Cracker Barrel hits the right note

How the restaurant company is using music to build its brand and ride out the recession [From our print edition featured in Monday's City Paper]

Of all the landmarks in the restaurant business, this will go down as an unexpected one.

A week after its release on Memorial Day, the latest album from country duo Montgomery Gentry, “For Our Heroes,” stood proudly at No. 5 on Billboard's Top Country Album Chart. It was the highest-ever sales number by an album issued by Cracker Barrel Old Country Store’s in-house label.

Amid a seemingly never-ending drop in CD sales driven by a younger generation that logs on to listen, Cracker Barrel has become a leader among non-traditional music retailers riding out the hard times. While company officials are guarded about sales numbers, they will say that CB Music Ltd. has shipped millions of the discs placed squarely under diners’ noses as they queued up to pay for their meals.

Sales in 2008 accounted for 2 percent of Cracker Barrel’s total revenues — which amounts to almost $50 million — and produced healthy profits, although officials won’t disclose details. At the counters, newer albums are marked at around $12 while some older ones go for $9, making CDs at the Old Country Store cheaper than most offerings from traditional labels.

Careful research into its consumer base, artist and song selection, and positioning have helped limit Cracker Barrel's exposure to recession and ensured a longer stay in music retailing, says the man leading the musical charge.

“Our point of difference is that we are half restaurant and half country,” said Peter Keiser, vice president of marketing at Cracker Barrel. “We resonate with the whole landscape of America.”

Located along the nation’s highways and interstate exits, with 588 stores in 41 states, the restaurant chain has positioned itself as a rest stop for weary road-trippers and music selection with a multi-generational target.

Cracker Barrel's identification with tradition goes beyond its store décor, heavy with the flavor of old Americana with authentic old advertising signs, farm equipment, early kitchen appliances and even eggs in the basket. The food chain used to sponsor the National Heritage Fellowships, the country's highest honor in folk and traditional arts, for three years. It also worked with the National Council for the Traditional Arts when founder Dan Evins was the chain’s CEO.

That emphasis on tradition has weaved its way into the company artist selection, too. A lot of research goes into the artists and their genre to see if they would fit into Cracker Barrel's family-friendly country atmosphere and whether the base customers would be interested in buying the albums.

Montgomery Gentry is a popular act that fits the target demographics of Cracker Barrel, said Sean Alexander, an analyst with IHL Consulting Group. “It was a natural marriage.”

The Montgomery Gentry album, “For Our Heroes,” is certainly adding sales sizzle to the standard Cracker Barrel fare. The new album has sold more than 58,000 copies since its launch on Memorial Day, according to Nielsen SoundScan, which provides data for the Billboard charts.

Artists buy in

Artist support and their affinity to Cracker Barrel play an important role in creating exclusive CD compilations. “The artists are selected based on their familiarity and passion towards Cracker Barrel country stores,” Keiser said. “Eddie [Montgomery] and Troy [Gentry], for instance, are frequent visitors of Cracker Barrel.”

Song selection for the exclusive albums is based on a combination of artist and record label efforts. “We are a family-friendly set-up and all music is screened for that,” Keiser said. “The compilations try to balance well-known hits and exclusive content that would ensure that customers make exclusive trip to our stores.” The 12-song Montgomery Gentry compilation includes a new song, “One Of Those Days”, four songs with limited release so far and two hits.

Artists play an important role in marketing the music that not only binds with the potential buyers but also with more than 65,000 employees at Cracker Barrel. “Troy and Eddie did a short video with some of our employees,” Keiser said. “It was meant to be a promo and also to give the employees a sense of ownership and say why we are doing it.”

Traditional music retailers have struggled mightily since the advent of the digital age, leading some artists to opt for exclusive releases to both combat piracy and retain their audience. In 2005, Walmart signed an exclusive distribution deal with country singer Garth Brooks to release “The Limited Series” CD-box set. Since then, big-name bands including The Eagles, AC/DC also have signed on with Walmart, while Prince recently hooked up with Target. Such deals fix a price with a captive audience, all in effort to ensure that an artist can reach a core audience.

Since 2003, when Cracker Barrel realized traditional music recordings would be a good idea, it has produced exclusive compilations of work by country and bluegrass artists, including Dolly Parton, Kenny Rogers, Ricky Skaggs, Merle Haggard and Alison Krauss. Multi-artist compilations such as “Songs of the Year” in 2006 and “Grand Ole Opry Live Classics CD Collection” in 2005 also have made it to store counters.

When Starbucks follows…

The country store is no lone ranger in nontraditional music retailing.

In 2007, Starbucks and Concord Music Group launched Hear Music Record Co. with Paul McCartney as their first artist. The companies sought to build direct relations with artists and distribute recordings at Starbucks locations. Starbucks also introduced Hear Music coffee shops where customers could download McCartney songs and burn them onto their CDs. The most recent Hear Music offering is Elvis Costello’s album, “Secret, Profane and Sugarcane,” which hit the market June 2.

Keiser said Cracker Barrel does not aspire to compete with traditional music retailers or the likes of Starbucks. Though highly profitable, music retail accounts for a only a tenth of Cracker Barrel's retail sales, and is primarily another avenue to build an awareness of the brand.

“Well over 90 per cent of our music sales is impulse purchases,” he said. “People come in to enjoy country style food and buy music.”

A narrow focus on one genre could give other retailers the jitters. And it would be easy to argue that, amid a general slump in physical album sales — the U.S. sound recording industry shrank by 18 percent to $8.5 billion in 2008 — a wider lens could increase Cracker Barrel’s sales, although that would also compromise the company’s signature theme.

In what could be a thumbs up to the Cracker Barrel model, Starbucks scaled down its music program last year, limiting CD-burning machines and pulling CDs off shelves to focus only on counter tops. The message is clear: When it comes to music retailing, it is wise to go small but steady while staying faithful to patrons of company's original business.

“Cracker Barrel can more easily identify artists that are more likely to resonate with their core consumers — after all, they only have 577 locations, so they might be able to more easily aggregate data about their customers — than say Starbucks can,” Alexander said.

With so many more retail locations, Starbucks can draw from a much larger cross-section of American consumers, but that doesn’t necessarily spell success.

“Cracker Barrel is seen as a business of the Southern United States,” Alexander said. “Even if they spread, and country music has a wide fan base, it will still be seen as a phenomenon of the South.”

And that's just the way Keiser likes it.