Economy accelerates but bread demand still weak

by Josh Sosland
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That the competitive situation in wholesale baking continues intense, as evident in financial reports issued by publicly-traded companies, appears hardly surprising given the magnitude of industry change in the past three years. There has been and should remain every expectation that bakers will be “duking it out” to regain or retain shelf space that has changed hands in the recent past. Of greatest concern, though, are observations by industry executives that consumer caution continues to adversely affect bread demand.

In a conference call with investment analysts last week, two top executives of Flowers Foods cited concerns about the “economic health of the consumer” by way of explaining both pressure on the company’s bread business in the second quarter and a darkening outlook for the balance of 2014.

During the second half of the 20th century, packaged food companies were largely insulated from the effects of economic downturns, and baking sustained only a glancing blow from the recession that began in 2001. The impact was more severe in 2008, and recent presenters at the annual meeting of the American Bakers Association have warned of continued struggles facing large swaths of the population. Still, that baking continues to feel this weakness five years into a recovery, even in the midst of a quarter in which gross domestic product grew at a robust 4% rate, suggests a business landscape for the industry fundamentally altered in a manner that may only be considered quite worrying.

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