Difficult tone emerges following banner week for baking

by Josh Sosland
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A week ago this column focused on what it described as a "banner week" in baking, highlighted by the emergence from bankruptcy of Interstate Bakeries Corp. and strong financial results reported by Sara Lee fresh bakery and Flowers Foods, Inc. Given the difficult economic environment, perhaps it isn’t surprising that the positive mood did not last long.

A number of developments emerged last week that should concern baking, including macro issues such as the stock market’s disappointment with the Obama administration’s economic stimulus package and, even more worrying, with the latest Treasury Department plan to stabilize the nation’s financial system.

The stock market fell to a new low, and data were released by the Commerce Department showing a decline in food expenditures, the steepest since before 1950. The latest flour production figures from the Bureau of the Census showing flour production in 2008 down 0.6% from 2007 does not indicate a decrease in consumption, as might be first assumed. The output decrease in 2008, of 2,552,000 cwts, is more than accounted for by a drop of around 2 million cwts in flour exports and a similar setback in durum semolina. In other words, it is likely that disappearance of non-semolina flour in 2008 posted a small increase.

Food industry observers have suggested that not too much should be read into fourth-quarter spending figures, describing consumer behavior during this jarring period as "aberrant." Still, it would be unwise to shrug off the seriousness of the recession that obviously will affect consumer demand for grain-based foods.

It is the food manufacturers that adjust strategies and products to these new challenges that will succeed in this harsh environment.

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