According to Mintel’s consumer research, almost half (48 percent) of respondents say that they are “eating more bread advertised as wholegrain than I did last year.” In addition to whole grains, an increasing number of shoppers are buying natural and organic breads.
This is good news for bread market, which was hurt by the low-carb diet trend, which peaked in January 2004. Carbohydrates are no longer seen as something to fear, and bread is back in style—provided it’s made with whole grains.
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Highly fragmented, the bread market is dominated by seven large companies—whose combined sales account for about half of total FDMx sales, as well as dozens of smaller, regional bakeries, according to Mintel. Only George Weston Bakeries has a market share over 10 percent. Historically, there has been a trend toward consolidation, and this is likely to continue as economies of scale become even more critical in a highly competitive environment.
George Weston Bakeries leads market
Toronto-based George Weston Bakeries Inc. (www.gwbakeries.com) leads the U.S. bread market with a 13 percent share of FDMx sales in 2007. Price increases, combined with volume increases in its Arnold and Thomas’ brands, drove sales up 10 percent from 2005-07. Weston continues to be a leader in product innovation, introducing new items geared to consumers’ preferences for healthy and portion-controlled and natural products, including Thomas’ 100-Calorie English Muffins; Thomas’ Mini-Squares Bagelbread; and a line of Arnold Natural Breads.
Sara Lee fights to grow market share
Sara Lee (www.saralee.com), Downers Grove, Ill., trails George Weston in the bread market with an 8 percent market share. In 2005, Brenda C. Barnes became CEO and was charged with turning around Sara Lee’s lagging bread business as part of a company-wide transformation plan. There have been a few bumps in the road to a turnaround. First, Sara Lee received negative publicity in late 2007 when the Center for Science in the Public Interest (CSPI) claimed it fostered consumer confusion by falsely claiming its “Soft & Smooth Made with Whole Grain White Bread” is as nutritious as whole wheat bread—and threatened to sue. The company responded with a consumer education campaign, which included a tool on its website (www.thejoyofeating.com) where consumers can check the wholegrain content of Sara Lee’s—and its competitors’—bread products. The company also launched several new 100% wheat breads which have helped grow its namesake Sara Lee brand. Sales of its Earth Grain brand (which Sara Lee purchased in 2001) continue to slide. Sara Lee is also looking for opportunities to expand its bread business, which currently reaches about 75 percent of the U.S., through acquisitions.
Interstate Bakeries Corp. seeks a buyer
Interstate Bakeries (www.interstatebakeriescorp.com), Kansas City, Mo., it filed for bankruptcy in 2004, partly to prevent a takeover by Mexico-based Grupo Bimbo. With sales continuing to fall in 2007, the company hired a former Pepsi Bottling Group Inc. executive Craig Jung as its new CEO and began a restructuring effort. ISB is seeking a buyer for all or parts of its business, and has been considered by Bimbo and Sara Lee. With 41 bakeries and 6,400 delivery routes across the U.S., Interstate’s bread business could be an opportunity for another supplier to expand distribution and gain economy of scale. Interstate’s bread sales fell nearly 16 percent from 2005-07. Marketer of iconic American brands like Wonder and Hostess, IBC has likely been hurt by the healthy eating trend. IBC has tried to round out its product mix with healthier offerings; however—because many consumers equate Wonder with “white bread”—sales of the brand’s new wheat varieties have been slow to take off.
Flowers Foods watches sales blossom
Thomasville, Ga.-based Flowers Foods’ (www.flowersfoods.com) bread sales grew nearly 10 percent from 2005-07, driven by the strong success of its Nature’s Own brand, whose sales climbed 26 percent to $332 million in 2007. Much of Flowers’ success can be attributed to its emphasis on developing items with whole grains, omega-3 fatty acids, organic ingredients, fiber, calcium and lower calories. In mid-2006, Flowers launched Nature's Own All Natural Specialty Breads targeted to health-conscious consumers. Varieties include: Double Fiber Wheat (which has 5g of fiber per slice, about twice the fiber of 100% whole wheat bread, and is a source of omega-3), 100% Whole Wheat with Organic Flour, and Hearty Oatmeal. Flowers Foods produces and markets bakery products in the Southeast, Southwest and Mid-Atlantic areas. The company continues to gradually widen its distribution into areas next to current territories; in 2007 Flowers expanded its DSD system into west Texas and Missouri.
Bimbo Bakeries leverages healthy eating trend
Bimbo Bakeries USA (www.bimbobakeriesusa.com), Fort Worth, Texas, a subsidiary of Mexico-based Grupo Bimbo, increased its bread sales by almost 12 percent from 2005-07. Price increases, coupled with volume increases in its Bimbo and Oroweat brands, drove growth. In 2007 Bimbo decided not to acquire Interstate, but says it continues to look for acquisition opportunities to “strengthen the company’s market profile, generate additional economies of scale, and create a platform for long-term growth.” Bimbo has successfully leveraged the healthy positioning of the Oroweat brand (purchased from GWB in 2002), adding new organic varieties and breads with functional ingredients like heart-healthy omega-3 and plant sterols, and is also testing a new line of Oroweat Mini Loaves—aimed at smaller households or families that prefer to buy several different varieties of bread—in Cal., Ariz. and Nev.