The failure of Hostess Brands, Inc. to emerge successfully from Chapter 11 bankruptcy has been something of a black hole in recent days when it comes to industry news, overshadowing other major developments in baking. High among important such other news stories were announcements by leading U.S. bakers of price increases for bread and other baked foods.
The significance of these announcements may be seen by glancing at similar looking charts appearing, by coincidence, a few pages apart in the current (Nov. 27) issue of Milling & Baking News. On Page 22 is a chart of retail bread prices, showing the national average for white bread in October at 142.2c per lb, nearly unchanged from the January 2012 price of 142.3c. In a feature article about the ingredient market outlook on Page 27, a chart shows the nearby Kansas City wheat price which, even after falling from recent highs, is up more than $1.80 a bu from the beginning of January.
It isn’t hard to appreciate that the baking industry will not be healthy when a 25% wheat price jump generates no bread price increase.
The impact of the bread price pressure has been broad – not limited to private label and lower price tier brands. Campbell Soup Co., saying days ago it experienced an earnings decline in its bakery business, said sales of its Pepperidge Farm bread and rolls were “negatively impacted by increased promotional spending in response to competitive activity.”
Amid the difficulties created by the Hostess collapse, bakers are anxious to nurse their businesses back to health, a process that will not move forward without prices that more accurately reflect the current ingredient market picture.