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NEW YORK--For Collin Street Bakery of Corsicana, Texas, marketing food by mail is a piece of cake.

At press time, executive vice president Norman Shaw told Direct that the company was enjoying the best Christmas season in its 94-year history with its one and only product--a deluxe fruit cake.

Collin Street Bakery is but one of 3,600 mail order food companies competing for $1.2 billion in orders, according to a study by FIND/SVP, a business research company based in New York.

The study reports that although the food segment is a relatively small part of the direct marketing industry, with less than 2 percent of Americans buying food by mail, it is growing about 10 percent annually. By the year 2000, food mail order will ring up more than $3 billion in sales, FIND/SVP projects.

Currently, 16 mail order food firms account for close to $600 million in sales and the top ten U.S. players have about 46 percent of the market, according to FIND/SVP. Harry and David; which sells fruit from its headquarters in Medford, Ore., is believed to be the single-largest food mail order company, with annual sales in the $120 million range. Among other leaders are Campbell Soup's Pepperidge Farm, ConAgra's Pfaelzer Brothers, Omaha Steaks, Priesters Pecans, Primerica's Fingerhut, Swiss Colony, Wisconsin Cheeseman and Yamanouchi Pharmaceutical, which acquired Shaklee Corp. and its Bear Creek subsidiary in 1987.

In contrast, about 3,000 food mail order companies can be considered mom-and-pop operations with annual sales averaging less than $50,000, according to the study.

Somewhere in between are companies like Collin Street Bakery, which produced more than 4 million pounds of fruit cake last year--all of which was baked to order and sold by mail. What's more, about 15 percent of this volume was sold direct to consumers abroad, without the help of agents or distributors. The regular size cake goes for $11.85, the medium for $17.20 and the large for $28.20, postage included (overseas delivery costs extra). All payment is up front, and credit card charges outpace checks and money orders by four to one.

The key to Collin Street's marketing thrust is its database, mailing to some 10 million names annually. In addition to consumer households, the firm has been prospecting business executive lists and about half its sales volume is now corporate gifts. About 70 percent of annual volume is repeat business.

Mail order is an integral part of the company's history, which began in 1896 when a German baker brought his Original Deluxe Fruitcake recipe from Wiesbaden to Corsicana and teamed up with local bon vivant and moneyman Tom McElwee. The business today is run by the McNutt family, which bought it from McElwee's widow.

Collin Street Bakery's direct mail piece stresses ease of ordering, makes generous use of four-color art, delivers an unconditional guarantee (which includes three-day delivery) and lists a roster of distinguished clientele for snob appeal. According to an article in People magazine, "What Dom Perignon is to champagne and Romanoff is to caviar, the Collin Street Bakery is to fruitcake."

Exotic foods attract

While the folks who buy food by mail are a relatively small lot, they make up in affluence what they lack in numbers. They are willing to pay more for the convenience of sitting at home to order perishables from a catalog rather than shop at the gourmet food shops in town.

In the true spirit of American yuppyism, today's well-heeled mail order shopper can order such basic necessities as six pints of assorted gelato packed in dry ice (at approximately $10 a pint from San Francisco's Gelato Classico Italian Ice Cream). Or treat the family to a genuine New England clambake, including lobster, mussles and corn on the cob packed in seaweed, from Clambake Celebrations of Cape Cod, Mass. Or order exotic mushrooms, such as shitakes and porcinis, from Franklin Foods of North Franklin, Conn. And even buy colossal asparagus spears from Mr. Spear Inc., of Stockton, Calif.

Aside from the booming couch potato lifestyle, another boon to the direct marketing of delicate or perishable items has been overnight and two-day delivery services, along with packaging and preservation technologies to guarantee that orders arrive safe and sound--perishables frequently come in a styrofoam chest surrounded by dry ice.

On the down side

Unfortunately for some worldclass companies, size and marketing muscle is no gaurantee of success in food mail order. General Foods made a splashy entry into the business in 1987 with its Thomas Garraway Ltd., "Purveyor of quite simply the finest foods in the world," catalog. The 40-page glitzy "colour" catalog (British spelling and all) featured an assortment of cheeses, pastas, mustards, marinades and dressings, gift baskets, coffees, teas and other "savouries and accompaniments." It lasted about two years and General foods has not commented on why the operation failed. In its study, FIND/SVP speculates that one factor may have been the expense of producing the catalog itself (customers had to buy it for $2.50, which was returned as a gift certificate on purchases of $25 or more). What's more, the catalog carried no high ticket products (the most expensive was a gift basket at $54) while most items sold in the $2.50 to $12.50 range. "The selection of goods and their pricing did not match the production standards set by the catalog," FIND/SVP concludes.

A shakeout also may be in store for other companies. Despite rosy growth projections, mail order food marketers can anticipate several bumps along the way. Among the issues and trends identified in the research are threats from increased competition from local speciality food retailers, the inability of some mail order food marketers to meet rapid changes in consumer tastes, and rising costs of doing business that may seriously reduce direct marketers' cost advantages.

Chief among the cost concerns are higher postage rates. While direct marketing advertising expenditures increased from $2.7 billion in 1970 to $21.9 billion through 1989, according to McCann-Erickson's annual study on advertising expenditures by media type, third-class postal rates have increased 350 percent in the same time frame. Collin Street Bakery estimates that a one-cent increase in postage results in an added cost burden of $100,000.

Another threat is the pressure from revenue-hungry states to have mail order companies collect sales taxes, forcing them to compete harder against local merchants.