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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 Perspectives Baking in Puerto Rico & the Caribbean

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    1. Baking PerspectivesBaking in Puerto Rico & the Caribbean Mario Somoza President and CEO, Pan Pepin Sponsored by:

    2. Baking Perspectives in Puerto Rico and The Caribbean Mario Somoza Pan Pepín, Inc. June 27, 2008

    3. Puerto Rico • Basic Facts • Bread Market • Pan Pepín • Who we are • What we do • Situation and Challenges • Q & A

    4. 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.

    5. 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.

    6. 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.

    7. 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.).

    8. 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%).

    9. 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.

    10. 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.

    11. 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.

    12. 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.

    13. 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.

    14. 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.

    15. 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.

    16. Thank You

    17. Thank You Session Sponsor