MUNICH — Between COVID-19 challenges, workforce shortages and supply chain problems, the baking industry has taken a front-row seat to a whirlwind of change. As the end of 2021 creeps closer and these issues are here to stay, industry members can’t help but wonder … What’s next?
That’s what Kerwin Brown, president and CEO of BEMA, and Robb MacKie, president and CEO of the American Bakers Association (ABA), tackled in their IBIE presentation at iba.CONNECTING EXPERTS, a virtual tradeshow that wrapped up last week. They covered some of the top trends impacting the industry and predicted next steps for bakeries and equipment suppliers alike.
Things are looking good as far as foot traffic for quick service restaurants, foodservice and brick-and-mortar grocery stores, with regional diversity giving them a boost. Although e-commerce is still a critical element of how the consumers of today shop, vital signs are improving on good old-fashioned in-person shopping.
“In the third quarter of 2021, everything seems to be rebounding fairly well,” Brown said.
MacKie also pointed to the strength that fresh bread, cookies and other products are showing in retail bakery. Although many bakeries have had to strategically shift their SKU diversity, demand is still strong, and smaller niche bakeries are seizing the opportunity to jump into the mix.
“I expect we’re going to see near record numbers of new product roll outs, particularly in the health and wellness area,” MacKie said.
But as demand soars, plenty of problems persist that get in the way of a seamless production process. Brown noted the “big three” issues for suppliers are supply chain, inflation and workforce — but these problems are there for bakers as well.
“Ingredient costs have spiked anywhere from 17-30% in the last year, but that increase is not exclusive to ingredients,” Brown said regarding inflation. “We’re seeing it with lumber, steel and motors too.”
And as inflation impacts raw materials, it also impacts how expensive finished bakery products will be and how much profit is made.
“At the end of the day, the retailer will set the price of the market,” MacKie said. “But I can say it’s all going up, and if you add it all together, that margin gets squeezed.”
With supply chain, the competition is fierce — everyone wants the same parts that are in short supply. Demand is higher than ever for things that have incredible long lead times, and one small missing piece can throw a whole operation out of whack.
“I think there are surprises. It might seem like no big deal, but if there is one little cog that’s off then boom,” Brown said. “We’re really talking about a new normal with flexibility, and communication is so important.”
MacKie echoed Brown, saying that understanding and honesty is key as every business scrambles to get things done.
“The importance of transparency sticks with me,” MacKie said. “Surprises are happening every day, so building that awareness is needed.”
And workforce issues are the cherry on top.
“I think there is a ‘help wanted’ sign at virtually every business I run into,” Brown said.
With nearly every business desperate to hang onto talent and recruit new employees, both Brown and MacKie hammered home that creativity is key. Listening to what employees want and providing them with a career rather than a job are important steps to bring people into the baking industry.
“We as an industry need to work on how create career pathways rather than an 8am-5pm,” Brown said. “We have to improve working conditions and avenues to success.”
Looking to the future, MacKie said that the way consumers shop is changing. From online groceries to new delivery models like Uber Eats to new brick and mortar dynamics, bakeries have to ask themselves where consumers are engaging and how to cross-market themselves outside of the perimeter and into other areas of commerce — both in store and online. But they also need to consider what they can realistically do when they might be short staffed.
“I think that bakers will be considering what they can make efficiently,” Brown said. “Health benefits and what tastes great will be in there, but it’s about what they can deliver.”
And what they deliver needs to be up to snuff on the innovation front, from the actual product and beyond.
“Consumers are looking for the latest innovation in a product, but also in processing, ingredients, packaging and more,” MacKie said.
All these issues and more will be discussed at IBIE 2022, and registration for the event is now open.
