USA Today
LOVELAND, Ohio — At first blush, this would not seem the perfect holiday for HoneyBaked Ham.
For one, it's got that darned word "ham" in its name, which, amid swine flu phobia, is a potential buzz kill.
For another, in a tough economy HoneyBaked sells spiral-sliced premium hams that can fetch $100 for a whole or $50 for a half. By comparison, Wal-Mart is selling spiral-cut half hams, about 10 pounds, for less than $16.
Tradition is taking a hit at HoneyBaked this Christmas, its biggest sales holiday. Despite selling one of the nation's most familiar comfort foods, few are comfortable in HoneyBaked Ham land, says Craig Kurz, CEO and grandson of the company's founder.
"These are unprecedented times," offers Kurz, 47, as he looks around a less-than-bustling HoneyBaked Ham store and cafe just down the road from the company's headquarters. "We have not seen conditions of the past 12 months at any other time in our company's history."
The economy has nudged the chain to open fewer company-owned stores and sell more franchises.
HoneyBaked also is working to break out of the box of being a once-, twice- or three-times-a-year stop. About 50% of its annual business is tied to Christmas (including New Year's) and another 30% to Thanksgiving and Easter.
So, it is adding restaurants to stores. It's trying to grow its catering and corporate gift businesses — but both fell double digits last year and single digits this year. It's opening kiosks in supermarkets. It's rolling out seasonal desserts. It's pondering partnerships, perhaps with an ice cream chain, to grow beyond ham.
"We're a center-of-the-plate brand," says Kurz, and they're trying hard to be more.
Yet ham is from whence it came. In 1957, Harry J. Hoenselaar, Kurz's grandfather, took a $500 loan on his Detroit home, where he figured out in his basement a special way to cook, slice and glaze ham.
Things went well for years. With regional offices linked to the founder's four daughters — living in Cincinnati, Detroit, Atlanta and Boston — it grew from the original Detroit location to 458 now in 41 states. It became the industry icon. It expanded into other meats, including turkey — now 10% of sales. But after the patent on its spiral cut expired in 1981, others jumped in.
Yet when asked to name a brand they associate with the word "ham," 65% of consumers volunteer "HoneyBaked," Kurz says. And 22% of folks who buy other brands of ham — often to save money — say their real favorite brand is HoneyBaked, he says.
Kurz refuses to allow a reporter to see the famous spiral slicing machinery or watch the even more secret glazing process — which is done at the stores. The recipe for that sweet, crunchy glaze, he says, is stored in a vault.
Layoffs, falling sales
But this holiday season, some of that glaze may be peeling off the company's image. Over the past year there have been layoffs, reduced store hours and store closings, though Kurz won't say how many at the privately held company. Same-store sales that fell in the high single digits last year have continued to fall in 2009.
With the unemployment rate hovering stubbornly around 10%, a pricey, honey-glazed holiday ham may seem optional — if not impossible — to many cash-strapped consumers.
"If somebody's going to buy a ham this holiday, they just might step past the premium-priced spiral ham and buy something more modest," says Steve Meyer, president of Paragon Economics, a livestock industry consulting firm. "I'd think HoneyBaked might feel the deal more than others."
Even so, HoneyBaked won't cut costly ingredients or processing, Kurz vows. Each ham spends 22 hours in the smokehouse and is cured for days.
That leaves HoneyBaked little choice but to use coupons and discounting like never before. HoneyBaked's traditional Christmastime marketing portrait of itself has been Norman Rockwell-like in its imagery. No longer. Now the holiday message is value, value and value.
"In the past, all we needed to do was to remind people that we were here," says Ken Caldwell, who oversees the company's growing franchising division. "Now, we're stressing value."
To try to keep folks from trading down, it's pushing $10-off coupons with unprecedented vigor on its website and in print ads. Before the holidays, it blasted hundreds of thousands of e-mail coupons.
Instead of pushing whole hams, it's promoting halves and quarters. The marketing message, for the first time, reminds folks that when they buy half a ham with a coupon, they can feed the family for less than $4 each.
"It's like a Christmas bonus for your budget," says a print ad. A website promotion boasts that at less than $4 per person, "There's no excuse for not inviting the in-laws."
Even the company's holiday catalog, which traditionally focuses on beauty shots of the food, comes this year with this big value burst on the cover: Save $10 on five fantastic ham meals.
Inside, its $157.95 "Grand Event" gift package of ham, turkey, cheese and creamy mustard is now promoted at $147.95. The "Ultimate Smokehouse Collection" of meats has been reduced from $155.95 to $145.95. And the price of the HoneyBaked "Ham & Dessert Duo" gift box is down from $111.95 to $101.95.
Is discounting the answer?
Marketing gurus are of mixed mind on this discounting strategy for the Rolex of hams.
"High-end brands cannot do much except wait for the economy to improve," says consultant Al Ries. "Keep HoneyBaked as a high-end product and it will come back stronger than ever when the economy gets better."
But Jez Frampton, CEO of consulting firm InterBrand, says HoneyBaked has no choice but to discount in this economy. "Any brand perceived to be a luxury brand is at risk of losing consumers who feel less rich than they did a year ago. HoneyBaked doesn't want to take the risk of letting people feel they can still have a great holiday dinner without one of their hams."
Side-stepping swine flu fears
A sick economy is not the only illness that HoneyBaked is battling this season. There's also the matter of that nasty swine flu virus.
HoneyBaked planned for the worst but so far has managed to avoid it.
Days after news broke of the virus' spread last spring, HoneyBaked executives fretted that the company's first real crisis was brewing. For years, executives have kept a crisis-management firm on retainer — in the event of an unexpected disaster — but had never had to meet with them over a specific crisis.
Executives quickly called a teleconference with the firm, which Kurz declines to name, and plans were made in the event of an escalation of the flu.
HoneyBaked quickly posted information on its website that explained that there is no connection between the virus and pork.
The timing of the swine flu scare could have been far worse. HoneyBaked had just wrapped-up its big Easter season before H1N1 fears took off in the U.S. By the time Thanksgiving and Christmas shopping began, most folks seemed to have gotten the message that pork was safe. "We haven't seen a large drop-off in sales because of H1N1," Kurz says. "It was largely below the radar."
But Christmas brings other challenges. The part-time workforce at the typical HoneyBaked store swells from six to 60, and the total workforce nationwide balloons from 2,400 to 12,000.
Some stores, even in these tough times, will see lines out the door as Christmas gets closer.
Offseason marketing
Among other things, the company is a social-media dinosaur. HoneyBaked Ham is unlikely to show up in anyone's text message, Facebook page or tweet. The company is looking into social media for 2010, but Kurz says it also is being realistic.
"We're not looking for 16-year-olds," he says. "Our audience is women over 25."
In truth, many of its most devoted customers are two or even three times that age. Kurz winces when a reporter points out the number of customers in their 70s — and even 80s — in its Loveland store and cafe, which offers free Wi-Fi.
Then, 16-year-old Angela Nieder of nearby Maineville walks in with her mom, Leslie. Angela has a cold, and only HoneyBaked makes her feel better. "It's my comfort food," she says.
Kurz is elated to hear this.
But he also knows the roadblocks his brand has hit in the name of growth. Several years ago, some HoneyBaked stores tried sharing space with a bakery chain and a coffeehouse chain.
Both were a bust. "Consumers found it to be a real disconnect," he says.
At one time it even tried its glaze on chicken breasts, which bombed.
A ham by any other name ...
Then, there's the name.
Marketing mavens seem to think a name change is an immediate need. The high-calorie connotation of "honey" and the fat connotation of "ham" are turnoffs to today's diet-conscious buyers, says InterBrand's Frampton. Perhaps, à la Kentucky Fried Chicken's evolution into KFC, maybe HoneyBaked Ham should call itself HBH, he ponders.
Or maybe, suggests consultant Pam Murtaugh, the brand could focus on baked goods and shorten its name to Honey Baked! (Yes, with an exclamation mark, as in: "Look what my honey baked!")
Ain't gonna happen.
Gathered at day's end in a HoneyBaked headquarters conference room with Kurz and his parents — Jo Ann Kurz, the founder's daughter, and George Kurz Sr., the chairman of the board — there's an audible gasp when the name-change issue is broached.
"No!" both parents utter in astonished — if not angry — unison, under the gaze from a black-and-white photo of Jo Ann's founding father.
In a world rife with sleight-of-hand image changes for change's sake, that response says it all.
HoneyBaked Ham is HoneyBaked Ham — any way you slice it.
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