Bread sales are down - a lot!
This is not a fad. More and more people are gluten intolerant. More and more try not eating bread and see how well they feel as a result.
This movement away from bread is having a major impact on mass market bakers like McCains, who have high fixed costs. The irony is that their response is to talk more about why bread is so healthy??????
First, cash-strapped consumers are being more disciplined with not wasting food products.
“Bread is a perishable product, so if one is more careful with it, putting it in the freezer for example, it doesn’t go stale,” he said.
Also, recent dietary shifts due to a stigma associated with wheat products and an embracing of gluten-free diets by people who are not adverse to gluten have driven down bread volumes, Mr. Hetherington said.
Maple Leaf president and CEO Michael McCain said bread woes are shared across the industry as “fundamental bread consumption is down.” Mr. McCain cited dietary trends, demographic shifts, and more cost-conscious consumers for the downtrend.
Its Bakery Products Group dragged down profits, experiencing a steep 73% drop in adjusted operating earnings to $3.3-million in the first quarter of 2012 from $12.2-million last year. Mr. McCain said the main factors were volume softness in fresh bakery sales and duplicate of costs related to the company’s new Hamilton bakery business.
Analysts anticipated bakery sales to fall, but were surprised by the magnitude of the effect on earnings.
“As [McCain] said, a big fixed-cost company, you get a small decline in volume and it really hits the profitability,” said Bob Gibson, an analyst with Octagon Capital Corporation.
Mr. McCain said Maple Leaf is addressing the volume crunch to meet its end-of-year earnings target.
Maple Leaf will implement marketing initiatives to drive sales in the category, including focusing on the health benefits of bread and target growth categories, such as English muffins and bagels, he said. The company also expects to benefit from lower commodity costs, including wheat, to improve margins later in the year
