US bakery giant rationalises

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Related tags: Generally accepted accounting principles, Baker, Chief executive officer, Interstate bakeries

US bakery giant Interstate Bakeries has announced that it is to
close several factories and invest in automation, a move that will
lead to an unspecified number of job losses.

US bakery giant Interstate Bakeries has announced that it is to close several factories and invest in automation, a move that will lead to an unspecified number of job losses. The move follows a significant drop in the company's quarterly profit.

Recent union contracts have caused labour costs to rise more than the largest US wholesale baker can make up for by trying to increase sales, according to Reuters news agency.

"We have to automate and we will. We have to rationalise production,"​ said James Elsesser, chief executive officer. The company expects to give details on plant closings after a management meeting at the end of the month.

The company, which makes Wonder Bread and Hostess snack cakes, also said that increased advertising spending as well as lower sales of branded products, have effect profit margins. The Missouri-based company reported profit of $11.2 million in the first quarter ended 23 August 2003. That compared with $27.1 million last year.

. For the fiscal year ended 31 May 2003, net sales fell less than 1 per cent to $3.53 billion. Net income fell 61 per cent to $27.5 million. Branded bread volume fell 7.2 per cent, while sweet goods volume slid 6.6 per cent.

Some industry experts believe that the company has not kept up with contemporary tastes for healthier products. There has been a considerable shift in tastes, with more and more manufacturers providing lower-fat alternatives.

Interstate Bakeries manufactures and distributes bakery products through supermarkets, convenience stores, and bakeries throughout the US.

Related topics: Markets

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