Bimbo Bakeries USA unfazed by Hostess re-entry, says president

Hostess Brands is back in business after its re-launch of the Twinkie snack cake last week, after just over half a year off the shelf. But the president of Bimbo Bakeries USA Fred Penny said the return of Hostess will have no impact on how Bimbo takes its business forward.

Speaking in Grupo Bimbo’s Q2 earnings call on July 24, Penny said: “Relative to the Hostess re-entry, it clearly is going to make the market more competitive – both in sweet goods and ultimately in bread as the brands re-emerge.”​

“How that’s going to happen remains to be seen, but we’re prepared to keep going forward in the new market structure that we’re going to have.”​

Penny said the BBU team will continue to work hard in the US, particularly on restructuring. 

Sweet success? Pushing Sara Lee cakes​

In particular, he said BBU would drive its Sara Lee snack cake brand – launched earlier in 2013 – further in the US to compete in line with Hostess.

“There has been a significant increase in marketing activity specifically with the Hostess cake re-emergence, which is now essentially a week in the market, and I wouldn’t characterize that as a surprise,”​ Penny said.

“From our own strategy stand-point we’ve launched Sara Lee cakes in basically the entire US now and on a go-forward basis, we’re going to support that launch with marketing and promotional activity as we feel the need to do.”​

From strength to strength in the US…​

Grupo Bimbo is following a heavy US investment strategy - committing to invest $1bn into growing market presence by 2015.

In the last few years, the Mexican bread titan has made a series of acquisitions and expansion investments to strengthen its US presence – buying Sara Lee in 2011 and expanding Bimbo Bakeries distribution in 2012.

For Q2 2013, Bimbo posted a net sales rise of 4.8% in dollar terms for the US market - although in pesos terms this was a decline of 3.5% due to an unfavorable foreign exchange market.

“Once again performance at BBU deserves the spotlight,”​ said Daniel Servitje, chairman and CEO of Grupo Bimbo in the earnings call.

Speaking about Q2 in the US, he said: “What is particularly notable about this quarter is that despite exchange rates, higher wheat costs and increasing integration costs, there was an almost 40% rise in dollar terms in operating income, which was purely driven by a revenue growth, integration synergies and waste reduction initiatives to the tune of almost $30m during the quarter.”​

There are a number of priorities for the US market, he said, such as adding brands and working on improving the supply chain. 

Q2 Bimbo round-up​

Overall net profit for the quarter was up 4.4% on the year before (Q2 2012) – the first net profit rise in some time.

Back in April 2013, net profit slumped 9.4% for the first quarter of the year, and in February Q4 net profit was down 80.7%.