IBC Pulls Out Of Tough N.W. Market

November 1, 2005
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IBC Pulls Out Of Tough N.W. Market

Interstate Bakeries Corp. (IBC) raised the white flag and said it would stop selling bread in the tough Northwest market, which is dominated by private label companies and two strong operators in Oroweat and Franz Family Bakeries. However, the Kansas City, Mo.-based company still will sell Hostess snack cakes and other sweet goods in the region.
The decision to stop selling Wonder and Bakers Inn bread in Washington and Oregon is part of Interstate’s ongoing efforts to consolidate its 10 profit centers nationwide. Already, it has announced the restructuring of six of its centers, resulting in the closing of several bakeries and the elimination of more than 4,000 jobs, which is costing the company tens of millions of dollars in charges.
The Northwest consolidation, expected to be completed by December 17, will cost Interstate $15 million in restructuring charges, according to its filing with the Securities and Exchange Commission.
Typically, IBC has chosen to close its older plants, in locations such as Miami, Fla., and Charlotte, N.C. However, in the Northwest restructuring, Interstate decided to shut down its state-of-the-art Lakewood, Wash., bread bakery, which it plans to sell, according to a company spokesman. The closing of a five-year-old plant indicates how bleak the situation is for the company in this market.
That’s doesn’t mean IBC hasn’t tried to stem the tide. A few years ago, at a consulting firm’s suggestion, Interstate went to everyday low pricing (ELDP) and substantially lowered the price of its branded white bread. Still it had trouble competing against private label producers, which control more than 50% of the white bread market in this region.
Moreover, consumers in the Northwest tend to prefer variety, artisan and whole grain breads over white panned loaves. The introduction of Bakers Inn superpremium breads over the last year or so was simply too little, too late.
The goal of the restructuring is to eventually create a smaller but profitable company. Interstate, which has filed for Chapter 11 reorganization, will eliminate some 350 jobs from the shuttering of the bakery and more. It also will be closing many depots and thrift stores in the area. The company will keep its snack cake bakery open in Seattle.
Oroweat is owned by Fort Worth, Texas-based Bimbo Bakeries USA, while Franz is a part of United States Bakeries, headquartered in Portland, Ore.
Gold Medal Wins Bread Award
Independent bakery cooperative The Long Co. awarded Gold Medal Bakery, Inc., Fall River, Mass., with The Long Company’s Best Premium Bread Silver Cup Annual Trophy at the cooperative’s recent annual conference in Chicago.
More than two dozen participating wholesale bakeries send premium bread samples to The Long Co.’s headquarters each month. The co-op’s technical staff rates samples on crust, thickness, color, interior grain, uniformity of cell structure, flavor, aroma, general eating qualities and other aspects. The annual winner receives a traveling trophy to display in its bakery for one year.
Gold Medal Bakery scored 96.02 points out of a possible 100 points in the bread category. Butter-Krust Baking Co., Sunbury, Pa., came in second with a score of 95.61, and Lewis Bakeries, Laporte, Ind., came in third with a score of 95.23. Visit www.thelongco.com for more information.

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