is going to be unstoppable.

Charpentier: I’ve been working in bakery industry for 30 years in the US, and I believe wholeheartedly that it can be done on a commercial level. But it takes all parties at the table to say, “Yes, we can,” because we still think, “We’ve been doing it one way, and it worked really well.” I respect that, and I think it is fantastic. But it’s, “How can we change?”Change does not happen overnight, but it starts with communication, which we’re doing now.

Spencer: Yeah, I totally agree. Well, Richard, I think that is an awesome note to end on for this episode. I am excited to look ahead to next week because we’re going to start getting technical with our upcoming episodes.

First, we’ll look at how you choose the right ingredients and start looking at formulating and R&D now that we’ve had these conversations around the market and the demand and the opportunities that are out there for commercial bakers. So, I am excited to dive in next week.

Charpentier: Thank you for having me on your podcast and looking forward to next week and  talking more about choosing the right ingredients. Thank you, Joanie,

Spencer: Thank you.

Learn more about this season here, and listen to Troubleshooting Innovation on Apple, Spotify, Google and Stitcher.