As bad weather, limited crops and high prices impact tortillas, suppliers look for new ways to cut costs, appeal to consumers.
In a time of economic uncertainty, tortilla suppliers are appealing to consumers' health-conscious side, boasting options from low sodium to whole grain. Trans fat-free labeling for tortillas was accomplished as of last year.
“Tortilla producers probably had more difficulty than any industry converting to trans-free fats; just given the nature of the product, how it is stored, packaged and used by the consumer,” says Stephen Bright, technical manager, global accounts, AB Mauri, Chesterfield, Mo. Now that the trans fat-free labeling has been accomplished, tortilla producers are shifting focus to offer calcium fortified, reduced-fat and multi/whole grain tortilla options. “All these have been around in one form or another at one time, but never promoted as much as they are now,” Bright notes.
In addition, “corn tortillas…are gaining new traction beyond the Hispanic market for their natural health benefits as low-fat, low-sodium, high fiber alternatives to wheat/flour-based bread products,” says Alberto Gonzalez, vice president, marketing for Gruma, the parent company of Mission Foods, Irving, Texas. “Tortilla chips also are undergoing a healthy makeover with baked, low-sodium, whole grain, portion-control, all-natural varieties and organic options.”
In the world of wheat tortillas, flavored options continue to grace supermarket shelves. “We haven't gained full consumer acceptance of flavors. The reason being is that you want to taste what's going into the tortilla as opposed to the tortilla itself; much like a sandwich where you don't want the bread to overpower whatever you're putting in that sandwich,” Bright says. Some companies have none-the-less been very successful making flavored wraps, he adds.
Succeeding amidst economic woes
With ingredient prices on the rise, weather hindering crop development and high demand for corn and wheat, tortilla companies are thinking outside the box to find solutions.
Corn suppliers especially are facing a difficult crop year in some places because of weather. “A tremendous amount of cropland has been underwater or the farmland itself has been so wet they have not been able to physically get out there and plant, so we have actually lost a lot of farmable corn,” Bright says.
In addition, a great deal of corn is being used for ethanol, cutting into the already diminished supply. In some cases, uncertain of what each new month will bring, tortilla suppliers are working on one to two month contracts rather than 12 month contracts, in order to renegotiate prices more frequently, Bright notes. In many cases, costs are being transferred to consumers as commodity costs continue to increase.
Wheat suppliers are finding that as the energy prices have increased, gas prices have increased, making multiple deliveries to supermarkets cost prohibitive. Commodity prices also have grown, which has manufacturers rethinking formulations. “Ingredients have become four to 10 times higher in some cases and all this is hitting at one time,” Bright adds. “There also are some ingredients that are impossible to get anymore.” Phosphoric acid, needed to make sodium acid pyrophosphate (SAPP) used in baking powder, is one example of an ingredient that is in short supply and has become very expensive, Bright says. “We have to look at our arsenal of leavenings. We have at least 30 different types of leavening for the industry. So there are actually other leavening-acid alternatives that are equally as good and less expensive too that are doing a tremendous job for us.”
Tortilla suppliers are focused on efficiency as a way to save costs. If a plant was running at 92 percent efficiency, by working to achieve 99 percent efficiency a company can begin to recover lost margins. In years past, six percent or seven percent production loss may have been acceptable, but now six percent or seven percent costs double relative to two or three years ago, Bright notes.
Feeling the pinch of the economy, consumers are focused on good quality, high value tortillas. “Tortillas provide this tremendous value in terms of an ingredient kids will accept. There is so much utility in this product. You can make peanut butter and jelly, hot dogs. It's a good alternative to bread,” Bright says.
The growing Hispanic population provides a solid customer base for the tortilla industry, but tortillas also are winning acceptance from mainstream consumers. One reason is the increased number of wraps and tortilla options on menus at quick serve and fast casual restaurants, which are introducing new segments of the population to tortillas for the first time, Gonzalez says. He adds that introductions, such as Mission's Multigrain, 96% Fat Free and Carb Balance products, have helped consumers view tortillas in a different light and allowed them to use tortillas in new and more healthful ways.
Tortilla suppliers will continue to target a growing consumer base with healthful tortilla options. While no one knows for certain how economic conditions will evolve, tortilla suppliers will be paying close attention to oil prices, commodity prices and weather patterns, especially for the next 18 to 24 months. “We are continuing to look for novel solutions; alternative solutions that make tortillas better, reduces their cost and improves their quality,” Bright says.
Top 10 RFG Tortillas
|Brands||Dollar Sales||Dollar Sales |
|Unit Share||Unit Sales |
|GUERRERO RFG TORTILLAS||6,216,383||9.1||2||2,565,058||1.4||2.7|
|AZTECA BUENA VIDA||3,245,702||-18.1||1||1,507,238||-23.5||4.1|
Source: Information Resorces Inc. statistics for the 52-week period ended June 15, 2008.
|Fresh Bakery Products|
|52 Weeks |
Ended June 15
|% Change |
|52 Weeks |
Ended June 15
|% Change |
|Pies (excl Snack Pies)||200,894,600||-8||44,843,720||-12.4|
|Cakes (excl snack/coffee)||59,898,060||-1.4||131,620,500||-4.6|
|Frozen Bakery Products|
|Sweetgoods (excl cheesecake)||207,725,800||4||57,018,370||4.7|
|Refrigerated Bakery Products|
|Cakes (excl Snack/Coffee)||70,027,460||0||9,107,437||0.5|
|Pies (excl Snack Pies)||23,014,760||-16||4,328,793||-18.6|
Statistics were supplied by Information Resources Inc., a Chicago-based firm. Its scanner data covers more than 11,300 supermarkets and represents 90 percent of all supermarket volumes. ADG July 16, 2008