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The Baking Products division is divided into three product lines: Industrial and Bakery Flours, Bakery Ingredients Group (BIG), and End Consumer Brands.

 

The Industrial and Bakery Flours segment includes eight mill operations which together grind approximately 1.1 million tons of grain, making them one of the largest suppliers of flour products in Germany. The focus of its activities is on the profitable and needs-based supply of discerning customers in the craft bakery and confectionery sectors, large-scale bakery operations, well-known manufacturers in the foodstuffs industry, and the animal feeds industry as well as end consumers via food retailers. This requires the use of a uniform quality management concept, which undergoes continual further development in conjunction with our business partners. The strategic business expansion into eastern European markets has led to the acquisition of interests in mills and mill projects in Poland, Hungary, Serbia, and Croatia.

 

The BIG segment produces and distributes bakery ingredients used for the commercial manufacture of baked goods. Special products from the bakery improvers, cake mixes, fillings, and decoration segments are distributed to commercial bakeries, confectioners, and industrial customers in Europe and China by a total of 12 companies. The Diamant (Austria, Czech Republic, and Poland), Gb Plange (western and southern Europe), Plange (Germany) and Unipan (China) brands have established themselves on the market with first-class product quality, market-oriented product ranges, creative baking ideas, and professional consulting expertise. The further development of the markets in neighboring eastern European countries and targeted acquisitions intended to strengthen particular segments are both key factors in the product line's strategy. The increasing focus of the product range on the needs of large-scale bakeries and industrial manufacturers particularly supports penetration of the national markets and will further continue the company's success.

 

In 2010, the product line began to develop a new segment under the Qbake brand. This will focus exclusively on the Chinese B2C market. In May 2010, Qbake opened its first bakeries in Shanghai under the same brand name. The Qbake chain has been expanded with many additional bakeries and, in the future, will also be further developed with new sites in the Chinese city. The product range is positioned in the premium sector and includes high-quality baked goods produced according to German baking traditions as well as items with a local, Asian flavor.

 

The focus of the End Consumer Brands segment is on flours and baking mixes. Thanks to innovations and quality differentiations, the two brands Diamant^® and Goldpuder®^® hold strong positions in comparison with own-label brands.

Volatile grain prices leave their mark on results

The Baking Products division is divided into the following segments: Industrial and Bakery Flours (IBM), End Consumer Brands (EVM), Bakery Ingredients Group (BIG) and the new Qbake bakery chain.

 

IBM, which has the highest sales of the segments, supplies flour to the baked goods industry, store bakers, craft bakers, and the pasta industry as well as small packets for food retailers. IBM is one of the leading producers and distributors of industrial and baking flour in Germany. The EVM segment distributes branded household flour such as Goldpuder and Diamant, bread baking mixes, and specialties for food retailers in Germany. EVM is one of the two leading manufacturers of branded flour for food retailing. BIG supplies special bakery ingredients such as bakery improvers, cake mixes, fillings, and decorations to commercial bakeries, confectioners, and industrial customers across Europe. BIG is one of the market leaders in western and southern Europe. Qbake was launched in China in 2010, with eight bakeries being opened in Shanghai during in the last year.

 

The market environment of the Baking Products division continued to be characterized by intense competition. The industry is continuing to undergo structural changes including a decline in craft bakers, the growth of store bakers, a concentration on industrial bakeries as well as the establishing of bake-off stations in retail stores and discount outlets. These trends are also to be seen in most other EU member states in central and eastern Europe. The procurement and sales markets for grain products continue to be subject to the influences of the EU and the global market. Price volatility and price risks remain high. Poor harvests in Europe and other regions of the world led to a sharp increase in the price of grain and thus also of flour in mid-2010. The weather also affected the quality and quantity of the grain. On the consumer side, the trend continues towards cheaper bread and baked goods that are sold via discounters. In contrast, consumption of higher-quality bread and baked goods has lost momentum. With consumption remaining virtually unchanged, this development has intensified competition.

 

In the Baking Products division, net sales in 2010 were € 359 million, 2 % down on the previous year. Net sales in the individual segments were mixed. While IBM and EVM on balance recorded falls in net sales due to increased raw material prices, the BIG segment was able to increase its sales again. As expected, establishing the Qbake chain in China led to start-up losses. The operating result for the division fell short of that for the previous year.

 

Despite the difficult market environment, IBM was able to slightly expand its share of the domestic market. Nevertheless, the result was still down on that of the previous year and lower than expectated. This was due both to the intense competition in the flour market and, on the customer side, to the increased purchase prices. Passing these on to the customer could only be delayed in part. Competitiveness with respect to cost and production structure could be improved by means of further optimization measures. In eastern Europe, the previous year’s strategy to acquire minority interests in mill sites was continued. In addition to holdings in Poland, Hungary, and Croatia acquired in the previous year, a further stake has been purchased in a newly built mill in Serbia.

 

The market for household flour in Germany was in decline and characterized by intense competition. Within this market development, growth in the sale of discounter brands slowed. They were no longer able to significantly increase their market share. However, price spreads with regard to trade marks had a detrimental effect on the branded flour market. Sales of the Diamant and Goldpuder brands remained down on the previous year. The result for EVM was therefore unsatisfactory.

 

The entire European market for bakery ingredients products stagnated. It even declined in some areas, particularly the non-industrial customer segment. Accordingly, BIG’s B2B activities continued to focus on strategic key account business with major customers and industrial bakers, without neglecting its traditional base of powerful craft bakers. It also focused on product innovations. This strategy had a positive effect during the year, with encouraging growth in Austria and eastern Europe. Once again, the division’s sales and results were up on the previous year’s figures.

 

The Qbake brand was launched in China in 2010. The first bakery was opened under the same name in Shanghai. During the year, the Qbake chain expanded into eight shops in the Chinese metropolis. The product range has been established in the premium sector and comprises highquality baked goods in line with German baking traditions. As expected, the preparations and establishing of Qbake resulted in start-up losses.

 

In 2011, the Baking Products division plans to continue its current strategy. For IBM, this means the further optimization of production and cost structures; for EVM, concentrating on its core sales areas; for BIG, focusing on growing markets and key accounts and for Qbake, opening additional bakeries in Shanghai. Overall, the Baking Products division expects its earnings to improve.