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BRAZILIAN BAKING SECTOR
Context and Challenges for
Wheat Chain
BAKING AND CONFECTIONARY SECTOR
Modern Consumer•People want convenience
•Childless couples•Women playing bigger role in work market•People want trouble free meal reparation•More and more meals eaten out of home•People living alone•Increase in life expectancy
BAKING AND CONFECTIONARY SECTOR
MODERN CONSUMER’S NEEDS
- MOBILITY: need for faster services, in the right place;
- QUALITY: customer is not prepared to sacrifice quality, companies
are looking for ways to add quality to products without charging
more;
- FRESHNESS AND NATURE: fresh products, prepared in front of
customer;
- COMMITMENT: health, quality of life, preserving nature.
THE BAKING SECTOR IN BRAZIL
Source: ABIP/ITPC 2013
In 2012:
� Sector revenues reached R$ 70.29 billion
� Growth of 11.6%
R$ 34.98 bi
R$ 39.61 bi
R$ 43.48 bi
R$ 49.52 bi
R$ 56.3 bi
R$ 62.99 bi
R$ 70.29 bi
6.9%
13.3%
11%
12.6%
13.7%
11.9%11.6%
0
2
4
6
8
10
12
14
16
0
10
20
30
40
50
60
70
80
2006 2007 2008 2009 2010 2011 2012
Faturamento embilhões R$
Crescimento em %
Revenues in billions of R$
Growth in %
Source:
Increase in Distribution
Channels
More demandingconsumers
IncreasedCompetition
Oscillation in raw material prices
Specializedlabor
Reduction in Production Costs
Increase in Services
Loss ofProfitability
NR 12Sodium Reduction
Taxes
BAKINGAND
CONFECTION-ARY SECTOR
Current pressures on Baking and Confectionary Sector
BAKING SECTOR IN BRAZIL
BAKING SECTOR IN BRAZIL
Pre-mix and additives plants
Inputs
Transformation Industry
Manufacture/Bakeries
Consumer Market
Wheat43%
Others19.8%
Yeast6%
Eggs5.2%
Fats5%
CassavaDerivatives
3%
IndustrialBakeries
ArtisanBakeries
SupermarketBakeries
ServicesConvenience, breakfast, snacks,
lunch and dinner
ProductsBreads, cakes, biscuits, pies,groceries, sandwiches, etc.
*Chain adapted from ITPC/Propan
2007.Sources: Interviews/ Carlos Cogo Consultoria Agroeconômica in John Deere Brasil / Portal Agrolink
BAKING PRODUCTION CHAIN
BAKING SECTOR IN BRAZIL
FRESH(SHORT LIFE)
NON FRESH(LONG LIFE)
� Long product life.
� Mass production with economies of
scale.
� Greater geographical range.
� Sales mainly business to business
(B2B).
� Short product life (1 day)
� End-to-end production.
� Scale economies less important.
� Limited geographical
distribution radius (1 hour).
Wholesale RetailNon artisan
(preservatives)Artisan(frozen)
BAKING SECTOR IN BRAZIL
XFRESH
(SHORT LIFE)NON FRESH(LONG LIFE)
More fragmented
business for micro, small
and midsize companies
Business
concentrated in big
companies
BAKING SECTOR IN BRAZIL
� Artisan bakeries: production of
bakery and confectionary products
as core business, direct sales to
consumer with limited scale.
� Industrial bakeries: large scale
production of bakery products, not
serving end consumer directly. Use of
product freezing and distribution
systems at other points of sale, such as
supermarkets and artisan bakeries.
COMPANY PROFILES
BAKING SECTOR IN BRAZIL
� Supermarket bakeries: it is not the
main business within the supermarkets,
but consists of production and sale of
bakery products.
� Production center: manufacture of
products at different stages, which are sent
to points of sale– POS. The products made at
these centers reach the POS ready or semi
ready for consumption; in the latter case, the
product is finalized for sale at the POS.
COMPANY PROFILES
CHALLENGES FOR BRAZILIAN BAKING INDUSTRY
�Labor �Competition
SITUATION BY REGION
� Intense presence of frozen bread
� Supermarkets have great influence in
region
SOUTHERN REGION
SITUATION BY REGION
� Food Service
� Delicatessens
� Incorporation of services
SOUTHEASTERN REGION
SITUATION BY REGION
� Lower incidence of frozen
breads
� Large stores in state capitals, in
contrast with smaller ones in
other towns
NORTHEASTERN REGION
SITUATION BY REGION
� Small presence of
industrialized and frozen breads
� Few supermarkets invest in
bakeries
� Larger stores in state capitals;
in other areas, smaller
companies with limited variety
of products and services
NORTHERN REGION
SITUATION BY REGION
� Small presence of industrialized and
frozen breads
� Few supermarkets invest in
bakeries
� Larger stores in state capitals; in
other areas, smaller companies with
limited variety of products and services
CENTRAL-WEST REGION
FRENCH ROLL STANDARD
� The formulation of the technical
standard “Bakery – French bread type –
Guidelines for quality assessment and
classification” helps to increase the
competitiveness of French bread and
establish a quality standard for the
product.
� A committee was created within the
ABNT Special Studies Commission (CEE
-160) comprising manufacturers, bakers,
teaching and research institutions.
FRENCH BREAD STANDARD
ASSESSMENT GREATER VITÓRIA AREA
0.00% 3.33%
30.00%
43.33%
23.33%Excelente
Muito Bom
Bom
Regular
Ruim
ExcellentVery GoodGoodFairBad
REPERCUSSION OF CHANGES IN BAKING INDUSTRY ON WHEAT CHAIN
� Vendor specialization by sales channel
� The variety of breads will increasingly require different raw
material profiles
� The wheat chain should be attentive to each business profile, for
example, the large bakeries are more concerned about taxes.
� Increase attention to flour quality and stratify offerings:
• Flour for artisan bread
• Flour for frozen bread
• Flour for savory snacks/products
• Flour for functional breads, among others
CHALLENGES TO GENERATING BUSINESS
� Activities should incorporate two dimensions: quality and
convenience / ease of access to product (flour) to increase
consumption by bakeries.
Dimension 1
Quality
Dimension 2
Convenience
French bread standardNew technologies could generate convenience
Consulting and training initiatives
Frozen bread is now irreversible and will increase access to bread and generate new applications
Adding services
STRATEGIC ANALYSIS
- Surveys of regions, clusters and companies that are global references.
- Interviews with companies and institutions in advanced markets:
Companies and institutions in
São Paulo
Companies in RJCompanies and institutions inSan Francisco
Companies in Los Angeles
Sources: Cluster Consulting
STRATEGIC ANALYSIS
- Visits to advanced markets: California, USA
- In the USA, non-fresh bread predominates, but there are cities like
San Francisco, California, where fresh bread predominates:
95% non-freshbread
United States(general)
San Francisco Bay area(California)
5% fresh bread
95% fresh bread
5% non-freshbread
Sources: Cluster Consulting
MOST FEASIBLE STRATEGIC OPTIONS
Bakery andmeals
Specializedbakery
Boutique bakery
Bakery-snackbar
Bakery-cafe Boutique bakery-cafe
Bakery andgourmet
meals
Bakery andChef brand
meals
Traditionalbakery
-
-
Service+
Quality
+Regular Gourmet Gastronomy
Bread
Bread+ cafe orsnack bar
Bread+
Restaurant
KEY SUCCESS FACTORS
Bakery andmeals
Specializedbakery
Boutique bakery
Bakery-snackbar
Bakery-cafe Boutique bakery-cafe
Bakery andgourmet meals
Bakery and Chef brand meals
Traditionalbakery
-
-
Service+
Quality
+Regular Gourmet Gastronomy
Bread
Bread+ cafe orsnack bar
Bread+
Restaurant
-Quality -Product mix: breads, foodservice and fresh products- Productivity in terms of volume- Efficient service- Marketing
KEY SUCCESS FACTORS
Bakery andmeals
Specializedbakery
Boutique bakery
Bakery-snackbar
Bakery-cafe Boutique bakery-cafe
Bakery andgourmet
meals
Bakery andChef brand
meals
Traditionalbakery
-
-
Service
+
Quality
+Regular Gourmet Gastronomy
Bread
Bread
+ cafe or
snack bar
Bread
+
Restaurant
-Quality of bread-Identity of space-Product offerings for consumption moments-Product mix: Special breads, ultra fresh foodservice and complementary gourmet products-Specialized complementary production units-Specialized service- Specialized marketing
FUTURE VISION
-
-
Service
+
Quality +
“Bakeries as a national benchmark in fresh, quality baking and foodservice”
Future strategies for bakeries
Current strategyof majority
With further opportunities in the fresh wholesale segment.
Head Office
Telephone: +55 (31) 2101.9999
Rua Espírito Santo, 1204 – 10º andar - Centro
Belo Horizonte, MG - Brasil
CEP 30160-031
www.marciorodrigues.com.br /
www.propan.com.br
São Paulo
Telephone: +55 (11) 3107-8594 /
3106-1208
Rua Maria Paula, 54 - 9º andar-
Bela Vista
São Paulo, SP – Brasil
Brasília
Telephone: +55 (61) 3326-3282
SHN, Qd02, Bloco H, nº 30, Sobreloja,
Sl, 55, Mix Metropolitan Flat
Brasília, DF – Brasil
Porto Alegre
Telephone: +55 (51) 3084-5885
Rua Caldas Júnior, 20, Sala 33, Centro
Porto Alegre, RS – Brasil
Espírito Santo
Telephone: +55 (27) 3325.3754
Rua Cel José Martins de Figueiredo,
965 – 1º andar – Tabuazeiro
Vitória, ES - Brasil