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Baking Perspectives Baking in Puerto Rico & the Caribbean. Mario Somoza President and CEO, Pan Pepin . Sponsored by:. Baking Perspectives in Puerto Rico and The Caribbean. Mario Somoza Pan Pepín, Inc. June 27, 2008. Puerto Rico Basic Facts Bread Market Pan Pepín Who we are What we do

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Baking PerspectivesBaking in Puerto Rico & the Caribbean

Mario Somoza

President and CEO, Pan Pepin

Sponsored by:

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Baking Perspectives in Puerto Rico and The Caribbean

Mario Somoza

Pan Pepín, Inc.

June 27, 2008

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  • Puerto Rico

    • Basic Facts

    • Bread Market

  • Pan Pepín

    • Who we are

    • What we do

  • Situation and Challenges

  • Q & A

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Puerto Rico Facts

  • Easternmost of Greater Antilles.

  • PR is 110 miles long X 39 miles wide.

    • Split by a mountain range from east to west.

  • Population of 4 million people.

    • 12% over 65, 29% 19 and under.

    • One-third live within the San Juan Metro Area.

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Puerto Rico Facts

  • Commonwealth of the US

    • US citizens since 1917.

    • Currency, banking and postal systems within the US system.

    • Own Internal Revenue system, not subject to US taxes.

    • Participation in all federal programs ($20 billion).

    • Resident Commissioner representation in Congress.

    • No right to vote in general elections.

  • Strong sense of national pridewith a keen awareness of our US citizenship/relationship.

    • Less than 5% support for Independence.

    • National sports teams.

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Puerto Rico Facts

  • The local economy is driven by the manufacturing sector, which represents +40% of GDP, followed by Finance, Insurance and Real Estate.

    • 11% Unemployment.

    • 45% of HH on US Food Stamps program.

      • Lower SEL that behaves like mid-SEL.

  • PR culture is a mix of Spanish, Caribbean and American influences.

    • Diet includes a lot of rice, pork, seafood and fried foods.

    • Music reflects this mix with Salsa and, more recently, Reggaeton.

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Puerto Rico Bread Facts

  • Bread is considered a staple of the PR diet with over 97% in-home penetration.

  • 72% of the people have bread at least 4 times weekly, with 56% consuming it daily.

  • Over 80% of bread consumption happens in the AM.

  • The market is evenly split (50/50) between pan bread and “Pan Criollo” (Agua, Sobao, etc.).

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Puerto Rico Market

  • Segmentation

    • Two wholesale bakeries specializing in pan bread and buns: Pan Pepín, Holsum.

      • Market evenly split between them.

    • Two frozen dough companies: Cidrines, Mi Pan.

    • Small, specialty and neighborhood bakeries.

    • Imports from US, Europe and Central America.

  • Channels

    • 55% of volume through chain supermarkets (approx. 300 stores).

  • Volume is relatively stable throughout the year.

    • Slight increase in bun sales during the Summer.

    • In tough economic times the category grows.

  • Small share for private label products at 7%.

    • 16% in US, +30% in Europe.

    • Highest in Latin America (Mexico 1%).

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Who is Pan Pepín, Inc.?

  • Founded in 1970 in Bayamón, PR.

  • 100% locally owned company.

  • Acquired in 1998 by the B. Fernandez Holding group of companies.

  • $60+ Million in annual sales.

  • Employ more than 520 people in five facilities across the Island.

  • Service over 4,500 customers in PR, Virgin Islands and Dominican Republic.

  • Selected three times as one of the 20 Best Companies to work for in Puerto Rico.

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Who is Pan Pepín, Inc.?

  • Our brand is available at all primary retail and consumption outlets.

    • Primary chains: Wal-Mart, Amigo, Grande, Costco, etc.

    • C-stores, colmados and small supermarkets

    • Cafeterias and restaurants

    • Hotels and cruise ships

    • Schools and corporate cafeterias

  • We also supply 13 of 15 private labels available on the Island.

    • Exclusive bun supplier to QSR customers like Wendy’s and Johnny Rockets, as well as casual dining chains like Denny’s and Ponderosa.

  • Exclusive licensees of Healthy Choice (ConAgra) and Nature’s Own (Flowers Foods) brands in the market.

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Pan Pepín, Inc.

  • All our baking is done in one primary facility.

    • 2 pan bread lines currently putting out 115,000 units daily.

    • 3 bun lines currently putting out 40,000 units daily.

  • Company’s historical growth has not allowed for optimal equipment and machinery planning.

  • Little consistency in equipment across baking lines which complicates operation.

    • Only cooling systems, bagger, tier, and coding machines are similar in all lines.

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Pan Pepín, Inc.

  • Our bakeries are all rated Superior or Excellent by The American Institute of Baking (AIB).

  • Pan Pepín operates 5 distribution centers throughout the island for optimum service.

  • We operate 165 sales routes; 5 days a week for 100% coverage throughout Puerto Rico and the neighboring Islands.

  • Delivery 5 days a week; Merchandising 7 days a week.

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Pan Pepín Products

  • We bake 16 different types of pan bread.

    • Top seller is the Club Sandwich White Bread.

    • Whole Grain White Club Bread has become #2 item in less than 12 months.

    • White bread still dominates market although wheat/whole grain products continue to grow fast.

  • 18 different kinds of buns and rolls.

    • 10-count Hot Dog buns is #1 bun item.

    • Local specialty items

      • Media Noche, Criollo Breakfast Bun, Sweet Dinner Roll

  • Contract packaging by outside suppliers.

    • Crackers, Polvorones, Besitos de Coco.

    • Currently evaluating other categories.

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Situation and Challenges

  • Island Environment

    • Limited space within current facilities and in the surrounding areas (urban sprawl).

    • Planning for growth without a dramatic impact to the operation is extremely challenging.

      • Market concentration – Only 2 players supplying the market, neither can absorb the other’s demand.

  • Raw material supply

    • One flour mill, few options for bulk ingredients.

    • Storage space within facility is at a premium.

  • Technical personnel recruiting

    • No breeding ground for personnel, must be homegrown.

    • Costly to retain when competing with large, multi-national corporations.

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Situation and Challenges

  • Planning for food trends

    • Tend to lag the US but are quicker to spread once established.

    • Difficult to gauge right timing, risk of being too early or too late.

  • Energy costs

    • Island currently has highest cost for energy in all of Latin America and US.

    • Can equipment companies provide some expertise in managing this area more efficiently?

  • Supplier support

    • Proactiveness of equipment companies vs. ingredient suppliers.

    • Constant and easy accessibility to technical support to effectively and promptly resolve emerging situations.

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Thank You

Session Sponsor