Wondering About the Future
October 1, 2007
Wondering About the Future
Dan Malovany, editor
For 30 cents or less, you can’t buy a loaf of bread — or a Twinkie, for that matter — but the sad truth is you could have bought a share of Interstate Bakeries Corp.’s stock for that amount of money earlier this month.
It’s hard to imagine that the company’s stock traded around $30 a share in the late 1990s — that’s 100 times what it cost in mid-October. It’s harder to imagine that it was only 12 years ago that Interstate Bakeries bought Continental Baking, creating the largest packaged bread and sweet goods company in the nation and spurring a groundswell of consolidation that transformed the face of the baking industry.
Today, the company is fighting for its life.
At the just-held International Baking Industry Exposition, IBC was the unofficial talk of the show. Once again, the producer of such iconic brands as Wonder bread and Hostess snack cakes is changing the face of the industry as it pulls its bread business out of what it calls “unprofitable markets,” creating an unprecedented groundswell of opportunity for its competitors.
IBIE attendees not only speculated about IBC’s future, but also debated whether its struggles are necessarily a good or bad thing for the industry as a whole. I guess it depends on whether your company does business with IBC, supplies it, relies on it for revenues or can take advantage of its weakened position in the market. It also depends on whether you own stock in Interstate, are one of its lenders or rely on IBC for your livelihood.
For better or worse, a lot of people’s lives may be impacted in the months to come.
Ironically, when Interstate purchased Continental, the baking industry was flooded with capacity. Now, it’s just the opposite. When asked if they were at IBIE to add capacity, many bakers couldn’t suppress a bit of a smile while hinting that they may be adding a line, expanding a plant or even building a new production facility.
That’s the good news that came out of the IBIE show. Despite the light attendance compared to previous expos in Las Vegas, most exhibitors indicated that their customers were less hung over and in a more serious shopping mood. And if IBC pulls out of additional markets, they’re developing contingency plans to fill the void in the bread aisle. However, before anyone says what happens in Orlando stays in Orlando, nearly everyone at IBIE 2007 indicated that they look forward to the show returning to Sin City in 2010.
It’s easy to understand why many suppliers, especially on the equipment side, left the show satisfied, if not pleased, with this year’s event. Take a historical perspective. In 2001, 9/11 occurred during the show, and in 2004, the baking industry was in the midst of the low-carb craze. Nobody was in a really good mood then. That’s when the baking industry launched the Grain Foods Foundation to defend its image and promote the wholesomeness of grain-based foods.
This year, the foundation launched its plans to celebrate 10 years of adding folic acid to refined flour, which has helped significantly lower the number of neural-tube birth defects. In 2008, its qualified members will be able to use the folic acid awareness seal developed in partnership with the GFF, its agency and the March of Dimes.
At the show, bakers saw new and improved systems that minimized maintenance with self-oiling chains, servo-driven motors and fewer electronics or moving parts. Exhibitors placed emphasis on simplified sanitation and faster changeovers. They focused on enhancing throughput and designing versatile equipment to produce a wide variety of products to allow bakers and snack producers to better respond to changing market demands. Even some companies, such as Casa Herrera and The Peerless Group, displayed prototype equipment and sought feedback on their inventions from bakers and engineers who attended the show.
Yes, these are dynamic times for the industry. Today, IBC not only stands for Interstate Bakeries Corp, but — for its legal team — “in bankruptcy court.” For its investors, IBC means “I bought Continental.” For many employees, they’re now “in between companies.”
In the end, will it mean “I’ve been closed?”