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Bimbo Bakeries USA notes ‘surprising’ decline in private label

2 comments

By Kacey Culliney+

24-Jul-2014
Last updated on 24-Jul-2014 at 12:23 GMT

Bimbo Bakeries USA president: 'The private label volume decline is quite frankly a bit of a surprise, in that (…) we didn’t see those trends last year.'
Bimbo Bakeries USA president: 'The private label volume decline is quite frankly a bit of a surprise, in that (…) we didn’t see those trends last year.'

Bimbo Bakeries USA (BBU) saw a 7% dip in US private label packaged bread sales in its Q2 results.

Grupo Bimbo posted an overall sales rise of 8% across the US and Canada for the quarter but noted a 7% volume dip in private label sales. CEO Daniel Servitje said there was “softness” across several private label customers in the US.

BBU president Fred Penny told analysts on Grupo Bimbo’s Q2 analyst earnings call the company hadn’t seen the dip coming.

“The private label volume decline is quite frankly a bit of a surprise, in that …we didn’t see those trends last year,” he said.

Food inflation, SNAP reform, Hostess

Penny said there were several factors that had likely contributed to the decline.

Food inflation in other segments, particularly protein; higher energy costs; higher health costs; and reduction in SNAPs (US government program - Supplemental Nutrition Assistance Program) had impacted lower-income consumers, he said. “That may be playing into private label softness in some cases.”

In addition, there had been shifts in purchasing behavior influenced by the Hostess exit and re-entry onto the market, he said. For example, consumers who bought Hostess brands may have moved to private label alternatives when it was out of action and could now have shifted back, he explained.

“Private label shares are down this year to date and some of the branded shares are up, and so I think the share would suggest some shift from private label to branded.”

‘It’s gotten more competitive’

As well as a change in private label/branded dynamics, Penny said the US packaged bread market had become increasingly competitive.

“It has gotten more competitive and that’s the function, in my view, of two things. Number one - customers and the providers and their players looking for sales; and number two – in the commercial sliced bread segment the fact that year over year there are more brands in the market.”

Servitje said Bimbo would work to optimize its presence in the US by introducing new and acquired brands into new areas of the country.

Penny said that despite the dip in private label and increased competition, BBU was pleased with its overall performance in Q2. “I think we’d say we’re satisfied; certainly with how our branded bread business has performed from a share and line standpoint given the more competitive dynamics.”

2 comments (Comments are now closed)

Under Siege

Did you see that Bimbo has started only reporting U.S. volumes blended w/Canada. The growth they are showing is not representative of what's happening. Got to be under siege in the US by Flowers...and their volumes there must be poor. They can't grow a business, they just keep buying new ones and hide results. Let's hope this doesn't spread up here to Canada! Dempster's was a great brand.

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Posted by Whole Grain Canuck
31 July 2014 | 20h06

Flowers with the Hostess Brands

Flowers Foods does know how to make and sell sliced bread, the management of Flowers is one of the best if not the BEST in the whole baked foods industry. With BBU having to sell Flowers the Earthgrains labels and with Nature's Own in the California market and now that Flowers baking it with their own plants I am sure they have taken considerable market share from Bimbo in that market, I know by living in the Cincinnati marketing area with about 7 different companies and Flowers the newest one in this area, in the second week of putting Butternut back on the shelves it was number 2 by volume, that speaks volumes because they were not allowed to have it in the Walmart's until recently and there is at least 20 Walmart Supercenters in the Cincinnati area. Nature's Own I would say is already the #1 Brand in this market because they already have about 50 routes just in the loop area of Cincinnati. I expect Flowers to be totally Nationwide in 2018 instead of just 90% of the population. Flowers Foods sticks to their core products, and with the new Cobblestone Mill Bakery products which are a super product, they will be #1 in USA once they go Nationwide.

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Posted by Nelluc
30 July 2014 | 18h08

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