Milling & Baking News - August 2, 2016 - 14

Financial Results X

Bimbo grows U.S. market share
and profitability in second quarter
Continued from Page 1

volumes," he said. "In the U.S., industry data is showing that consumption
of commercial and mainstream breads
remains soft. However, our dollar
share of the total bread category is
higher year over year, most notably in
mainstream and premium.
"This performance reflects continued
innovation, increased and focused marketing in strategic brands and selected
investments in new products. Recent
national launches of Eureka! Organic
and Oroweat Extra Grainy breads are
examples of innovation in the category."
Mr. Servitje described the private label bread market as "challenged," but
the good performance of the company's
strategic brands together with attractive
commodity prices and productivity improvement have boosted profits.
By contrast, the company's Canadian business was more challenging, especially the commercial bread market.
"We're struggling to maintain visibility in the market, and it may take
some time to see some prime growth,"
he said. "At the operational level, cost
structure benchmarking is aimed at
supporting productivity."
Stepped-up capital expending is
being deployed at plants in Canada,
moves expected to deliver good returns in coming years, Mr. Servitje said.
Still greater detail into the improved
results was offered by Fred Penny,

president of Bimbo Bakeries USA.
While certain tailwinds will ebb in the
second half of 2016, others will continue to lift B.B.U., he said. Gross profit
margins in the second quarter widened to 53.8% from 51.2% in the
second quarter of 2015. Yearto-date margins were 53%, up
from 50.4%.
"We had really three components that drove gross
margin expansion in North
America: favorable product
mix, commodity favorability,
to your point and in the release, and productivity efforts
across our supply chain," he
said. "And as we think about
the second half, I'd say we
expect the commodity favorability to lessen, it will lessen.
I'd expect continued improvement or
continued margin improvement from
mix and from our productivity efforts
ongoing in the second half, although at
somewhat lower levels than we experienced in the first half."
In a soft overall bread market,
Bimbo branded sales rose 1% despite
a drag from stock-keeping unit rationalization taking place as B.B.U. optimizes its portfolio, Mr. Penny said.
He predicted continued branded
sales growth ahead, adding that current overall sales trends with regard
to branded and private label will

Product innovation pays off for
Frito-Lay and Quaker Foods units
PURCHASE, N.Y. - Quaker Breakfast
Flats biscuits, Simply Tostitos Black Bean
chips and other recent product launches
contributed to organic revenue growth
for PepsiCo, Inc. in the recent quarter.
Operating income for Frito-Lay North
America in the second quarter ended
June 11 rose 8% to $1,083 million from
$1,007 million in the prior-year period.
Revenue for the segment increased 3%
to $3,564 million from $3,452 million.
For the Quaker Foods North America
segment, operating profit increased 11%
to $146 million from $132 million, and
revenue advanced 3% to $561 million
from $546 million in the quarter.
Overall, net income attributable to
PepsiCo in the second quarter was $2,005
million, or $1.38 per share on the common
stock, up 1% from $1,980 million, or
14 / August 2, 2016 XMilling & Baking News

$1.33, in the prior-year period. Net
revenue fell 3.3% to $15,395 million from
$15,923 million. Excluding the negative
impact of foreign currency translation
and the deconsolidation of Venezuelan
operations, net revenue increased 3.3%.
"Product innovation and portfolio
transformation are enabling us to provide
consumers the delicious and convenient
products they want and to satisfy their
constantly evolving demands across a
broad spectrum of occasions and need
states," said Indra Nooyi, chairman and
chief executive officer of PepsiCo, during
a July 7 conference call with financial
analysts. "We have ramped up our
innovation engine and as a result, new
products comprise approximately 9% of
sales, or over $5 billion. We've achieved
this by leveraging our global scale

remain in place going forward.
Mr. Servijte also commented on the
recently completed Panrico acquisition in Europe.
The $209 million transaction was
first announced in July 2015, but only
recently received approval from Spanish and Portuguese competition authorities. The company's sales in 2014
were about $300 million. The
company is a leading baker
in Spain and Portugal in the
sweet goods and buns and rolls
categories. The company's
packaged bread business
was not included in the
transaction. The acquisition
includes brands such as Donuts, Qé!, Bollycao, La Bella
Easo and Donettes.
"We will end up with
seven plants and approximately 2,000 associates," he
said. "We expect to capture
substantial synergy opportunities during the integration process on
the order of €40 million to €50 million
on a yearly basis with an investment of
€70 million in integration costs."
Net majority income of Grupo Bimbo in the second quarter was 1,906
million pesos ($101 million), up 10%
from 1,729 million pesos in the second
quarter of 2015. Net sales were 60,626
million pesos ($3,212 million), up 14%.
For the six months ended June 30, Grupo Bimbo net majority income was 3,189
million pesos ($169 million) up 23% from
2,600 million pesos. Sales were 117,202
million pesos ($6,210 million), up 13%. MBN

while simultaneously tailoring products
to appeal to local tastes, addressing
consumers' evolving demands for
convenience, taste and variety from
the occasional treat to nutrition by
transforming our product portfolio.
"So today, what we refer to as guiltfree products generates approximately
45% of our net revenue. And we are now
recognizing consumers' interests in craft,
niche and premium products."
Quaker Breakfast Flats, which are
crispy baked snack bars made with oats,
fruit, nuts and seeds, debuted during
the quarter. The product was introduced
"because consumers are increasingly
seeking greater convenience, portability
and nutrition in their breakfast," Ms.
Nooyi said.
"Turning to Frito-Lay, we continue to
expand our portfolio with a particular
focus on premium offerings and healthy
snacking options. So for example, we've
expanded our Simply line with the
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Milling & Baking News - August 2, 2016

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