Milling & Baking News - April 25, 2006 - 10

B U S I N E S S

More time for I.B.C. to reorganize;
ups and downs in efforts so far
Continued from Page 1
processes in its bakeries and improving customer service through the company's field sales force.
"Additionally, the company plans
to review its field and corporate infrastructure to ensure that those costs are
in line with the restructured P.C. configuration," I.B.C. said.
In a review of progress made since
the company's September 2004 bankruptcy filing, I.B.C. said its first postfiling actions were "quickly identifying opportunities for cost reduction
that did not require fundamental operational changes."
These steps helped lower costs, but
the company said problems remained,
including continuing revenue declines
and a high fixed-cost structure.
Next, the company extensively reviewed each of its 10 profit centers, an
organizational structure that was created in June 2004, just before the bankruptcy. Before the restructuring, the
company operated 54 decentralized
baking plants. The centers grouped
bakeries, depots and bakery outlets,
and the subsequent P.C. restructuring sought to eliminate unprofitable
products and routes, streamline distribution and rationalize brands, stockkeeping units and excess capacity.

Work force cut by 6,000
The effort has resulted in the closing of 9 baking plants (45 remain), 200
distribution centers (700 remain) and
300 bakery outlets (860). The overall
workforce has been reduced by about
6,000 (26,000) and I.B.C. has rationalized of the company's delivery route
network, cutting the number of routes
by 29% - to about 6,500 from 9,100.
The cuts did not result in a large reduction in the number of customers
served by the company, I.B.C. said.
The entire process has been completed, except for certain aspects
of its restructuring in the South
Central region.
The restructuring has had negative
effects that were anticipated, at least
for a period of time, I.B.C. said. Specifically, revenues have declined, hurting
results of operations and cash flows.
The restructuring also has involved
implementation risks, including the
possibility that forecasted sales might
not be achieved either in terms of volume or sales margin.
"To date, initial results of the P.C.
restructurings have been mixed, and
bakingbusiness.com / world-grain.com

lective bargaining units. It warned,
though, that there was no guarantee
that this objective will be achieved "in
the same time frame or fashion as it
while overall route sales averages has to date. "
have been improved and unprofitable
The company added, "Because the
sales selectively abandoned, it is too framework for the agreements was
early to predict whether these early initially fashioned based upon proresults will be sufficient to achieve the jections made during the early stages
desired results," I.B.C. said.
of the P.C. restructuring process, it is
possible that, if actual results do not
Must maintain higher averages
meet expectations, these agreements
Keys to success, going forward, will (which remain subject to assumption
be the degree to which the I.B.C. route or rejection in the bankruptcy court)
delivery sales force will achieve and
may need to be revisited and admaintain higher average levels of
ditional concessions may be
sales per route and the companecessary."
ny's ability to maintain its deAlso reviewed by I.B.C.
sired customer base in the afwere the company's martermath of abandoning certain
keting initiatives since
unprofitable products.
the bankruptcy in
Progress achieved
an effort to offset
by the P.C. restrucdeclining
revturing has been
enues.
undermined
"The underto a degree by
lying focus of
the effects on
the marketing
continuing cost
program is to
pressures.
In
develop proparticular,
the
tocols to betcompany
has
ter anticipate
faced increases
and
meeting
in ingredients,
changing conenergy and emsumer demand
ployee
costs.
by developing
The latter cata
consistent
egory includes
flow of new
wages, health
products,"
and
welfare
I.B.C. said.
In April, I.B.C. introduced Wonder buns made
and pensions.
Toward that
"I.B.C.
has with whole grain.
end, the comtaken strategic
pany
hired
pricing actions designed to address Richard Seban as chief marketing ofthese inflationary pressures," the com- ficer in August 2005. Several new
pany said. "However, it is not yet clear products have been introduced under
whether price increases can be fully the Wonder brand, including Wonder
implemented or otherwise adequate Made with Whole Grain White, Wonto offset these increased costs."
der Kids and Wonder White Bread
I.B.C. also provided an update on Fans 100% Whole Grain.
its efforts to negotiate more than 430
collective
bargaining
agreements Introduces whole grain buns
More recently, the company introwith union-represented employees.
The company's objectives include the duced new buns and rolls, including
achievement of cost savings and infla- Wonder wheat buns and buns made
with whole grains (shown above).
tion controls over the next five years.
In sweet goods, the company has
"To date, long-term extensions
have been ratified with respect to 80 updated its packaging for Hostess and
C.B.A.s and agreements in principal conducted a promotion and public rehave been reached with respect to 41 lations campaign to celebrate the 75th
C.B.A.s, subject to ratification by em- anniversary of Twinkies.
While describing results of the marployees. In total, these C.B.A.s represent approximately 47% of the compa- keting initiative implemented to date
as encouraging, the company said that
ny's unionized workforce."
The company said it continues to it is too early to predict whether the
hope to use these agreements as the efforts will be successful enough to
framework for negotiating similar "stabilize or reverse the sales decline"
agreements with its remaining col- of the past few years. MBN
Milling & Baking News, April 25, 2006 / 11

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Milling & Baking News - April 25, 2006

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