Developments within the retail sector of the food business, which at one time might have been of little consequence for flour millers in developed or developing countries, suddenly loom large for their impact on milling. This impact has two forms — how it is shaping the structure of milling in an increasing number of nations, and how it is introducing systems and technologies that appear to be having a pronounced effect on the actual quantity of flour consumed in a specific country.
Of great and almost unnoticed importance is the internationalization of the retail food business. Once an industry of distinctly regional and national character, the giants of food retailing have suddenly elected to expand into the far corners of the globe as a way of building their business. Publicly-owned companies, such as Wal-Mart, Ahold, Tesco, Sainsbury and Carrefour, all have expanded their operations beyond their home countries, in instances to the point that foreign operations are the dominant part of the business. Similarly, leading privately-owned retail operators, such as Aldi, have also expanded into other nations.
Each of these retail chains that is seeking to grow by entering into foreign markets has a "style" of operation that demands certain performance on the part of their food suppliers. This is especially the case in bread baking where these grocers have attained a size that they increasingly have an interest in selecting suppliers of flour to the bakers that provide their bread. This interest is not only in the quality and pricing of the flour, as a factor in the price of bread but also in how the mills operate and comply with all sorts of national regulations of sanitation, wheat quality and other matters. For the most part, these are totally new interests on the part of retailers, as compared to the time not very long ago when a baker’s bread retailers had little or no impact on the supplier of flour used in baking.
In the realm of systems and technologies, this retail expansion exerts a tremendous influence on how bread is displayed in stores, how it is priced, and how bakers seek to contend with the high expense in every country of delivering fresh bread to store shelves. In response to many of these factors, the United States currently is experiencing an explosion in production of E.S.L. (extended shelf life) bread that has doubled or even tripled the shelf life of a fresh loaf, from several days to 10 or more. Achieved by the introduction of new ingredients and new technologies in the baking process, the outcome for U.S. bakers is a reduction in "stales," meaning bread that does not sell and is usually taken back by the baker, from levels as high as 15% to less than 8%. After some hesitation in adopting such an approach — primarily stemming from concerns over consumer reactions, which have been negligible — E.S.L. is sweeping the American baking industry.
The goal of bakers has been to slash the cost of the direct-store-door delivery system and at the same time keep shelves fully stocked at all times, which would have been costly beyond imagination before E.S.L. Based on about a year’s experience, both of these goals have been achieved beyond the expectations of E.S.L.’s most ardent advocates. The result has been substantial cost savings on the part of bakers, and newly-satisfied grocery retailers.
The "loser" in all of this has been the market for flour. Reducing stales from 15% to 5% of production directly relates to the quantity of flour required to bake a loaf of bread, as producing 10% less bread to supply the same consumer demand is a whopping cut in flour utilization. Flour disappearance statistics in the United States are beginning to reflect these changes in how bread is baked and distributed — a situation that is further compounded by grocers around the world introducing distribution efficiencies and store-stocking procedures that also might reduce bread wastage, thus decreasing the quantity of flour used.