Josh Sosland: Financial picture looks tough for baking

by Josh Sosland
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Baking’s landscape was not enhanced with last week’s release of financial results by Sara Lee Corp. While operating results at the company overall were strong, the Sara Lee U.S. baking business struggled. Only modestly profitable, the company indicated sales in the three months ended March 27 were down 5%, reflecting both lower prices and lower volumes.

Flowers Foods, Inc. also has very publicly indicated in recent months a challenging marketplace and a determination to defend the company’s market position. Just a year ago, at the start of the outdoor grilling season, a marked deterioration occurred in baked foods pricing. The industry was caught off guard by some of the deepest discounting in years.

On a market-wide basis, no sustained improvement has been observed since then. With new major players in the industry over the past two years, some marketplace turmoil was inevitable. Whether conditions will settle down and bakers will compete in a fashion demonstrating commitment to profitable growth remains to be seen.

For the time being, the picture looks tough and is unlikely to generate any real “winners.” As one baker ruefully said last week, “We’d be fine if I could buy wheat futures at $2 a bu. But I can’t.”

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