BAGELS GO WEST TO LASSO CONSUMERS

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Anyone living within New York's five boroughs knows the pleasure of a dense and chewy bagel.

But travel beyond the Big Apple illustrates the scarcity of quality bagel suppliers in the rest of the U.S. Hoping to get a lock on these untapped markets, several bagel bakery chains are rolling west.

According to the U.S. Department of Commerce, per capita bagel consumption rose 44%, to 3.6 pounds a year, in 1993 compared with 1988. Supermarket sales of frozen bagels for the year ended May 22 grew 9.7% to $245.4 million, according to Information Resources, Chicago.

Yet a survey conducted in May by trade publication Baking Buyer showed that while 76% of independent bakeries in the Northeast sell bagels, that number drops to 60% in the Midwest, 54% in the South and only 35% in the West.

With 103 units, Bruegger's Bagel Bakery, Burlington, Vt., is by far the biggest regional chain eying national expansion. Bruegger's already has a strong presence in Boston and New York state, but is expanding in Seattle, Dallas, North Carolina and Iowa. In 1993, systemwide sales were up 36.5% to $53.3 million; another 50 stores are to open by yearend.

Manhattan Bagel Co., Eatontown, N.J., operates 43 stores with another 42 under construction.

Weighing in next are 45-unit Chesapeake Bagel Bakery, McLean, Va., and 24-unit Skolniks Bagel Bakery, Oklahoma City.

"When we started out [in 1987] in New Jersey, they already had 318 bagel shops without us," said Jack Grumet, chairman of Manhattan Bagel. "When we go into other states there is very little competition; we're finding these are higher volume stores."

Creative menu boards helped boost average unit sales at Bruegger's last year to $827,000. In comparison, average unit sales are about $650,000 at KFC and Pizza Hut and $1.5 million at McDonald's.

"Bagels now are almost where frozen yogurt was in 1992," said Big Apple Bagel CEO Michael Evans, who used to own 19 TCBY franchises. "People are substituting a dozen bagels for doughnuts."

To ensure bagels don't go the way of many failed frozen yogurt stores, most bagel chains have extended menus to include flavored cream cheeses, bagel sandwiches, soups and baked desserts. Big Apple Bagel, Chicago, has introduced a jelly-filled bagel hole named "Bagel Yummy" to its 16 stores in Chicago and Milwaukee.

And Manhattan Bagel serves ham and eggs on a bagel.

Marketing budgets remain low-key for the fledgling bagel chains. Most create radio, outdoor and print ads in-house.

Big Apple says it will begin advertising on cable TV when it expands to new markets like Denver, Toledo, Ohio, and San Diego.

Bruegger's relies on direct mail to attract new customers. "We believe if we can get it in most people's mouths we can get them to buy it," said Sarah Stearns, marketing analyst at Bruegger's.

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