Bimbo Bakeries USA notes ‘surprising’ decline in private label

Last updated on 24-Jul-2014 at 12:23 GMT2014-07-24T12:23:12Z - By Kacey Culliney+
Bimbo Bakeries USA president: 'The private label volume decline is quite frankly a bit of a surprise, in that (…) we didn’t see those trends last year.'
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Bimbo Bakeries USA (BBU) saw a 7% dip in US private label packaged bread sales in its Q2 results.

Grupo Bimbo posted an overall sales rise of 8% across the US and Canada for the quarter but noted a 7% volume dip in private label sales. CEO Daniel Servitje said there was “softness” across several private label customers in the US.

BBU president Fred Penny told analysts on Grupo Bimbo’s Q2 analyst earnings call the company hadn’t seen the dip coming.

“The private label volume decline is quite frankly a bit of a surprise, in that …we didn’t see those trends last year,” he said.

Food inflation, SNAP reform, Hostess

Penny said there were several factors that had likely contributed to the decline.

Food inflation in other segments, particularly protein; higher energy costs; higher health costs; and reduction in SNAPs (US government program - Supplemental Nutrition Assistance Program) had impacted lower-income consumers, he said. “That may be playing into private label softness in some cases.”

In addition, there had been shifts in purchasing behavior influenced by the Hostess exit and re-entry onto the market, he said. For example, consumers who bought Hostess brands may have moved to private label alternatives when it was out of action and could now have shifted back, he explained.

“Private label shares are down this year to date and some of the branded shares are up, and so I think the share would suggest some shift from private label to branded.”

‘It’s gotten more competitive’

As well as a change in private label/branded dynamics, Penny said the US packaged bread market had become increasingly competitive.

“It has gotten more competitive and that’s the function, in my view, of two things. Number one - customers and the providers and their players looking for sales; and number two – in the commercial sliced bread segment the fact that year over year there are more brands in the market.”

Servitje said Bimbo would work to optimize its presence in the US by introducing new and acquired brands into new areas of the country.

Penny said that despite the dip in private label and increased competition, BBU was pleased with its overall performance in Q2. “I think we’d say we’re satisfied; certainly with how our branded bread business has performed from a share and line standpoint given the more competitive dynamics.”

Related topics: Manufacturers, Bakery