Product and Service
Companies, focusing on production of breads, buns, rolls, snack cakes, and tortillas, have been grouped into fresh breads sector of bakery industry.
Demand for Product and Service
Fresh breads sector has been providing stable demands for fresh breads and other bakery products. Competition exists among a relatively small number of companies who share branded breads market of US and compete with private label products as well. Demand from foodservice seems to be weak.
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Sales volume data indicates that the demands for fresh breads of some companies, which present an amazing stability in the past several years, may be shrinking.
- The growth in demands for premium products such as organic breads has been faster than other categories.
- Demand from vending and foodservice seems to have been weak.
- Companies in this sector have been able to raise price of their retail products as costs went up.
Causes behind the trend
- As it happens in other sectors of food industry or personal consumption industries, shifting to premium products of consumers’ preference has been the trend with the consideration about higher quality, better taste, and more benefit to their lives. We usually can see reasons behind this shifting from changes in economy including people’s wealth accumulation and increase of income and changes in consumers’ behaviours.
We think the growth in demands for fresh breads will continues to be flat based on its historical performance. We certainly can find supporting proofs for our conclusion from any potential changes in fundamentals such as demographic prediction or economy development.
General Financial Performance of Companies In the Sector
For long run, bread retail has been providing stable demands for the products that this company sells. The stable sales volume data of recent years also presents consistency with our conclusion that demands for fresh bread of US market in terms of sales units have changed in a very small range (+/- 1%) and selling price may go up lightly. Premium products such as organic breads seem growing faster than other categories. However, the data from 2017/18 indicates that there may be a downturn trend (1-3% down annually) in non-retail bread market especially from vending and food service market while retail price has been rising.
The pressure from declining demands and increasing ingredient costs is hurting this company’s margin: gross margins (44% distribution costs excluded), operating margins (6%), and cash flow as percentage of sales (3.5%).