An Appetite for Growth
Fruitcake, while a much-maligned holiday gift-giving tradition, nonetheless comprises a serious mail-order business in Corsicana, Texas. Fifty miles south of Dallas along Interstate 45 stands the home of the DeLuxe fruitcake and Cryer Creek Kitchens catalog, a wholly owned subsidiary of world-renowned Collin Street Bakery.
In recent years, Cryer Creek Kitchens has taken great strides in testing new concepts that have, in turn, fed the parent company’s appetite for sustained growth. Here’s what actions the food cataloger has taken, some of its results and lessons learned along the way.
Birth of a Catalog
The food-by-mail industry, and Collin Street Bakery with it, enjoyed solid and predictable growth in the 1960s and ‘70s. But by the ‘80s, the market for fruitcakes began to level off.
Marketing Director Robert Means says the company tested expanding its fruitcake production line with additional gourmet desserts, such as cheesecakes, pies and tea breads. To avoid damage to its brand, the company launched its expanded product line under a new brand name: Cryer Creek Kitchens. In this way, says Means, “It would be a ‘safe’ failure if it were going to be a failure.
“We didn’t want to simply broaden the Collin Street Bakery product line, given the amount of corporate infrastructure that had been dedicated to our DeLuxe fruitcake,” he explains. “We can produce 30,000 pecan cakes a day, and we can produce about 1,000 cheesecakes a day. So if we were to simply offer that broad product line to all of our Collin Street Bakery customers, we could have a crippling production issue very quickly,” he says.
Under the management of Bill McNutt III, the Cryer Creek Kitchens catalog launched in 1986. From then until 1990, the catalog was mailed only to select Collin Street Bakery customers, and no mention was made of any association between the two brands.
“We were conducting an internal test,” says Means, who explains that the company was trying to ascertain if customers would buy products other than fruitcakes from them, and if the customer file would result in profitable list rental.
Calculated Risks
Today, Cryer Creek Kitchens boasts a customer list of 40,791 12-month buyers, and mails five to seven catalog campaigns a year, depending on its appetite for off-season mailings, which is anything outside of the fourth quarter. The frequency with which Cryer Creek Kitchens profitably can mail these customers is based on recency, frequency and monetary segmentation. The best customer segments within the Cryer Creek Kitchens database get eight contacts, while lesser-performing segments may receive just two to five contacts. Response to customer mailings averages a healthy 10 percent.
The Cryer Creek Kitchens database is only a fraction of the 486,592 24-month Collin Street Bakery file, and accounts for just 12 percent of the company’s business. But because there’s a close affinity between the two files, the company can use the Cryer Creek database as a proving ground for company-wide database changes, list selection, creative tests and product line expansion.
Testing within the Cryer Creek Kitchens database allows the organization to make these types of probes at a reduced risk rarely afforded other catalogers. Says Means: “If we’re selling a thousand units of a product we never should have rolled out with in the first place, and we lose $10 a piece on them, that’s hardly a noticeable loss to an organization our size.”
In this, Collin Street Bakery is in a unique position: It has the flexibility to test things that a single-title merchant often can’t. Says Gary Hennerberg, a catalog consultant working with the company, “Most catalogers with multiple titles keep their brands separate. However, Collin Street Bakery has so much equity in its name that we feel it’s stronger to refer to Cryer Creek Kitchens as part of the Collin Street Bakery family.”
Profitable Database Growth
Cryer Creek upped its prospecting efforts in 2004 and mailed 3.8 million names on files of apparel buyers, food-by-mail buyers and donors. Cryer Creek mails files such as Harry and David, Norm Thompson Outfitters, Wolferman’s and R.C. Bigelow, to name a few.
Within these files, age and mail-order buyers are the most important selects. The average age of Cryer Creek Kitchens catalog buyer is 55, a younger demographic than the Collin Street Bakery buyer who averages 65 years old. According to Means, the catalog’s most loyal buyers are empty-nesters in the early and active years of their retirements.
“She was a homemaker and is interested in her book or bridge club and community. He was a sole earner for his family,” he says. And because these types of people often donate to causes they believe in, donor files have a high corollary to the Cryer Creek database.
Because its database is made up of mostly seniors, its business is much more heavily weighted toward mail and phone orders than most catalog businesses. Web orders account for only 10 percent of its business, while 55 percent of its orders come in through its customer call center. A full 35 percent of orders arrive via mail.
While two-thirds of the company’s total business comes from gift orders, more than 85 percent of its customers also buy products for themselves. Like most catalogers with a large number of gift recipients, Cryer Creek does an annual gift-list mailing to customers each fall.
Cryer Creek brings in 20 percent of Collin Street’s total new-to-file names. Response rates to prospect mailings average 1.25 percent. Like most catalogers, Cryer Creek suffers from declining prospecting returns and increasing attrition in the second year of new customer acquisitions. Favoring long-term growth over short-term profits, it’s taking a slight step back and plans to mail only 2.2 million prospect names in 2005.
“This year we’re going to take some profits off the acquisitions we made,” says Means. “We remain internally financed, both for working capital and capital improvements. So when your efficiencies and mail plan are up, and you bring in more customers than you’ve brought in the last 10 years, it creates quite a cash crunch going into that second year of business, because you have to pay the marketing and fulfillment expenses.”
While this is a conservative approach, Means says he wants to “add to the database at zero cost so the second order makes a contribution to overhead and profit.”
Continuing forward, Means’ plan in 2005 is to shore up the relationships he has established with a new crop of customers and ensure that repeat purchases from this group continue at the same rate as historical three-, four- and five-year buyers.
A Boost in Response
One way to combat declining response rates is to mail more; another tactic is to sweeten your offer. As prospecting effectiveness declined in the late 1990s, Cryer Creek’s competition was enticing prospects with deep discounts. But discounting product was not an option for Cryer Creek, according to Means, because its margins are relatively thin. What’s more, the cataloger already offers free shipping on all orders delivered within the continental United States as a way of combating slower delivery times. (Cryer Creek waits for a batch of orders for a given product, then ships the delicacy fresh from the oven. Standard delivery times range from seven to 14 business days.) So the cataloger had to find a premium with a low cost to the organization but a high-perceived value by the customer. This, too, created a challenge because Collin Street Bakery is its own supplier of raw materials, which leaves its product line narrow and fixed. “There’s only a few things you can do with pineapples and pecans,” Means jokes.
The solution: coffee. Cryer Creek began offering free coffee with a buyer’s first purchase. The premium has worked well. It now offers coffee with an order of $85 or more to carefully selected segments of its customer database.
In addition to sweetening its offer, Cryer Creek combats flagging response rates by analyzing its prospecting list performance, and refining its list selection criteria. For example, it may apply a ZIP code model to identify and mail only those ZIP codes that historically perform well.
From Fruitcake to Pecan Cake
While its first coffee test bore out the 40/40/20 rule, its last creative test, according to Means, “turned that rule right on its head.”
At Hennerberg’s advice, the company tested new creative on the repositioning of its core product, the DeLuxe fruitcake, and in its 2002 prospecting efforts renamed it a Native Texas Pecan Cake. Instead of focusing on traditional fruitcake nomenclature, the copy zeroed in on its unique selling proposition: native Texas pecans. When the first round of results came in, the test mailing outpulled the control to such a great extent that Means retested it to verify the results were, indeed, that good. “We were afraid we had some kind of merge/purge error,” Means explains.
This test was a significant breakthrough, because even with a catalog full of cheesecakes, tea breads, cookies and pies, pecan cakes now account for more than 50 percent of Cryer Creek’s sales. A rollout of the new creative to the combined Collin Street Bakery and Cryer Creek Kitchens customer database in 2004 resulted in a “banner year for new customer acquisition,” says Means. Indeed, Cryer Creek Kitchens made last year’s Catalog Success Top 200 list with a leap of 30 percent in its 12-month housefile.
Because its pecan cakes are the workhorses of the catalog, Means plans to test a change in the pagination of the first two signatures of its four catalog mailings this fall. Repagination, he explains, will give high-value real estate to more of its top-selling products and will enable the cataloger to tailor its mailings to the previous purchasing habits of the dormant segments of its customer database.
For example, says Means, “We’ll make sure those who’ve purchased pecan pies get a pecan pie catalog, rather than sending them a catalog where they’ll have to hunt up pecan pies three or four pages into the book.”
Long-term Strategy for Growth
As Cryer Creek Kitchens’ file grows and brings in a larger portion of Collin Street Bakery’s business, so will its media mix expand. In addition to solo catalog mailings, Means anticipates adding direct response space ads and free-standing inserts to its media plan as Cryer Creek’s brand identity grows.
More immediate plans call for a renewed focus on the catalog’s e-commerce site. While the current site is integrated with its print catalog on a basic level, Means would like to see the Web site’s graphics and copy better match the current print catalog. The number of Web orders may be small, but it’s growing and will continue to do so as the baby boomer generation moves into its senior years.
Going forward, the organization’s strategy for long-term profitability is to gradually increase its production capacity for non-pecan cake desserts at levels of risk justified by the growth prospects of its multiple product-line items. Says Means: “If you chart out the trajectories of Cryer Creek Kitchens and Collin Street Bakery’s growth, they will be roughly the same size in seven to eight years.”
About Cryer Creek Kitchens
Headquarters: Corsicana, Texas
Parent company: Collin Street Bakery
Merchandise: fruitcakes, pecan cakes and other baked delicacies
Catalog launch: 1986
Inbound channels: mail, 35 percent; phone, 50 percent; Web, 10 percent
Target demographic: mail-order food buyers age 55 and older
Average order value: $64
Number of employees: 65 employees at Collin Street Bakery; Cryer Creek Kitchens has just one full-time employee plus independent contractors
Printer: Arandell
Creative director/copywriter: Gary Hennerberg, Hennerberg Group, Grapevine, Texas
The Cryer Creek Kitchens List
12-month housefile: 40,791
Rental cost: $90/M
List manager: Allmedia
Contact: (469) 467-9100, jlaufer@allmediainc.com
Takeaway Tips From This Cataloger
1. Market a unique product. You’ve got to be unique and have a product that people can’t just drive to a mall and buy, says Gary Hennerberg, a catalog consultant who works with Cryer Creek Kitchens. And when promoting a unique product, look for the interesting angle. Native Texas Pecan Cake sounds more exotic than fruitcake.
2. Don’t test whispers. The only way to make big breakthroughs is to test big ideas, says Hennerberg. To its credit, Collin Street Bakery, parent company of Cryer Creek Kitchens, has allowed Hennerberg to test significant departures from its control mailings, which is why it’s able to make significant gains.
3. Plan for the lean times. According to Means, his predecessors at Collin Street Bakery always took a long-term view of the business. “They’ve foregone opportunities for aggressive growth and for capturing market share in favor of remaining internally financed and risk-averse. Through the down years of our industry, that has really benefited us.”
History of Collin Street Bakery
August Weidmann, a German immigrant, founded Collin Street Bakery in 1896 with the financial backing of Tom McElwee, a local cotton buyer, in Corsicana, Texas, site of the first oil strike west of the Mississippi River. Although Weidmann’s specialty was a holiday fruitcake, the bakery’s primary function was to provide bread to the region. After World War II, bakeries in Dallas began to penetrate the Corsicana bread market. At this point, the McNutt family bought the bread bakery, which also sold fruitcake at Christmas, and turned it into an international direct marketer of fruitcakes that also sold bread.