For two weeks in the middle of March, “all hell broke loose” at commercial bakeries, as consumers crowded into groceries or stood in long lines to observe social-distancing rules.
Sliced bread sales zoomed 60%, according to industry data cited by Fred Penny, President of the nation’s largest commercial baker, Horsham-based Bimbo Bakeries USA, with yearly sales of $7 billion.
That left some stores out of bread products. Buyers responded by hoarding and stripping more items off store shelves. Drivers reported bread lines at some stores, and “consumers were following some of our trucks so they could get into the stores and buy bread,” Penny added. “Early on, it was chaos.”
Bimbo, the U.S. arm of Mexico’s bakery giant Grupo Bimbo, responded by reopening a shuttered bakery in Hazleton, Pa., and adding people at plants, including its modern, 175-worker bakery in the Lehigh Valley, which Bimbo opened in 2015 to replace the old Stroehmann bakery in Norristown (slated to reopen soon as a Bimbo truck center). In all, the company runs 62 U.S. bakeries, including seven in eastern and central Pennsylvania.
Seven months later, it’s not back to normal. Since the spring spike, bread production has remained up a “steady 10%” over last year’s level, Penny said.
That’s compared with a steady “1% or 2% shrinkage a year, prior to COVID,” for packaged bread, buns, and rolls nationwide, he added.
Although white bread sales had been slowly slipping as Americans’ tastes changed, Bimbo kept recording higher sales of sweetened breads and cakes, such as Entenmann’s, and premium and organic breads, such as Arnold.
The company’s U.S. fresh products — including Lender’s Bagels, Sara Lee dinner rolls, Artesano (“thick, rich and creamy”), Maier’s Italian rolls, Thomas’ English muffins, among others — account for nearly half of Grupo Bimbo’s $15 billion in worldwide yearly sales.
The sliced bread and rolls business has endured waves of consolidation of local plants and brands, many of which, such as Norristown’s Stroehmann, were established by German American bakers generations ago, said Lou Minella, Bimbo’s senior vice president in charge of human and labor relations, risk management, and other areas.
A lifelong bakery veteran, Penny said, “I’ve been bought and sold with the companies I’m with eight times, going back all the way to the 1980s.”
Many of the bakeries were acquired by large consumer product groups, such as the former Kraft Foods, or by other hedge-fund-backed conglomerates “who thought it was great to have the brands” and hoped to sell them at inflated prices a few years later. “But they found that, because it’s fresh, this is capital intensive. This is not an inventory business. You are running six days a week. Your assets have to be in good shape.”
Companies willing to invest in automation and driver-support technologies have done better than brand speculators, he added.
Georgia-based Flowers Foods is Bimbo’s nearest rival, with $4 billion in yearly revenue. Flowers boosted sales at Philly-based Tasty Baking, with its South Philly Tastykake cupcake and lunch box pie plant and bread bakery in Oxford, Chester County, since buying the company in 2011.
Like Bimbo, Flowers has its own fleet of dedicated drivers. Bimbo’s 11,000 route drivers are all paid commissions, Penny said: “The more they sell, the more they make.”
Another unexpected result of the virus: It’s not as difficult to hire bakery workers, Minella said.
“Pre-COVID, it was hard to find” reliable people, he said. “It was a real issue for us and for our industry. Though there’s this clamor for ‘more manufacturing jobs,’ the concept of shift work [nights and weekends] is not attractive to people. It’s challenging.”
Even at wages from $18 to $24 an hour, with full medical benefits, guaranteed pensions, and union contracts, Bimbo plants were having a tough time finding labor. “But since the pandemic, so many people have been furloughed and out of work, that equation has changed,” he concluded.
Bimbo employs more than 20,000 in the U.S., including 2,230 in Pennsylvania — 300 at its Horsham headquarters, the rest based at plants in Reading, Breinigsville (near Bethlehem), West Hazleton, Carlisle, Northumberland, Williamsport, and Sayre, and at sales centers and outlet stores around the state.
Unlike in Mexico, where it is a household brand sold in stores across the country, Bimbo sells relatively few products under its corporate name in the U.S., relying on brands familiar from decades of advertising.
It was Nick Sakiewicz, who headed the Philadelphia Union professional soccer team in the first years after its 2008 formation, who suggested that Bimbo add the name to its team jerseys, in exchange for sponsorship payments. The team has sold 30,000 Bimbo jerseys, the company says. This year, it added jerseys with the Artesano brand, which the Union has started wearing at away games.
The name bimbo, an Italian word for baby, has been an American term of derision, and when the Union first put it on jerseys, “social media went berserk,” Penny recalled.
But “it didn’t take long for the fans to embrace it,” he added. “Watching parents buy their 7-, 8-, and 9-year-olds a Union Bimbo jersey for their local soccer leagues is a great way to spread the corporate name” in the company’s hometown U.S. market.