Sara Lee's Middle Road

Sara Lee (NYSE:SLE), a Motley Fool Income Investor recommendation, may be on a roll. The food products outfit is introducing breakfast bread items that will be formulated like its "Soft & Smooth" whole-grain white bread, which mixes white and whole-grain flour to combine white-bread taste with whole-grain health benefit. The "Soft & Smooth" bread has become the top-selling bread in the U.S., and the company is no doubt hoping for similar success for its new breakfast offerings.

Before you get overly excited, though, Soft & Smooth's success isn't as spectacular as it first seems. The bread achieved its No. 1 rank by capturing just 1% of the $1.6 billion U.S. bread market, according to a recent article from Crain's Chicago Business. Furthermore, in entering the breakfast bread category, Sara Lee will come up against some well-established competitors such as Pepperidge Farm and Thomas'.

Sara Lee clearly has its work cut out for it if it hopes to lead in the breakfast sector. Nevertheless, the firm appears to be onto a powerful formula for winning consumers -- take a commonly consumed food, add some health benefits, and don't sacrifice taste.

While stories dealing with America's obesity problem have faded from the headlines, eating healthy is likely to remain a big issue. This is especially true as new Food and Drug Administration rules on food labeling covering items like trans fats come into effect in 2006. Food companies have already begun to emphasize the healthiness of their products in relation to the new rules in hopes of edging out competitors.

At the same time, as a recent New York Times article notes, healthfulness alone isn't always enough to guarantee success. Kellogg's (NYSE:K) Ensemble line of products that contained fiber proven to reduce cholesterol flopped back in 1999, and Cadbury Schweppes' (NYSE:CSG) vitamin-fortified 7Up Plus has yet to take off. These examples suggest that most consumers don't jump into the products that simply offer the best health claims.

In the final analysis, the key to capturing a broad cross-section of food consumers appears to be to follow a fairly conservative approach. Cater to health but be mindful, above all, to taste. Sara Lee's new breads face plenty of competition, but management's product positioning looks right on. If Sara Lee can follow the same path with other items, the future looks bright.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.