Walter Bread profits from wellness, health trend

Josiah Go

Walter Bread president Walter Co ventured into making bread right after college in the 1980s. After two decades, he decided to launch the first two of a series of innovations, the “Walter Sugar Free Bread” in 2005 and the “Double Fiber Bread” (wheat and apple) in 2006. He shares his turning point and his challenges as an entrepreneur.

Question: Until the entry of a multinational brand in 1998, bread was an unexciting category. Today, there are various bread products, TV ads, rented shelves and national distribution. How have you responded to these changes?

Answer: With the entry of a multinational bakery in 1998, the whole retail landscape changed. They were getting prime shelf space because they rented the spaces, backed it up with big advertising, promotion and merchandising budgets. Other than that, they were willing to lose money for several years just to gain market share. Suddenly, all the bakeries were facing a Goliath in the industry. We were also forced to hire merchandisers to push our items and refill the shelves with our breads.

Each bakery reacted differently in the face of tough competition. Many responded by going for price competitiveness and advantage while Walter Bread opted for product innovation and superiority. We believe in the law of the first. So, we were the first to come out with “Walter Sugar Free Wheat Bread” and “Walter Sugar Free Wheat Pan de Sal.” We also launched an improved version of a normal wheat bread, the “Walter Double Fiber Wheat Bread.” It is a slice over the ordinary wheat bread in the market, so to speak. We added apple fiber from Germany. One can enjoy the benefits of eating two natural fibers in our wheat bread: fiber from apple and fiber from wheat. The apple fiber imparts the subtle sweetness and adds extra moistness to the bread.

With new products, we were able to get good shelf space, for one, because they were selling well. Secondly, it’s a different category that required a different shelf display apart from the white bread. We covered more areas and territories to serve the growing demands of our healthy breads.

Q: When you launched your Walter sugar-free bread, the competition countered with its own products. What made Walter sugar-free bread narrow the big market share dominance of the multinational leader in the healthy bread category?

A: First and foremost, it’s the integrity of the product. The product has to deliver on what it claims. When we claim that it’s sugar-free, it is really zero in sugar content based on a serving size of two slices, and not based on just one slice. When people eat our “Walter Sugar Free Wheat Bread,” their blood sugar level is under control because there’s no sudden spike in insulin release. The product has to live up to the expectations of the consumers. Weight conscious people were able to maintain or achieve their target weights. The benefits have to be there, but more importantly, it has to be good tasting.

We advocate healthy living and that’s why our focus is more on the healthy breads. It is our company’s passion and a mission to help people live healthy lifestyles. Inevitably, there will be copycats from competition. However, coming out with me-too breads just to get a slice of the market won’t cut it. The product has to deliver on what it promises, otherwise, there’s no continued patronage. With 10 years of being the bestselling and leading brand for sugar-free bread, it proves that the product lives up to consumers’ expectation and satisfaction. Our tagline is: “Healthy is now delicious!”

Q: Your focus has been on product innovation the last decade as you envision to lead in the healthy bread category. Why do you limit your distribution to just Metro Manila? There are many upscale families in the provinces who would like “healthier” bread as well, right?

A: Yes, but logistics is a big issue. We have expanded our coverage to Tarlac and Zambales up north and to Quezon and Batangas down south. We have seen people from Visayas and Mindanao buying our healthy breads in bulk to bring back to their families and relatives in the provinces whenever they are in Manila. In fact, many balikbayans also brought with them our healthy breads back overseas because they didn’t have wheat breads as soft and moist as “Walter Health Nutrition Breads.” We know that there is still a great opportunity out there for growth.

Q: Logistics in the bread industry is really tough. Deliveries are being made and near expiring products are pulled out almost daily. Sales returns are nearly 20%. Why hasn’t anyone been able to create a better demand forecasting in the industry?

A: We have been in the industry for more than 30 years, yet forecasting remains a daunting task. With the advent of so many retail formats and stores, it’s difficult to predict where one will go to shop and buy. Long holidays and vacations make forecasting even more difficult, simply because you don’t know whether people will be traveling. If ever, where and when will they buy the breads?

We can only go by the historical records of each store. But every year, there are new stores sprouting up beside the existing stores chewing away the consumer base of the current stores. With breads being a perishable product, forecasting is critical. We are able to trim the percentage of returns to 15 to 16 percent.

Q: You have your share of failures as well. Your premium priced calcium bread for kids and bread for women have not succeeded. What have you learned from these failures?

A: The seed of failure is planted in times of success. Due to the three hits—“Walter Sugar Free Wheat Bread,” “Walter Sugar Free Pan de Sal,” and “Walter Double Fiber Wheat Bread”—we were able to capture a substantial share of the market that competitors took notice and came out with a slew of their own versions to regain market share. We were on a roll, so to speak, and became less careful in critical analysis.

At that time, it seemed to be a good idea to have bread rich in calcium, vitamins and minerals for the kids and a bread dedicated to women since women have different nutritional needs. However, upon hindsight, families usually buy a maximum of two loaves on each purchase—a wheat bread and a white bread. There’s no room for a third type of bread (be it for kids or for women).

(Josiah Go is the chairman of marketing training and advocacy firm Mansmith and Fielders Inc. For a complete transcript, as well as his Q&A with other thought leaders, please find time to visit www.josiahgo.com)