PALM SPRINGS, CA — When commercial bakeries supplying to foodservice look back on the past two years, it might feel a bit like a boomerang.

The overall foodservice industry was down by about 25% in 2020, according to David Henkes, senior principal for Technomic, during a business panel discussion at the American Bakers Association (ABA)’s annual convention, held March 27-30.

Henkes was quick to note that “foodservice” doesn’t just mean restaurants; it includes more than a million facilities such as healthcare operations, hotels, business and recreational venues, bars, clubs, and more. And it all impacts commercial bakers. In fact, that 2020 plummet translated to a nearly $3 billion loss between 2018-2020 in manufacturer shipments. That’s a 20% decline over a two-year period.

While there was a significant bounce back in 2021, new COVID-19 variant surges led to more setbacks. But today, top-line revenue is looking good for many restaurants, according to Henkes, despite acute cost pressures foodservice operators are experiencing, likely due to Americans’ level of disposable personal income with the economy on an upswing for the time being.

There are specific challenges happening, though, and the panel addressed those that are directly impacting bakers supplying product to foodservice channels. Those panelists included Robin Hernaez, division chef of Charlotte, NC-based Compass Eurest B&I; Joe Turano, president of Berwyn, IL-based Turano Baking Co.; and Susan Sarich, founder of San Francisco-based SusieCakes.

The first challenge is labor. “The industry-wide labor crisis is something we’ve been hearing about across retail and foodservice, and it’s not going away anytime soon,” Henkes said. “This impacts not only supply chain but also, obviously, what restaurants and foodservice operators are able to do within their operation.”

Many foodservice establishments have had to cut back on hours of operation just because there’s no one to run it. Then again, establishments like SusieCakes intentionally that limit their business hours as part of the company culture and a recruitment/retention tool as well.


“The industry-wide labor crisis is something we’ve been hearing about across retail and foodservice, and it’s not going away anytime soon. This impacts not only supply chain but also, obviously, what restaurants and foodservice operators are able to do within their operation.” —David Henkes | senior principal | Technomic


“When I founded SusieCakes, it was very intentional to have a business model that supported women having progressive careers in foodservice,” Sarich said. “Our hours of operation are based on that premise. We’re not open early mornings or late nights, and we’re closed on major holidays. For a retail business, that’s very different, and meeting team members where they need to be met is really important, especially in this labor environment.”

That said, the SusieCakes model isn’t the norm, and the life cycle for foodservice employees has historically been relatively short. And in this scarce labor market, operators often have to rely on their suppliers more than ever, especially with specialty and niche products like baked goods.

Turano Baking helps its foodservice customers by making products user-friendly for back-of-house restaurant workers who are either untrained or manning a skeleton crew.

“In the past two years, we have certainly adapted our products to be easier to use in restaurant kitchens, especially due to labor shortages,” Turano said. “That could be making packaging easier to utilize, or it’s products that are ready to go with less preparation.”

He also noted how a lack of foodservice labor has impacted the bakery’s distribution and, ultimately, its production.

“There’s no doubt that with the labor shortage, and now with freight costs up, the direct-store delivery model is declining,” Turano said. “That’s because there are less people. So, the move toward frozen on a national level is real; we have more and more customers going toward that model, and I think that will continue.”

From the customer perspective, Hernaez noted that labor reduction also means SKU rationalization and paring down menu offerings. It’s a double-edge sword, limiting innovation in product development but shifting the focus to quality over quantity, often driving the premiumization trend.

He issued a challenge to commercial bakers: “How can you help support efficiency in our operations? We need fewer SKUs that are also more versatile. The more we can find one product that can do multiple things, the easier it is for us as operators.”

And that’s the next challenge … getting access to the product when disruption is preventing every point in the supply chain from accomplishing that goal.

foodservice panel

“Even if a manufacturer could put out a product fast enough, the distributer can’t get it to the end-user,” Hernaez said. “It’s a trickle-down effect.”

Hernaez acknowledged that it’s tough across the board; when his establishment has to wait six months for a coffee brewer, the problem gets exponentially worse the further up the chain.

“I don’t want to say it’s out of their hands, but it really kind of is,” he said. “Adapting is the best thing we can all do right now.”

Compass Group North America, parent company to Eurest, serves upwards of 10 million meals a day through corporate cafes, school lunches, vending and restaurants. So, if the company can’t obtain SKUs proprietary to a particular program, the operation has to adapt. When this happens, the relationship between manufacturer and customer — whether that’s allied to baker or baker to foodservice operator — has to be such that they can rely on one another.

“The key now is reliability,” Turano said. “Each of us, whether we’re a raw material provider, equipment supplier or bakery producer, the reliable suppliers will be the winners.”

Reliability can come in many forms, he noted, but the most important is inventory.

“Having proper inventory across your goods being built is going to be the key to getting through this period.”

But keeping that inventory is coming at a cost … and that’s not going down anytime soon. This becomes a critical issue in the foodservice space because it’s a market that relies heavily on consumers’ discretionary income. While the economy is still healthy at the moment, costs that are passed onto the consumer will not bode well should another recession hit.

One immediate tool goes back to streamlining menus as a cost-reduction strategy. It’s another reason that foodservice operators are relying more heavily on versatile products that can be adapted and applied to a variety of menu items.

During the pandemic, online ordering for SusieCakes saw a huge spike in sales. That boded well for the labor because it required less staff for onsite order taking and prep. But it also increased sales as well.

“Before the pandemic, someone would come in and want one cupcake,” Sarich said. “However, when they order online, they tend to purchase much more. As a result, our average ticket price has gone up.”

Although inflation has hit, demand has not waned. It’s only re-engaged the value proposition, and consumers are looking for higher quality products from their foodservice experience.

“Early in my career, someone told me that guests remember the first part of their meal and the last part … that’s bread and dessert,” Sarich said.

Taking that cue, Sarich has placed an emphasis on quality over quantity: fewer SKUs that provide an upscale product experience for the customer.

When quality doesn’t wane, the price is often easier to justify.

“I believe high-quality baked goods are the ones that will succeed,” Turano said. “Consumers have had time to understand food in a more intimate way. And from a foodservice standpoint, especially, we have to be ready and willing to create, develop and implement high-quality-ingredient foods and baked goods.”