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A baker kneads dough at the Schmidt bakery in Munich, Germany. Photographer: Guido Krzikowski/Bloomberg

(bloomberg)

(Bloomberg) -- As if Swiss baker Aryzta AG doesn’t have enough to chew on. On top of figuring out how to shrink its chronic debt levels and dealing with spiking wheat prices, the Zurich-based company isn’t millennial enough, according to one fund manager.

Aryzta, whose shares have fallen 82 percent over the past three years, has an old-fashioned view of consumers’ food demands, and stands in contrast to cheese and yogurt maker Emmi AG, according to Eleanor Taylor Jolidon, who manages $3 billion at Union Bancaire Privee in Geneva. Emmi’s stock, which has more than doubled in the same period, has been helped by its investments in organic food and healthier-eating options, according to the fund manager.

“Aryzta is still in this old world form of food consumption, whereas Emmi is more ‘millennial,’ with its caffe lattes and California goat cheese and other healthier options,” Taylor Jolidon said in an interview at UBP’s headquarters. Aryzta is “in the wrong segment, because we don’t eat pastries anymore, and is dealing with its past as opposed to its future, paying the price of previous strategic decisions.”

Aryzta is planning a share sale to raise as much as 800 million euros ($906 million) as it struggles to lower debt after three profit warnings in 18 months, the latest one in May. Adding to its challenges, this summer’s heatwave in Europe has led to soaring grain prices, which Credit Suisse said may prompt more caution in the company’s next outlook.

While Emmi may also suffer from the extreme temperatures that have been damaging harvests in Europe, the company is “more in the higher growth food categories and that helps them,” said Taylor Jolidon, whose bank owns shares in Emmi but not Aryzta.

Emmi, with products including YoQua and muesli yogurts, Luzerner cheese and energy milk, is among the best-positioned companies in the organic food sector, and may get a boost as media coverage of Monsanto’s Roundup weed killer case prompts consumers to reconsider what they are eating, according to Kepler Cheuvreux analyst Karel Zoete.

“In certain markets, organic food is starting to become mainstream and scares around food safety are incrementally positive for the category,” the analyst wrote in a note on Wednesday.

To contact the reporter on this story: Albertina Torsoli in Geneva at atorsoli@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Beth Mellor, Angela Cullen

©2018 Bloomberg L.P.

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