Milestone moment for tortilla category

by Eric Schroeder
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Gruma Mission tortillas
Unit sales in hard/soft tortillas/taco kits segment exceed 1 billion.

KANSAS CITY —There may not have been thunderous applause or loud sirens to mark the milestone, but for the tortilla industry, 2016 has been a banner year. Unit sales in the fresh hard/soft tortillas/taco kits category have eclipsed 1 billion units, according to Information Resources, Inc., a Chicago-based market research firm.

The milestone was inevitable for a category that has been growing at a steady clip for the past several years. Following two years of growth exceeding 5%, dollar sales in the fresh hard/soft tortillas/taco kits category increased 3.4% in the 52 weeks ended May 15, exceeding $2.3 billion in sales, according to I.R.I.

Mexico City-based Gruma S.A.B. de C.V. continues to see strong sales in its Gruma business as well as its subsidiary, Mission Foods Inc. In the 52 weeks ended May 15, dollar sales for Mission Foods in the fresh hard/soft tortillas/taco kits category totaled $711,875,968, up nearly 7% from the same period a year ago, while dollar sales for Gruma Corp. in the category grew 5% to $390,989,248, according to I.R.I.

In an April 21 conference call with analysts, Raul Cavazos, chief financial officer at Gruma, said Gruma believes there still are further opportunities in the U.S. division to grow revenues and enhance profitability. To that end, he said the company expects margins could be expanded to a range of 18% to 19% in the mid-term.

Asked how Gruma expects to achieve those margins, Mr. Cavazos responded, “One, we are quite confident that the strength the company has developed over time — the strong brand recognition, our leadership position in the market, the economy of scale and the distribution capabilities we have in Gruma Corp., as well as the innovation in products … — all of this, among others, are basically the way to support the strategy we are following in Gruma Corp. Then, we are quite comfortable that we will be in the same trend. Of course, as everybody can think, once you are improving the margins at this level, always it is going to be a little bit more complicated to improve it. But in our plans, we have contemplated that, we have considered, and again we are quite confident that we have room for growth, and this is going to be something in-between 18% to 19%.”

Gruma also plans to further reduce its s.k.u.s to focus on higher-margin products. Mr. Cavazos said the company has about 550 to 600 s.k.u.s but hopes to trim that number to about 400 by the end of 2016 or beginning of 2017.

Another way Gruma expects to achieve higher margins is by cutting freight costs. Mr. Cavazos said the company is experiencing additional freight expenses because it is running at max capacity at some of its plants. The company is building new plants that will ease some of the capacity restraints, leading Gruma to be more efficient on transportation and freight costs, he said.

General Mills, Minneapolis, and Ole Mexican Foods Inc., Norcross, Ga., also have experienced sales gains over the past year.

Tortilla dollar sales at General Mills increased 4% to $263,024,464 in the 52 weeks ended May 15, according to I.R.I., boosted by a 16% increase in sales of Old El Paso Stand ‘N Stuff taco shells.

At Ole Mexican Foods, dollar sales increased nearly 7% behind an 8% gain in sales of the company’s La Banderita brand, to $176,533,056. Ole Mexican Foods also experienced a nearly 4% increase in dollar sales in its Ole Xtreme Wellness brand of tortillas, which includes tortilla wraps in such varieties as high fiber, fat-free, spinach and herbs, tomato and basil, and multigrain.

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