Roll Out the Cracker Barrel

Restaurant/country store chain plans to expand into groceries

Published in CSP Daily News

LEBANON, Tenn. -- Family restaurant chain Cracker Barrel Old Country Store Inc.--known for offering Southern comfort food and nostalgic Americana merchandise in a homestyle atmosphere--is again seeking to expand its brand beyond those roots, reported USA Today.

First, it branched into the takeout business with several Cracker Barrel Corner Market locations throughout Tennessee. Then it opened a retail-only store, simply called The Store, in a Nashville-area mall. Both efforts failed, said the report.

Now officials with the restaurant chain plan to try again, this time by expanding their lineup of Cracker Barrel-branded food products and offering them at grocers and other outside retail outlets for the first time.

"Our research shows that our guests would like to be able to purchase Cracker Barrel products in places other than just our restaurants and retail stores, and we believe that there is opportunity here to meet that desire," the company told the newspaper.

Analysts applauded the strategy, calling it a low-risk way to broaden brand awareness, appeal and revenues. But they caution that Cracker Barrel should avoid overreaching, as others have done in branching into nonrestaurant channels.

"It's a good start, but you don't want to do too much or you'll risk brand dilution," Stephen Anderson, an analyst with Miller Tabak, told the paper.

Cracker Barrel already sells various food products such as pancake and corn muffin mixes, cobbler filling and syrup under its name. But those items are available only at Cracker Barrel stores and through its website.

That will change under a recent multiyear licensing agreement with John Morrell Food Group, a Smithfield Foods subsidiary. It will make various food products, including ham, bacon, lunch meats, glazes, jerky and summer sausage, under the Cracker Barrel name and sell them through grocers, mass merchandisers and other retail outlets, the report said.

Cracker Barrel hasn't said when those products will hit store shelves.

"We are greatly increasing the number of consumers who will see and interact with the brand on a daily basis," the company said. "There will be quite a large impact on brand awareness that we will be able to build upon."

It's a path that several other restaurant chains, including Bob Evans, Boston Market, P.F. Chang's and T.G.I. Fridays, have trod before, said USA Today. In a 2011 U.S. consumer survey by Mintel Group Ltd., more than three-fourths who responded said they had bought restaurant-branded items. Families with household incomes of $75,000 or more, a key consumer demographic for restaurants, were among the most frequent buyers.

Analysts said Cracker Barrel's expansion move, while initially small in scope, is sound.

By offering a limited number of items not sold in its stores, Cracker Barrel reduces the risk of cannibalizing restaurant sales, they said. That's a mistake other restaurant chains have made, said the report, especially by offering frozen versions of their menu items.

Cracker Barrel isn't saying whether its retail food push will ultimately extend to the frozen-food market.

Partnering with John Morrell also is strategically smart, analysts told USA Today. Using a licensing agreement means "the risks are mostly on John Morrell, not Cracker Barrel" if the venture fails, Anderson said.

John Morrell also has a large presence and distribution network in Western states, which will help Cracker Barrel gain shelf space and build brand awareness in markets where it has little or no footprint, Hayden said.