Milling & Baking News - April 1, 2014 - 20

Industry Activities 

A.B.A. chairman bringing quiet
baking sector to forefront
SCOTTSDALE, ARIZ. - Among the
many different segments that make up
the baking industry, contract manufacturing in the past has ranked fairly
low when it comes to
visibility
compared
with the group's branded product counterparts. The rapid growth
and the pending acquisition of Hearthside
Food Solutions L.L.C. Scalise
by an investment group
led by Goldman Sachs & Co. (see related story, beginning on Page 1) has
dramatically raised the profile of at
least one major player in the business.
Adding further to the company's
visibility was the recent elevation of
its chairman and chief executive officer, Richard G. Scalise, to chairman
of the American Bakers Association.
Mr. Scalise became A.B.A. chairman
only two days before the Goldman

acquisition announcement.
In an interview with Milling & Baking News conducted just before the
A.B.A. annual meeting, which was
held at the Phoenician hotel in Scottsdale March 16-18, Mr. Scalise described Hearthside as the nation's
largest privately-held baking company. He said he established the Downers Grove, Ill.-based company in 2009
with Wind Point Partners, a private
equity firm based in Chicago.
"We concluded that by melding the
speed and flexibility of a lean start-up
with structure, resources and capabilities of a major provider, we could
deliver both good value and outstanding, consistent quality," he said.
He cited an investment in an SAP
enterprise resource planning system
as an example aimed at giving "customers greater visibility and control."
The company's product line includes
more than 1,400 stock-keeping units

Alton warns bakers on continued
bread consumption weakness
SCOTTSDALE, ARIZ. - While several wholesale regional bakers experienced unprecedented double-digit
sales growth by filling a market void
during the past year, significant challenges remain for the category, said
Howard (Robin) Alton III, president
and chief executive officer of Pan-OGold Baking Co., St. Cloud, Minn.,
and now immediate past chairman
of the American Bakers Association.
Following the collapse of the old
Hostess Brands business in late 2012,
many baking companies serving the
bread aisle reaped the benefits, Mr.
Alton said. Some bakers called it the
"wonder year." Mr. Alton addressed
the A.B.A. all membership meeting March 16 kicking off the annual
meeting March 16-19 at the Phoenician hotel in Scottsdale.
"I think it masked a lot of issues
that are still out there - issues that
we had two years ago when I came
in as A.B.A. chairman," Mr. Alton
said. "We're looking at declining
consumption by consumers. That declining consumption is still out there
- don't kid yourself."
Fad diets and "misinformation
on the Internet" prompted by such
books as "Wheat Belly" and "Grain
20 / April 1, 2014 Milling & Baking News

Brain" continue to dampen the purchase of bread and other grain-based
foods, Mr. Alton said.
"These things hit fast and hard,
and it takes organizations like A.B.A.
and the Grain Foods Foundation to

Alton

work on our behalf to slow down
these bad ideas and combat them,"
he said.
He noted the increasing popularity of Chinese, Japanese and other
ethnic cuisines where bread generally is not a component of the meal,
has negatively affected its overall
consumption.
"It's going to take a lot of work to
turn around what I see as a slide in consumption of baked products," he said.
Mr. Alton's observations were

sold under 150 different brand names
and baked at 20 different plants.
Prior to the Goldman announcement, the largest recent piece of news for
Hearthside was the 2013 decision of Wind
Point Partners to merge into Hearthside
a business called Ryt-way, another Wind
Point portfolio company. Headquartered in Lakeville, Minn., Ryt-way is a
provider of contract manufacturing and
packaging equipment solutions to North
America's food and consumer products
companies. Ryt-way operates seven production facilities across four states.
"That was a big change from just
being bakers," Mr. Scalise said. "It
was really our focus on understanding that the marketplace dynamics
have changed so much. Unique packaging plays a larger role in success
than ever before. You have dollar
stores, drug stores, mass merchandiser even electronics stores. Everyone is selling food. Look at Walgreens
today. They used to sell snacks. Now
bread, butter. We offer unique packaging for each channel. Now we take
our baked goods in unique packaging
supported by Nielsen ScanTrack data
provided by Todd Hale, senior vicepresident of consumer and shopper
insights for The Nielsen Co. For the
52 weeks ended Dec. 21, 2013, bread
prices rose 2.1% while bun prices increased 1.6%, Mr. Hale said. However,
unit sales of buns declined 1% while
bread volume slipped 2% during the
same period. Mr. Hale said total bread
and baked goods sales rose about 2%,
but softness in the bread and bun categories held down the overall category's performance.
Mr. Alton said some consumers
appear to be avoiding grain-based
products because they're watching
their carbohydrate intake to lose
weight, but others may be lured
away from the baked foods category
because they are following a glutenfree diet.
"Their belief is it's a more nutritious way to eat when in fact it is
not," he said.
Those popular ideas are negatively affecting the baking companies today, Mr. Alton said.
"You shouldn't hide what your
product is - whether it is good
nutritional values or an indulgent
treat," he said. "We have to be transparent as an industry. We have to
embrace some of these challenges,
and we have to play our cards face
up. That's what consumers want." MBN
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - April 1, 2014

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