Interstate to close another bakery

- Last updated on GMT

Related tags: Bread

Interstate Bakeries, which filed for bankruptcy amid mounting debts
and falling sales less than a month ago, has announced plans to
close another of its US bakeries. But streamlining alone will not
solve the problem, argues Chris Mercer.

Interstate, America's largest wholesale bakery, aims to close its Florence bakery in South Carolina by 6 February next year. The move, expected to affect around 200 workers, marks the latest attempt by the company to lose excess baggage that has weighed down profits in 2004.

Tony Alverez, Interstate chief executive, said: "Closing a bakery is a decision we never take lightly. Our employees in Florence have been solid contributors, and we are grateful for their hard work. However, IBC must continue to seek production efficiencies on a national scale. Our entire management team is committed to making IBC more nimble and competitive, and consistent with the best interests of the company and its stakeholders."

He added that Interstate would continue supplying food stores in the area from its Charlotte and Rocky Mountain factories in North Carolina.

Alverez, along with Interstate's chief restructuring officer John Suckow, was appointed after Interstate voluntarily filed for protection under Chapter 11 of the US Bankruptcy Code in September. By then the company had run up $1.3 billion (more than €1 million) worth of debts.

Both men are reputed turnaround wizards; Alverez is the co-founder and co-chief executive of global corporate advisory and turnaround management services firm, Alavarez and Marsal, while Suckow is the firm's managing director.

Their decision to shut the Florence bakery follows Interstate's earlier decisions to close bakeries in Buffalo, New York and Monroe, Los Angeles. And there may be more to come as the company tries to tackle over-capacity caused by declining white bread sales, in turn blamed on low-carb diets.

But reducing capacity can only solve part of the problem and Interstate will have to keep pace more successfully with switches in consumer demand if it is to pull itself out of the mire.

The firm has already made some effort by introducing a range of low-carb breads under its well-known Home Pride banner. But again, 2004 has seen mixed fortunes for low-carb products with analysts warning of market saturation and some new launches falling by the wayside - notably those of American Italian Pasta, a fellow producer of traditionally higher carb foods.

In April, Interstate's then chief executive James Elsesser, said: "We believe the consumer drivers in today's market are convenience, value and health."

Now, the company, which makes bread and cakes under some of America's best known brands including Wonder, Hostess and Twinkies, needs to start acting on its own advice.

Perhaps it could do this by looking at emerging trends towards fibre-enriched or wholegrain foods such as those recently introduced by rival Sara Lee. The most the company has mustered so far is a range of super premium breads - a start, but not enough.

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