Publicly-traded baker an endangered species
April 20, 2011
For a piercing look into the change that has transpired within wholesale baking over the past 50 years, one need look no further than last week’s leading news story. The world of publicly-traded wholesale commercial bakers once included a rich list in the bread and cake category, names like American, Campbell Taggart, Continental, General, Interstate and Ward. Today, only two U.S. companies fit this description And with the announcement that Flowers Foods, Inc., will acquire Tasty Baking Co., the two companies become one.
A very different long-term change is evident by glimpsing at the companies themselves. For Tasty, the transaction represents the end of a bold, expensive and difficult transition into new production facilities in Philadelphia. Challenges at Tasty were hardly new, though. Successive management teams going back decades had attempted unsuccessfully to grow the once highly successful Philadelphia-based business.
Underscoring the degree to which these efforts have been futile, it was not so long ago that Tasty Baking was a larger business than Flowers. A review of financial data of the two regional bakers indicated that in 1974, the balance sheets of Tasty showed net shareholder equity of $27.6 million, versus $25.1 million for Flowers. By 1982, the Tasty equity figure had grown only to $28.2 million, versus $96.8 million for Flowers. Before this week’s announcement, Tasty Baking had a market capitalization of about $13.8 million, versus $2.6 billion for a buoyant Flowers.
That wholesale baking has a promising future is evident in moves such as Flowers’, but no one should expect the business environment to become any less dynamic or challenging.