Consumers shun bread, Maple Leaf profit falls

Wed May 2, 2012 4:24pm EDT
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By Rod Nickel

(Reuters) - Consumers are turning their noses up at bread and other baked staples, much to the surprise of Canadian food processor Maple Leaf Foods Inc (MFI.TO: Quote), which on Wednesday reported a drop in quarterly profit.

Maple Leaf, which owns the country's largest single bakery, widely missed analyst expectations, and its shares fell as much as 7 percent, before ending regular trading on the Toronto Stock Exchange down 5 percent, at C&12.27.

Weak fresh bakery sales were the main reason for the lower profit and are an industry-wide problem that "popped up quickly," said Chief Executive Michael McCain.

The company said lower bakery volumes partly offset the benefit of price increases the company implemented last year.

Changes in dietary trends, demographic shifts and more cost-conscious consumers are possible reasons behind the drop-off in bakery sales, McCain said in a conference call with analysts.

"The elephant in the room is bread consumption is down. And it's down around the world," McCain said, citing a drop in branded commercial bread volumes in the last 12 weeks in Canada, the United States and the UK of 3 percent to 5 percent.

Maple Leaf expects its bakery volumes and margins to improve later in the year as the price of wheat declines in the second half and as the company cuts costs and markets the health benefits of bread.

"I believe these things are infinitely addressable with good marketing," McCain said. "Bread has been around for 2,000-plus years."   Continued...