Current Trends and Status of the Baking Industry

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Current Trends and Status of the Baking Industry
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Top Ten List of Negative Bread Statistics

• 10. Bread has been proven to be addictive.
  Subjects deprived of bread and given
  only water begged for bread after only two days.
• Bread is a known gateway food item leading the
  user to harder items such as butter, jelly,
  peanut butter and even cold cuts.
• In the 18th century, when virtually all bread was
  baked at home, the average
• life expectancy was less than 50 years.
  Mortality rates were sky high and
• typhoid and influenza ravaged entire nations.
• Nutrition News Focus

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Top Ten List of Negative Bread Statistics

• More than 98 percent of convicted felons are
  bread users.
• Fully HALF of all children who grow up in bread
  consuming households
• score below average on standardized tests.
• Bread is made from a substance called dough. It
  has been proven that
• as little as a pound of dough can be used to
  suffocate a mouse.
• - Nutrition News Focus

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Top Ten List of Negative Bread Statistics

• 4. Newborn babies can choke on bread.
• Bread is baked at temperatures as high as 400
  degrees, which can kill an adult in less than a
  minute.
• 2. More than 90 percent of all violent
  crimes were committed within 24 hours of eating
  bread.
• -Nutrition News Focus

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Top Ten List of Negative Bread Statistics
1. Many bread eaters are utterly unable to
distinguish between scientific fact
and meaningless statistical babble.
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2006 Preview Cover
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100 Years of Flour Consumption
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35 years of Flour consumption
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Most Important Growth Factor

• Growth in grain-based foods consumption was the
• result of the consumers need for increased
• convenience resulting from the shift
• to two income families.

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Drivers in 1996 1997

• Fat-Free Light baked foods/ breads
• Snack Wells at pinnacle
• Bagel chains peaked
• Tortillas growing 12 annually
• Rising crust frozen pizza, fastest growing frozen
  food
• Pretzels sixth consecutive year of double digit
  growth
• Promotion of Pyramid on bread bags
• In-store bakery sales growing at 8 clip
• Pasta boom

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Per Capita Flour Consumption Stalls
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Lost Consumption of Grain-Based Foods

• Per Capitaan 11lb. decline
  
• Total Flour Usage a 32 million cwt. shortfall

Equivalent Per Capita Annual Consumption 55
bagels OR 135 tortillas OR 18 cakes OR 13 loaves
of bread
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Good News on the Horizon?

• The downward trend in flour consumption is
  over. Guy Shoemaker, NAMA Chairman
• Third quarter Census Bureau figures appear to
  confirm the accuracy of the statement
• 0.8 gain over the same quarter in 2004

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Trend New Products Continue to Be the Driver
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New product introductions in 2004
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Trend Health and WellnessThe current consumer
interest in health and wellness issues are
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Trend Top Management Changes

• American Italian Pasta Co.
• Bimbo Bakeries USA
• ConAgra Foods, Inc.
• Interstate Bakeries Corp.
• The Kellogg Co.
• Krispy Kreme Doughnuts, Inc.
• Lance, Inc.
• Pepperidge Farm, Inc.
• Sara Lee Bakery Group
• Tasty Baking Co.

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Trend Turnaround Firms

• The concept was foreign to grain-based foods
• Becoming a household name

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Trend SKU Rationalization and Big Brands

• Sara Lee cutting hundreds of SKUs and reducing
  the number of brands
• Switching to Sara Lee brand
• Growth of Wal-Mart business requires efficiency
  to compete.

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Trend Continued Shift in the Retail Environment

• WAL-MART accounts for 50 of all grocery
  purchases?
• Forcing bakers to adjust their go to market
  strategy
• Forcing competitors to adjust their offerings
• Is Wal-Mart working on a C-Store concept?

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Wal-Mart dominates grocery retail market

• Top Grocery Retailers

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Trend Merger and Acquisition Drought

• Feast or famine in the baking MA world
• Current activity at a standstill

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Trend Private Equity Investment in grain-based
foods

• The big fishing in mergers appears to be over
• Significant small to mid-sized transactions
• Not operating food businesses

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Trend Allergen issues to the forefront

• Soy, wheat, eggs, and dairy are among the major
  allergens found in grain-based foods
• FDA failed to offer guidance
• Major miller decides to act

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Trend Fortification

• Grain-based foods have always been at the
  forefront
• What is grain-based foods role in the future

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Big Trend Health and Wellness

• The Intuitive Diet
• Stop Counting Calories
• Eat when you are hungry
• Eat all you want
• Eat whatever you want
• Requires you to get in touch with your inner
  guide and use your inner wisdom.

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Big Trend Health and Wellness
Purple Passion Sara Lee Blueberry bagels
Purple and deep-red fruits contain
Antioxidants Suggested to have
anti-aging properties
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Health and Wellness

• Purple Passions
• Natures Path Optimum energy bars
• Cranberries, blueberries
• Antioxidants, vitamins

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Big Trend Allergen Issues

• Gluten-Free
• 2.2 million Americans have celiac disease
• Restrict gluten consumption (wheat, barley and
  other gluten-bearing foods)
• New certification mark will be administered by
  Orthodox Union

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Health and Wellness

• Organic Nutrition
• Clif Bar Nectar
• Combines organic fruits and nuts
• Each bar two servings of fruit

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Health and Wellness

• Pregnancy Nutrition
• NutraBella Bellybar
• Folic acid, iron, calcium, vitamin E
• Omega-3 and omega-6 fatty acids

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Health and Wellness

• Pregnancy Nutrition
• P.B.M. Pharmaceuticals Bright Beginnings
  PreNatal bar
• Prescription strength dose of folic acid and
  calcium

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Health and Wellness

• Pregnancy Nutrition
• Eating for Two Mommy Munchies nutrition bars
• High RDA 90 of iron, 50 of calcium, 80 of
  folic acid

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Obesity and diabetes crisis

• 100 Calorie Packs
• Kraft Nabisco 100 Calorie Packs
• Snack sensibly and in moderation

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Obesity and Diabetes Crisis

• Sugar Freedom
• Benchmark Foods Sweet Abandon snack cakes
• All natural
• Co-branded with ADMs Nutrisoy

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Obesity and Diabetes Crisis

• Sugar Freedom
• Flowers Natures Own sugar-free 100
  whole-wheat bread
• A whole-grain product

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Obesity and Diabetes Crisis

• Sugar Freedom
• Bimbo Bakeries USA Mrs Bairds sugar-free
  buns
• Health Essentials line
• No sugar, but added calcium
• Earlier introduction of sugar-free 100
  whole-wheat bread

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Big Trend Whole Grains
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Whole Grain and Fiber Claims

• Whole grain 7.013 Billion, up 6.3
• Total Fiber presence 1.63 Billion, up 15.5
• Comparative Fiber 30 Million, up 133
• AC Nielson, Label Trends, 2005

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New Whole Grain UPCs
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Whole Grains Minor Setback

• Petition seeking whole grains content guidance
  nixed by F.D.A. MBN 12-6-05
• (FDA) is months, maybe years away from making a
  decision. Peter Barton Hutt
• Whole Grains council sees stamp program moving
  forward

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White Bread versus Wheat Bread
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Big Trend Grains

• Whole White
• IBC Wonder White Bread Fans 100 Whole Wheat
• All flour is whole-wheat from hard white wheat
• Slightly tan color
• Darker than white bread, lighter than
  conventional whole-wheat bread
• Appeal to moms and kids

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Big Trend Grains

• White Bread Plus
• Flowers Natures Own whitewheat
• Bridges parents desire for healthy eating and
  kids preference for white bread
• Not a whole-grains product
• Enriched flour, plus extra fiber, calcium and
  iron

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Big TrendGrains

• Enhanced White and Wheat
• Weston X-treme Breads
• White and wheat varieties
• Targeted at kids and moms
• Wheat variety is whole grain
• Extra calcium, fiber

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Big Trend Grains

• Whole-Grain Muscle
• Sara Lee Heart Healthy 100 Whole Wheat
  bagels
• Company has many more whole-wheat items
• Style offered under several brands

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Big Trend Whole Grain

• Whole-Grain Muscle
• Pepperidge Farm Goldfish whole grain
• Real cheese
• No artificial preservatives

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Big Trend Organics

• Organics at the Crossroad
• Harvey v. USDA
• Court upheld Harveys claim that the Organic Food
  Production Act of 1990 prohibits use of synthetic
  ingredients in organic foods
• June 9 court order is reported in July 1 Federal
  Register

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Big Trend Organics

• Organics
• Country Choice Organic oatmeal squares
• Breakfast on the go
• Company approach make products taste as good or
  better than their conventional counterparts
• Targeted at 25- to-40-year-old women, who are
  the households primary shopper

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Big Trend Marketing to Hispanics
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Big Trend Marketing to Hispanics
Weekly Average
133
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Hispanics take 26 shopping trips to the grocery
store per month, more than three times that of
the average U.S. household at 8.7 trips. FMI
Source FMI, 2005 (21)
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Big Trend Marketing to Hispanics
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Big Trend Hispanic Marketing

• Healthy Oil Tortillas
• La Tortilla Factory Healthy Wraps
• Made with extra virgin olive oil
• Also available in organic
• Diabetes a major health challenge in Hispanic
  population

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Big Trend Hispanic Marketing

• Major Bakers get into the act
• Flowers Foods Tesoritos
• Launched in 2003
• First major wholesale baker to produce
  Hispanic cake items in US
• Croissant-like product added this year
• More introductions slated for 2006

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Big Trend Hispanic Marketing

• Major Bakers into the Act
• IBC Hostess Las Delicias assortment
• Hostess already sells better in Hispanic
  households than average American households

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Big Trend Marketing to Hispanics

• Culture Transfer
• Bimbo Bakeries USA Dead BreadPan Muerto
• Tradition from Mexico
• Nov. 1-2 Day of the Dead

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Traditional Alter Designed to Entice the Dead to
Return and join the party
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Big Trend Flavor Liberation

• Cinnamon is hot!
• Poore Brothers Cinnabon cinnamon roll soft
  cookies
• Considers cinnamon an untapped segment of the
  cookie market
• Cream cheese icing
• Concept tested well with consumers

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Big Trend Flavor Explosion

• Hot Cinnamon
• Pennant Foods Korintji cinnamon rolls
• Cream cheese icing
• Food service product

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Big Trend Flavor Explosion

• Tex-Mex
• General Mills Totinos Mexican Style Rolls
• Chicken fajita is newest flavor

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Big Trend Convenience

• Where do grain-based foods fit?
• Where do opportunities lie?

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Big Trend Busy Lifestyles

• Mighty Minis
• Weston Entenmanns Enten-minis
• Cakes, brownies and dessert treats
• Indulgent but portion controlled
• Appeal to adult tastes

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Big Trend Busy Lifestyles

• Mighty Minis
• Pennant Foods Cini Minis
• Portable snacks
• Target is c-store shopper

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Big Trend Busy lifestyles

• Mighty Minis
• Pepperidge Farm Whims crunchy clusters
• Cup-like package, stacks on shelf in two
  directions
• Bite-size shape

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Big Trend Busy Lifestyles

• Kid Oriented
• Brand Castle Crayola Crafty Cooking Kits
• New seasonal offerings
• Fully contained kits, including decorations

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Big Trend Busy Lifestyles

• Kid Oriented
• Kraft Nabisco KidSense fun packs
• Reformulated to cut fat, sugar and
  artificial ingredients
• Single-serving pouches
• Each serving 3 grams of whole grains
• 100 Calories per pack

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Big Trend Busy Lifestyles

• Kid Oriented
• Kellogg Sunshine Gripz snacks
• Baked snack crackers
• Designed for on-the-go tweens
• Portable containers
• Also in Chips Deluxe
• chocolate chip cookie format

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Big Trends Busy Lifestyle

• Fast, Faster, Fastest
• DiGiorno microwave rising crust Pizza
• DiGiorno leads self-rising category
• Adds to line previously
• oven-baked only

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Big Trend Busy Lifestyles

• Fast, Faster Fastest
• General Mills Pillsbury frozen breakfast
  products
• Pancakes, dunkable bites
• Dunkables come with
• dipping cups of icing
• Microwave in 1
• minute or less

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Big Trend Busy Lifestyles

• Fast, Faster, Fastest
• Kraft Foods South Beach Diet microwave pizza
• Microwave in 3 minutes
• Wheat crusts
• Good source of protein and fiber

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In Summary

• Flour consumption on the rise (good)
• Growth in new products projected (good)
• Atkins is history (good)
• Grain based foods and the health and wellness
  trend are a perfect fit (good)
• Complacency may set in (bad)

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Leading Wal-Mart Private Label Purchases

• Milk
• Bottled Water
• Fresh Bread
• Fresh Eggs
• Frozen Poultry
• Carbonated Beverages
• Natural Cheese
• Pies Cakes
• Sugar
• Processed Cheese

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Fastest growing population sector Baby Boomer
Generation

• Age Population Share
  Change
• 2000 2010
• 50-54 6.2 7.1 25.9
• 55-59 4.8 6.3 44.0
• 60-64 3.8 5.3 51.5
• 65-69 3.4 3.9 28.7
• Totals 18.2 22.6 24.1
• 
  

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Bakings Value of Shipments

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Weekly spending on bakery products by ethnicity

• Category 2001 2002 2003
• White 5.88 5.83 5.85
• Black 4.50 4.65 4.58
• Hispanic 5.58 5.81 5.92

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Why Boomers are the key driver for consumer
trends

• Baby Boomers
• 22 of population will have 50 of the disposable
  income
• Wellness will become a major emphasis as they
  seek to take a more active role in their health
  and well being