Prospects for pricing discipline seem shaky
Feb. 15, 2011
In an interview with Milling & Baking News earlier this year, Robert Moskow, a consumer products analyst with Credit Suisse, said the success bakers will achieve restoring profitability in 2011 will be evident before the end of March. “We will know at least half the story by then,” he said.
Even before Flowers issued earnings last week, rumblings were widespread of continuing aggressive pricing utterly disconnected from a steadily and severely tightening ingredient market picture. Flowers, which announced higher pricing in October, said promotion activity deteriorated in the final weeks of 2010 in a manner the company had not anticipated. The company defended the price hikes, noting wheat prices had more than doubled since June 2010.
While Flowers restated its commitment to a rational pricing strategy that allows it to retain profitability and reinvest in its plants, products and employees, the company also said it had begun promoting products in “very select” markets where the company sustained sales declines. Whether the promotions are continued going forward remains to be seen.
For 2011, a recovery in profitability still seems possible for bakers, but the time is now. It’s crunch time for baking.