(Bloomberg) -- When Francesc Gallés opened a bakery in 1862 in Castellterçol, a small town outside of Barcelona, little could he have imagined that three generations on his family would be running one of Europe’s biggest frozen bread giants, with operations in 80 countries around the world.
Supplying bread and pastries to the likes of Starbucks Corp., Dunkin’ Donuts LLC and Pret A Manger, the Gallés of Catalonia now run a company called Europastry SA — with annual revenue exceeding €1 billion ($1.1 billion). As the family prepares to list the company, it’s inching closer to becoming Spain’s first billionaire baking clan.
The planned initial public offering would value Europastry at about €1.5 billion and the family’s controlling stake would be worth at least €825 million ($911 million), according to data compiled by Bloomberg. The listing would follow that of beauty products company Puig Brands SA, another Catalan family business that went public earlier this year in what was Madrid’s first large listing since 2021.
Having progressed from its modest beginnings, Europastry now produces partially baked frozen bread and pastries in 27 factories spanning Spain, Portugal, Holland, Romania, the US and Mexico, supplying bakeries, cafés and supermarkets around the world. With the frozen bakery bread market estimated to expand to more than $50 billion from about $32 billion last year, the company is in a sector with momentum.
“This industry has truly changed the world of bread,” said Manuel Gómez Pallarés, a professor of food technology at the University of Valladolid. “People nowadays want bread that lasts a long time, and that’s also the case for companies, restaurants, supermarkets. Partial baking means you can have cheap, freshly baked bread at any hour of the day.”
That said, Europastry and its controlling family may be seeking an IPO share price that gives it a valuation richer than that of its Swiss rival Aryzta AG, analysts said. Having shelved IPO plans in June on volatility concerns, Europastry plans to list on stock exchanges including Madrid and Barcelona by Thursday, offering shares at €15.85 to €18.75 apiece.
“The range seems justified, but could be rather on the high end based on where Aryzta is trading currently,” Arben Hasanaj, an analyst at Bank Vontobel AG, said in an emailed response to questions. According to Hasanaj, Aryzta trades at 8 times forward earnings, compared with about 9.1 times for Europastry, if it’s priced at the middle of the range.
Patrik Schwendimann, an analyst who covers Aryzta at Zuercher Kantonalbank, said the valuation isn’t justified. “Europastry are very aggressive in terms of capex,” he said. “That means in the short term you should have higher growth, but that’s not sustainable.”
The bread market is crowded, with several other suppliers — in addition to Aryzta, there’s Lantmännen, Harry, La Lorraine, and Vandemoortele, to name a few. But unlike many of its rivals, Europastry under Executive President Jordi Gallés has made a series of acquisitions to grow its global footprint. It bought rival Wenner Bread in the US in 2018, and this year acquired DeWiBack in Germany, US-based Dawn Foods’ frozen bakery division and Dutch frozen baked goods distributor De Groot Edelgebak. The company is also banking on its robust research and development spending — $114 million last year — to give it leg up.
Nestled among nondescript offices and warehouses on the outskirts of Barcelona is Europastry’s first R&D center — it has six in all. Pastry chefs conduct relentless rounds of testing to develop new products. New recipes are born and honed, each subjected to exhaustive trials and refinements stretching over months. Constantly fueling the lab is a stream of insights from Europastry’s commercial scouts, who traverse global markets to bring back whispers of emerging trends and flavors. Through its research centers, where meeting rooms are named after luminaries of the baking world like Pierre Hermé and Nancy Silverton, Europastry last year added more than 400 products to its portfolio, which in addition to breads includes everything from croissants and brioches to donuts and brownies.
“They have the ability to respond if there is any problem that others do not have, a diversity of products that others do not have,” Pallarés said. “They are also very aware that the market demands different types of qualities and they have capacity to make the cheapest bread possible, and other factories to make a higher-end product.”
The Gallés family’s foray into the frozen bread market began with Francesc’s grandson Pere Gallés Payàs, who laid the foundations of Europastry in the 1960s when he created a chain of bakeries in Barcelona, called El Molí Vell. Traveling to France in 1980, Pere discovered frozen bread dough. While it was common to freeze raw dough before fermentation, Pere began baking bread up to 80% of the way before freezing it, leaving the client to finish the job. “Precuit” bread, as he called it, was commercialized in 1984, and Europastry was founded soon after in 1987. In 2015, closing a chapter on its past, the company sold its bakery chain and cafes to focus on supplying frozen bread and pastries to coffee chains, supermarkets and bakeries.
With revenue of €1.4 billion in 2023 and a profit of €205 million, the company claims to be among the top five global suppliers of frozen bakery products. It plans to use the proceeds of the IPO to bankroll further international expansion, product innovations and M&A.
As Europastry seeks validation from the market, a new chapter is opening for the relatively low-profile family. Of the three children of Pere — who died in 2010 — Jordi Gallés is the only one in a managerial position at the company. Jordi worked at a bakery in France for a short time in 1993, and then dabbled in other jobs, including as a controller at Volkswagen Audi in Spain, before joining the family business at 24. He was 37 when he became executive president in 2010.
His sister Eva has a seat on the board, and along with another sibling, Anna, and their mother, Gloria Gabarro, they control the family office that owns the Europastry stake. The vehicle has made small investments in real estate and a venture capital firm specializing in biotech.
In addition to the Gallés family, Europastry has pre-listing investors, including MCH, Spanish food producer Agrolimen and Banco Sabadell. JPMorgan Chase & Co., UBS Group AG and ING Groep NV are leading the IPO, and the stock is expected to begin trading on the Madrid Stock Exchange on Thursday under the symbol EPTY.
--With assistance from Benjamin Stupples.
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