Canada Bread intent on realizing stronger sustained profitable growth

by Eric Schroeder
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TORONTO — Despite what company executives described as “an excellent business, with leading market shares and brands in most of our segments and markets,” growth at Canada Bread Co. Ltd. has been flat over the past few years, a trend the executives said they are “intent on changing.”

Late in 2012 the company, which makes and distributes fresh bakery products, frozen par-baked products and fresh pasta and sauces, launched a strategic review of its bakery businesses. The review included a closer look at growth platforms, category expansion, geographic expansion and cost reduction opportunities.

The company provided additional details on the review as part of its 2012 annual report issued March 28.

“We are confident this (strategic review) will result in further actions in 2013 and beyond to realize stronger sustained profitable growth,” Richard A. Lan, president and chief executive officer, and Michael H. McCain, chairman, said in a message to shareholders.

Mr. Lan and Mr. McCain cited several factors as contributing to the shift in bread consumption, including concerns over carbohydrates and weight gain, the increasing popularity of gluten-free diets, and food inflation and related changes in consumer purchasing patterns. Those factors mostly affected Canada Bread’s commercial fresh bakery business in 2012, and as a result the company is setting out in 2013 to reverse course.

“We are tackling these issues through a number of initiatives, including marketing and education programs to raise awareness and understanding of the health benefits of grains,” Mr. Lan and Mr. McCain said. “We are also accelerating product innovation with a focus on offering consumers more healthy whole grain choices and further cementing our leadership in these categories. As a result of these efforts we stemmed a significant volume decline that impacted our results earlier in the year and increased our branded market share.”

A key component of Canada Bread’s return to growth has been the start-up of the company’s fresh bakery plant in Hamilton, Ont. Considered the largest initiative in the company’s value creation plan, the facility opened in September 2011, and Canada Bread has spent the past two and a half years closing existing older and smaller facilities located in the southwestern Ontario region. The investment required to build the new plant was approximately C$100 million, with an additional C$25 million of restructuring and other one-time costs for decommissioning production and employee severance payments. So far, two of the three plants have been closed. The third bakery is expected to close in the middle of this year.

Separately, Canada Bread earlier this year detailed plans to close two baking plants in Grand Falls, N.B., and Edmonton, Alta., during the year. The company said the closings will improve efficiencies by reducing overhead and the rationalization of lower margin products.

The Grand Falls plant manufactures a variety of cake products, sweet goods and English muffins. The production of cake products and sweet goods will be discontinued while English muffin production will be shifted to another plant. The closing, which is scheduled for June 28, will affect approximately 75 employees.

The Edmonton bakery produces raisin and garlic bread as well as a variety of food service products. Production will be shifted to other Canada Bread bakeries when the plant closes on March 30. The closing will affect approximately 46 employees.

Canada Bread said it also plans to reduce costs by standardizing the sizes of the pans it uses to bake its bread and rolls, and by simplifying the baking process and improving distribution efficiencies.

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