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King Arthur Baking Company sees flour sales up 58% year-over-year amid pandemic

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Karen Colberg, King Arthur Baking Company Co-CEO, joins Yahoo Finance’s Alexis Christoforous to discuss the company’s spike in sales amid the pandemic.

Video Transcript

ALEXIS CHRISTOFOROUS: Lots of time spent at home during the pandemic has brought out the inner baker in many of us. Just take a look at these numbers, because they don't lie. King Arthur Baking Company sold over 156 million pounds of flour last year. That's a nearly 60% increase over 2019. But will that baking boom continue now that things are slowly getting back to normal?

Joining me is Karen Colberg. She is co-CEO of King Arthur Baking Company. Good to see you again, Karen. The last time we spoke was sort of the height of the pandemic when it was hard to find flour on the store shelves because people were just realizing that they could bake, and they were baking more at home. But tell me what demand is like now versus those many months ago.

KAREN COLBERG: Many months ago, we were seeing three times the volume that we would typically see. And that did not-- it didn't level off for probably the first quarter. It slowly tapered over the year. But we are still seeing baking at levels of about 25% to 30% over prior year. And we are excited for what it means for our future.

ALEXIS CHRISTOFOROUS: Now tell me some of the trends you're seeing. I mean, I know what I was baking. I tried a coconut cake for the first time. But what were some of the things that a lot of folks were baking during the pandemic?

KAREN COLBERG: The sort of-- the winner was sour dough for us. And what that means is breadmaking. And what we do, what's core to what we do, is teaching people how to bake. And we were thrilled to both be the resource for the inspiration and the know-how and what to do and to then to help people hopefully have the product. And as you alluded to, being in it at the levels of sales that we saw, we were in and out of stock for a while. But bread baking will persist, which is incredible.

And the other side of the coin is indulgence. And I think baking brought a lot of comfort to people, as well as an activity. And it's grown into a hobby-- again, great for our future. But I think we see bread baking indulgence. And then, this-- as we think about the future of what holds for us in innovation, there's health and wellness is an area that you don't necessarily pair up with baking. But we've got new products in that space because I think as people explore and want to do more with baking, they want to do it in a healthful way. So we're seeing health and wellness, indulgence, and bread baking all being really important.

ALEXIS CHRISTOFOROUS: Oh, my. You've said a lot of words that don't normally go together, right, Karen?

KAREN COLBERG: Right, sorry, yeah.

ALEXIS CHRISTOFOROUS: I mean, a lot of us during the pandemic have taken a closer look at our eating habits, our lifestyle habits. And many people have put on the pounds. They call it the pandemic pounds, right? Because of all the sedentary lifestyle now and the more baking. So talk to me about these new products because I'm excited. If there's innovation in this area where I could have my baking-- sorry, have my cake and eat it, too, right? Like, be healthy and still have my baking. Tell me some of the products that we can expect.

KAREN COLBERG: So, from an innovation standpoint, it's critical to any business's growth. And as we went, we were planning, as rebranding the King Arthur Baking, we had these new products ready to go, two of which are a baking sugar alternative and a keto flour. And those-- innovation really had to take a backseat to the core products and getting the supply chain sorted out. So we're excited to see the initial launch of those, which happened in the latter part of 2020. But we're really seeing them take off in the first couple of months of this year.

And the baking sugar alternative is a zero calories, zero carb product. And it really bakes well. And that's-- it took us a long time to get there. And that's-- when we offer a new product to the market, it's gone through its paces, and it has to perform for the baker. And so we're really excited about the baking sugar alternative. And when you pair it up with the keto flour, you have new opportunities for people in sort of in a healthier baking avenue.

And the other sort of quick point is, people are experimenting, where baking's become a hobby. So even if you weren't interested in health and wellness, people are interested in trying some of these new products.

ALEXIS CHRISTOFOROUS: And I also know we had a graphic up just a second ago, talking about how you're engaging with your customers, especially these new customers who you want to retain post-pandemic. 43% rise in your baker's hotline, which I have to admit, I didn't know you had a baker's hotline, so that's good to know. And also your digital social media through the roof, up 226%. So talk to me about those efforts, and what are plans to build on that this year?

KAREN COLBERG: So what I've always believed sets us apart in the marketplace is our connection with our customers, deep connection with bakers, and being that resource. So our hotline, which is 855-371-BAKE, so very easy to remember, it's been around for 25 years. And we don't have it quite 24/7, but it's seven days a week.

And it's there to help people, whether it's my bread isn't rising, what product-- I don't have this in my pantry, which we got a lot of that during the pandemic, so what do I substitute, or I'm looking-- I'm just looking for a recipe for something. And it's a range-- there's a range of questions that you can imagine that were there to help people with.

Social media has been-- you know, it's-- we have put a tremendous amount of effort into pivoting in the past 12 months to create content that is helping people learn how to do new things, as well as just putting recipes out there really quickly so that people can learn how to bake. And for us, so that's probably one of the biggest learnings for us in the pandemic, was that we could do that, and we could do it quickly. We pivoted.

We didn't have to-- perfection was probably not our-- seeking perfection was probably not our friend. But we said people were in their-- we had people in their kitchens, in their homes. Where am I actually, actually in King Arthur's studio this afternoon. But people were just having to do this kind of one-off do it with their iPhones. And it worked really well, and it continues to work really well. So social media is where the customer is, really, for any brand, quite honestly. And so you really have to make sure the content's there to engage them.

ALEXIS CHRISTOFOROUS: What was it like for you in your factories and trying to get product to store shelves? I feel like it's easier now to find a lot of those baking items that I couldn't find six, seven, eight months ago. But what has the supply chain situation been like for you? And are things back to sort of pre-pandemic levels, if you will?

KAREN COLBERG: Really challenging in the beginning, and yes, back in stock now. But that's a big journey between those two points. And we probably produced two times the prior year's amount of our all purpose flour, three times the amount of our bread flour. Those same levels apply in our gluten free category as well. And we've disappointed a lot of customers early on in the pandemic in terms of not being able to be in stock, both in our direct to consumer business, as well as the grocery store shelf.

So we put a-- we committed to really significant levels of inventory so that going through peak baking season, November, December, we were in stock and continue to be in stock right now. And that-- having the inventory that people need is as important as inspiring them to bake. I think of our priorities as inspiring, innovating, and in stock. And we're back where we want to be with inventory.

ALEXIS CHRISTOFOROUS: That's really, really good news. How much of-- excuse me. How much of your business is wholesale or the restaurant industry, and not retail? Because we know restaurants are not up to speed yet. They're slowly getting there. How much of your business is that segment?

KAREN COLBERG: So we-- we think of our business as our wholesale in the grocery store, our direct to consumer business, and then what you're referring to, we call our bakery food service business. And this kind of breaks down 70, 20, 10. It's actually a very small percentage of our business from a sales [INAUDIBLE] critical from how much flour is out there in the marketplace. And working with professional bakers makes us better at what we do and gives us a lot of, I think, credibility in the baking space.

So while not a large part of our business, really important to what we do, meaning being in the-- and as you just pointed out, it had a tough year in the sense of relative to the two to three times. And even if we're still at 25% to 30%, we had these big numbers that we're seeing in wholesale and even higher in our direct to consumer space. The bakery food service business has held its own. It hasn't declined as much as we expected it would, which is great. And then as we look ahead to a post-pandemic period, we still see a lot of potential, obviously, when bakers get back in business.

ALEXIS CHRISTOFOROUS: What are your expectations for the business post the pandemic? Because it's going to be-- you're not going to be able to keep up, one would think, this torrid pace of people baking, as we all get back to our lives. So what are your expectations?

KAREN COLBERG: So we've doubled the number of customers that have come to us in this year. And so that-- you know, I always think of that as that's our opportunity to lose. We have to both do everything that we do really well, which is the consumer engagement that I was talking to you about and inspiring them how to bake, and being in stock so they can bake. So, we've put the challenge in front of us to say, let's do everything we possibly can to hang on to the market share that we've gained.

That said, we fully expect, present company included, that once we can travel and go out to dinner and recreation, go to entertainment and gather with friends, that amount of time people are spending in their home kitchens is going to dramatically decrease from what it was kind of in April, May of last year.

But what we do believe and we're forecasting-- and we are bullish on baking-- we think it'll be at levels that are, you know, probably 20%, 30% above what they were pre-COVID--

ALEXIS CHRISTOFOROUS: Wow.

KAREN COLBERG: --which is aggressive, but again, we have-- because people come to us and are hobbyists and passionate about baking and they learn more with us, they stick with it. And those bakers that are hobbyists use a lot of flour.

ALEXIS CHRISTOFOROUS: Yeah, mistakes happen. You need more flour. Before we let you go, what have you enjoyed baking the most during this time? What's one of your faves?

KAREN COLBERG: So, there's the classics, and I might have even mentioned them to you last time, meaning, like, chocolate chip cookies with these amazing chocolate discs, as well as I've been-- I mean, we've made a lot of bread in our house as well. And we have a rye flour that's also new. So it's using our rye flour in bread recipes, as well as in sort of brownies and indulgence. And so, experimenting. I encourage people to be adventuresome with their baking.

ALEXIS CHRISTOFOROUS: Oh, you're an expert. That sounds wonderful. Karen Colberg, co-CEO of King Arthur Baking Company, thanks so much, and happy baking.