Bread Production in the US Industry - Research Paper Example

Penera Bread Company Analysis Panera Bread Company Analysis Executive summary The main aim of this paper is to analyse the bread industry, some of the challenges the industry has been facing and how the challenges have been addressed by the companies. The paper is divided into two main sections; industry analysis and organisational analysis. The industry analysis is subdivided into four subsections; product life cycle, general environment and competitor strengths and weaknesses. While organisational analysis is subdivided into strategy evaluation, and core and distinctive strategies ` Industry analysis The bread industry is one of the most competitive industry in the world. This is because customers’ needs keep changing. According to most analysts, consumers needs keep on changing because they like eating different types of bread (ABA, 2013). Product life cycle Bread industry is in its maturity stage. This is because according to IBIS world (2013), revenue for bread production has been decreasing for the last five years up to 2013. This because most consumers are watching their diets, so as not to became obese. In connection to this they prefer taking low carbohydrate diets. However, the trend is expected to change because most companies are now innovative and have started producing a wide range of products (IBIS, 2013). In addition, the demand for bread also went down because of the recession the country was experiencing. In regards to this, the flow of money was reduced drastically. As a result consumers, started buying low cost wheat products such Paleo. In fact, some of the largest consumers of bread like hotels and schools, also started buying alternative products to bread. This is because they are also trying to reduce their budgets (IBIS, 2013). In connection to this even the largest consumer products stores and supermarkets also reduced their storage for the bread products. There have been many healthy campaigns on the media, and with the recent reports that 52% of Americans who are between 35 years and 45 years are obese. It is not surprising that most consumers have been forced to change their diets. Also, with the entrance of free gluten diets into the market, most Americans have therefore preferred to buy the free gluten diets to bread (Solms, 2009). However, in response to the changing demands of consumers, most bread companies have started introducing nutritious products in order to keep up with the consumers’ latest trends. According to a recent report by IBIS world (2013), during the recession which caused the demand for bread in some of the largest consumer stores to reduce, resulted in the decrease of per capita income by 0.3%. However, marketing analysts, expect this trend to change in 2013. It is expected that by introduction of low gluten products the revenue will increase by 1.17 % which will result to a total revenue of $38.1 billion (IBIS, 2013). The bread industry has also experienced rising costs in inputs especially wheat and sugar. According to most marketing analysts the prices for the two products have more than doubled for the last five years. This increase have been attributed to the challenges the sugar and wheat industries have been facing. For example, the sugar industry have also been experiencing in input costs. For example fertilisers and also the machineries which are used to build the industry. In addition to that, the unreliable rainfall and it is also being said that most of the sugarcane plants are doing well. On the other hand, wheat industry have also been experiencing an increase in their industrial inputs (IBIS, 2013). Therefore, the rising costs of these inputs, have resulted to low profit margins for the bread companies. Also, the bread companies which have not been able to lower their price have been forced to scale down production. In the year 2011, about a third of the employees who were in the bread industry were send on compulsory leave. This is because the companies could not cater for their salaries anymore (Hooks, 2009). However, in five years’ time through to 2018, consumers will be expected to be more health conscious and the bread industries will also be ready with more nutritious products. In addition, most bread companies are planning to introduce, portable bread products so as to attract the consumers who are always on the go. It also expected that most bread companies will start exporting bread products to the neighbouring countries. If it is possible, most of them will also start to set up industries in the neighbouring countries (IBIS World, 2013). In connection to this, the bread industry is expected to grow of the next five years despite the increasing costs of the input. General environment Demographic trend. According to analysts the population is increasing and as a result, the world resources are under pressure. In connection to this, there has been several media campaigns that couples should start practising family planning. As a result birth rates in the USA have reduced, although there are certain families which are still having more children (Hill, 2009). However, according to a recent report the people who born during the baby boomers period are entering the next phase of their lives. Most analysts, therefore predict that, they will also be changing their diets and their spending patterns, as they enter the next phase of their lives. It is not known what kind of food they will prefer. Although, with the current health campaigns that has been on the media. It is expected that they will start taking foods which are not rich in fats. This is because a lot of fats is not good for health, and with the health related problems that is associated with fats, every consumer has become more aware of their health (Freud, 2007). By the year 2020, the youths who are over the age of 25 years, who spend a lot of their income on food, will be making 25 % of the American population up from 5% in 2010. In regards to this, most bread industries do not know how their spending power will change. This is because every stage in life is associated with certain spending patterns (Hill, 2009). Economics trend. The baking industry is one of the sectors which contribute a lot to the USA economy. It contributes about $311.0 billion in total output that is about 2.1 percent of the GDP. It also employs about 1.76 million people. These workers are earning over $78.1 million while the amount of taxes which was paid to the federal state $38.5 billion (ABA, 2013). There are also plans that the most companies are planning to export some of their products. Therefore, the industry will also start being a major foreign exchange earner. In connection to this, the countries will strengthen and therefore, the USA government will be able to carry out more developments in the country. The table shows some of the economic impacts that the baking industry is having in ten states (ABA, 2013). State Direct Jobs Direct Wages (in thousands) Direct Output Total Jobs Total Wages (in thousands) Total Output (in thousands) All States Total 633,020 $31,495,974.07 $102,453,748.72 1,760,363 $90,214,425.33 $310,971,293.56 Alabama 7,399 $374,152.15 $832,493.83 17,071 $782,975.86 $2,518,131.65 Alaska 875 $43,900.49 $49,853.26 1,564 $97,723.06 $234,147.15 Arizona 8,458 $402,726.32 $797,010.71 20,306 $1,045,301.28 $2,810,741.93 Arkansas 6,648 $306,659.72 $1,058,905.29 18,349 $734,459.63 $3,193,331.99 California 89,016 $4,609,224.57 $14,000,244.37 262,147 $14,692,513.82 $49,102,268.41 Colorado 8,777 $407,779.03 $1,160,956.88 22,897 $1,207,456.12 $3,766,958.94 Connecticut 7,715 $477,210.75 $1,531,617.52 19,276 $1,261,190.11 $3,807,552.39 Delaware 681 $25,667.47 $61,841.49 1,416 $89,565.66 $311,164.91 District of Columbia 866 $47,365.85 $143,315.96 1,291 $142,592.28 $370,986.37 Political/Legal trends. The government legal policies affect the distribution and cost of bread products. It also affects the producers of the raw materials. All the bread industries are expected to meet food and safety regulations, set in the food act 2000, food regulation act 2006 and food production act 2008. The employees of the bread companies are expected to meet certain health requirements. They are also expected to be clean at all the times (Hooks, 2012). Socio cultural trends. One of the industries which has experienced changing social cultural trends is the bread industries. The current population of consumers are more watchful of whatever they eat. This is because of the associated health risks that are associated with eating various types of foods. The changing whether also affects the way consumers spend their money on buying bread related products. In addition, most analysts say that Americans spend 9 percent less on food, which is much less than any citizen around the world. Most of the consumers also prefer eating take away foods, therefore, in connection to this, most bread companies have started producing bread products which can be easily carried (Putin, 2010). Technological trends. Just like any other industry, the bread industry has also witnessed a growth in usage of technology. Most bread companies have increased their production capacities. Most of the production processes have been automated. Hence leading to an increase in the output (Solms, 2010). Global trends. There has been a decrease in the production of bread. This trend can be attributed to the changing consumer preferences. Especially, those who are more concerned about their health. Also, the decrease can be attributed to the recession that has been witnessed around the globe (Putin, 2010). Physical environment trends. The physical environment trend for most bread companies have changed. This is because, the food industry is expected to meet a certain set of regulation standards. For example, every bread industry is expected to provide clothes, white gumboots among other things to its employees. It is also expected that the company takes its workers for regular check-ups (Solms, 2010). Panera Bread Company. This a chain bakery café restaurant company offering a variety of services to its customers, such as catering, food and nutrition expert advice among other services. It is located it is located in Sunset Hills (Penera). Competitor strengths and weaknesses. Some of the companies which provide stiff competition to Penera Bread Company are Brio restaurant group and Aramark Holding Corporation. Brio restaurant Strengths. The company has a lot of dedicated staffs. It also has a wider network branch and also the company was founded before Penera Company. In connection to this, most consumers are well conversant with it (Brio). Weaknesses. The company does not have a wide range of products (Brio). Aramark Restaurant Strengths. The company has a wide range of products and it also has a wide branch network (Aramark). Weaknesses. Panera Company was established before it, in this regards therefore, more customers are well conversant with Panera Company (Aramark). Organizational Analysis Strategy Evaluation. Company mission; It’s all about bread at Penera (Penera). Generic Business level strategy. The company has a low cost leadership generic business level strategy. This company’s main aim is to provide low cost services which are of high value (Penera). Corporate Level/ Multi –product strategies. The company has a wide network of branches and it also offers a wide range of services and products (Penara). Core and distinctive competencies. Some of the core competencies that the company is offering are free nutritional expert advice. It is also offering high quality service (Penera). Bibliography American Bakers Association. Industry analysis. Retrieved from < http://americanbakers.org/> Aramark. Food Service and Refreshment. Retrieved from < http://www.aramark.com/services/foodserviceandrefreshments/> Brio. Welcome to Brio restaurant. Retrieved from Freud, Sigmoid (2007). Regulations in the Food industry. New York: Mondial. Hill, Grahame (2009). Challenges facing the bread industry. New York: Oxford University Press Hooks, Kevin (2012). The biting economy. Cambridge: South end press. IBS World. Bread Production in the US Industry Market Research Report from IBIS World Has Been Updated. Retrieved from < http://www.prweb.com/releases/2013/10/prweb11244145.htm> Penera Bread Company. What breakfast fave do you crave? Retrieved from < https://www.panerabread.com/en-us/home.html> Putin, Bernard (2010). The changing bread industry. Chicago: Einstein group. Solms, Mark. (2010). Panera Bread Company. American Bakers Association 08.22: 100-116 Read More