Key Takeaways
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Despite some high-profile negative outcomes, the bakery category is showing long-term growth potential, particularly in premium and artisanal segments.
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Product quality remains the top priority for forward-thinking manufacturers, who are designing operations around their recipes rather than compromising to fit equipment limitations.
The bakery category has seen its share of ups and downs over the last six to 12 months, with new plant openings and announcements lifting some companies through peaks, while others are closing facilities or changing ownership hands, taking them down through valleys.
The highly publicized struggles that The J.M. Smucker Co. has had with its massive Hostess Brands acquisition certainly stare the industry in the face at first blush, but that situation alone doesn’t appear to speak for the overall health of the entire category, according to some analysts. For example, baked goods remain at the heart of consumption preferences for numerous consumers, according to a report published by global investment bank Harris Williams’ Consumer Group (www.harriswilliams.com). In the report, the authors highlight a few positive trends currently prodding the industry along.
First, over the next decade, the global premium bakery market is expected to grow by 4.2% to reach $25 billion by 2035 — while artisanal bakery products should grow by 5.7% from 2023 to 2030. In the last five years, the report noted, annual sales of perimeter bakery items jumped from $13.9 billion to $18.3 billion (2019-2024).
With growth in the forecast, baking companies are maneuvering themselves to best take advantage down the road. And while Smucker has divested several of the former Hostess divisions (Voortman, Cloverhill and Big Texas brands, in two separate deals) and taken a significant hit to its overall bottom line, success in the bakery business doesn’t appear unattainable for everyone.
Indeed, acquisition activity continues to pepper the newswires in this space, and Harris Williams Consumer Group managing director Brent Cash says opportunities are aplenty for bakery manufacturers to “expand into new categories, develop new customer relationships and acquire companies that unlock cross-sell opportunities and operational synergies.”
The news around M&A activity in the last two months alone supports that belief.
As companies jostle for position in the bakery marketplace, bakery operations continue to advance in terms of product quality and efficiency, in a world in which speedier isn’t always the answer. Meeting the quality demands of consumers takes precedence for processors, and the industry continues to do some in-plant shuffling to position itself for further growth.
“Winning bakery companies are pulling ahead by investing in new equipment and collaborating with customers to develop higher-quality, innovative products that are easier to execute on-premises to drive incremental sales,” the Harris Williams report said. “The best bakery companies are also investing in automation to lower their cost structures while ensuring more reliable supply chains.”
Keeping quality top of mind
Zack Kazarian is vice president of Research & Development at Legendary Foods, which manufactures protein-forward pastries, sweet rolls and popped chips — and just launched a new line of high-protein, low-carb, zero-sugar Protein Donuts.
“We’re always in search of the best equipment that will help us produce the supply our consumers demand of us, without compromising on quality,” he says. “Whether that’s the latest and greatest or technology that has been around for a while, we’re focused on what equipment will give us the best end product.”
Companies have been opening new bakery facilities in recent months — capital that was committed to projects developed a year or more in the past, for sure. Mars Inc. opened a new Nature’s Bakery plant in Salt Lake City, Utah, while Bakery Express Midwest christened its new baking facility in Kentucky earlier this year.
Meanwhile, companies such as Bauducco Foods and Vibrant Health Products committed to building new baking facilities in the near future, while Crown Bakeries and King’s Hawaiian (Irresistible Foods Group) will expand existing baking facilities. Though not a full-scale expansion, the launch of its new Protein Donuts product meant Legendary Foods had to make some changes to its plant, Kazarian explains.
“This included adjusting both our machinery and assembly lines to meet the specific needs of this product,” he says. “For example, we customized the length of the assembly line to support the unique production requirements of the donuts. Having this flexibility in our operations allows us to adapt our equipment and processes for new product innovations as needed.”
Legendary Foods also needed to install a fryer and make adjustments to utilities as required to process the donuts, which was new to the plant. Legendary Foods prioritizes career growth and skill development for its workforce, and automation and robotics play a significant role. Kazarian says this high-tech equipment helps the company meet those goals, allowing workers to be trained on high-tech equipment and advance their knowledge and careers. Yet, there is room for improvement in terms of process efficiency overall.
“There is opportunity with our enterprise management system (ERP) to be more customizable and user-friendly,” Kazarian says. “A challenge faced across the industry, advancements in this software would relieve a lot of inefficiencies many manufacturers face today.”
Still, challenges will always arise for the industry, no matter the speed of growth and size of consumer demand. Kazarian says Legendary Foods is prepared for the next hurdle with multiple sets of solutions to address what may be ahead, but keeping focus on what matters most will be key for any baking company.
“When we started the design of our new facility, we kept our product attributes in mind while reviewing any potential challenges and engineered around those,” Kazarian says. “If a challenge does come up, we believe in changing the equipment to suit our formulas, not the other way around.”
That’s a perfect example of a bakery manufacturer keeping product quality ahead of any other operational pressures.
About the Author
Andy Hanacek
Senior Editor
Andy Hanacek has covered meat, poultry, bakery and snack foods as a B2B editor for nearly 20 years, and has toured hundreds of processing plants and food companies, sharing stories of innovation and technological advancement throughout the food supply chain. In 2018, he won a Folio:Eddie Award for his unique "From the Editor's Desk" video blogs, and he has brought home additional awards from Folio and ASBPE over the years. In addition, Hanacek led the Meat Industry Hall of Fame for several years and was vice president of communications for We R Food Safety, a food safety software and consulting company.