State of the Industry
BAKERy
2022
Facing formidable challenges
Baking companies continue to address the supply chain, workforce development, and inflation.
Douglas J. Peckenpaugh, Group Editorial Director
In 2022, the baking industry continues to face formidable and ongoing challenges related to the supply chain, workforce development, and an inflationary economy—all compounded by complications introduced by the Russia-Ukraine conflict and the ongoing coronavirus pandemic.
The BOTTOM LINE
- Cost input analysis
- Addressing workforce challenges
- Strategizing for efficiency
SPONSORED BY
“In a year that ended up being just as—if not more—crazy than the previous one, the American Bakers Association again was honored to work hand in hand with our members to take on some seemingly insurmountable challenges with the supply chain, critical worker shortages, and more—all amid the ongoing pandemic,” says Robb MacKie, president and CEO, American Bakers Association (ABA), Washington, D.C.
“Many times over the past year, we have leveraged industry relationships both in our category and in the broader food sector that have helped us succeed and thrive despite all the challenges we have faced.”
— Robb MacKie, president and CEO, American Bakers Association (ABA), Washington, D.C.
“I am extremely proud of how we have helped each other through the pandemic, dealing with supply-chain disruptions, and now navigating cost increases caused by the war in Ukraine,” says MacKie. “One thing that stands out to me is the importance of relationships to help us through these times. Many times over the past year, we have leveraged industry relationships both in our category and in the broader food sector that have helped us succeed and thrive despite all the challenges we have faced. Now, we must all work even closer together, so we can continue to be successful in supplying baked goods to all Americans.”
The food industry supply chain still faces challenges. “Our entire supply chain, from farm to table, is under enormous stress,” says MacKie. “It is through honest, transparent, and open communications that will help us get through these tough times. The relationships between suppliers and bakers are more critical than ever.”
Our new reality
Supply-chain activities have faced a variety of logistical challenges. “Everything is taking longer—almost twice as long and sometimes two to four times as expensive,” says Jeremiah Tilghman, COO, Better Butter, Salt Lake City, and a member of the Board of Directors for the American Society of Baking (ASB), Kansas City, KS. “For capital, expect lead times to be double.”
This has led to an increase in rehabilitating equipment that previously might have seen replacement—or used options to purchase, notes Tilghman. “Materials, you must try to get as much contracted as possible with cost not as important as availability.”
In the current economic climate, an inflationary financial reality impacts every food business today. “You expect higher prices and budget accordingly,” says Tilghman. “Work on not only on securing secondary suppliers as backups, but in many cases look for a third and fourth source.”
We have grown accustomed to these business hurdles. “Most folks understand the situation and are more tolerant than I would expect,” says Tilghman. “Most folks expect delays, which I have never seen before.” We are living through particularly unique and challenging times.
Inescapable financial realities has increased pressure to raise prices. Tilghman recommends focusing on the controllables. “Downtime and waste are more costly than ever before,” he says. “Focus on being as efficient as possible.”
Nevertheless, many of those across the baking industry have raised prices. Unfortunately, in many cases, the costs are passed on to customers and end consumers, notes Tilghman. “It is a new world of higher costs for everyone and everything.”
Scott Houtz, president, Air Management Technologies, Lewisburg, PA, and a member of the ASB Board of Directors, notes his company has unfortunately had to raise prices for customers, with reduced margins to minimize the impact. “This is due to a trickledown effect, since we have experienced increases of over 50% from some of our vendors during the past 18 months. It should be noted that several of these vendors are Fortune 500 companies, so this is widespread throughout various industries. They contribute increases to various factors relating to the pandemic, economic state, and the energy-intensive manufacturing operations. In addition, lead times have more than doubled.”
Bruce Campbell, vice president, dough processing technologies, AMF Bakery Systems, Richmond, VA, and a member of the ASB Board of Directors notes his company has had to implement two small price increase in the last year to offset the dramatic increases in raw materials and other purchased components like electrical controls. “In order to try and prevent additional increases, we are stressing value engineering where we can reduce the cost of the machines, ensuring only the features the bakers really need are designed in,” he says.
“You expect higher prices and budget accordingly. Work on not only on securing secondary suppliers as backups, but in many cases look for a third and fourth source.”
— Jeremiah Tilghman, COO, Better Butter, and member of the Board of Directors for the American Society of Baking (ASB)
Supply-chain strategies have faced ongoing troubleshooting for several years. “We have added about 50% more suppliers than this time last year in order to cope with shortages,” says Campbell. “This is especially significant in the machined components supply. Besides raw materials being extended, the shops that can make parts have struggled with labor supply for years before COVID, and now it seems worse.”
Workforce challenges sometimes hinder production efficiency. “As with many industries, the old veterans are retiring and not enough skilled machinists are entering the market,” says Campbell. He notes his company has added three major new machining centers in the factory that use a high degree of computerized numerical control (CNC) technology to replace skilled machinists with machine operators.
Today’s challenges are leading more bakers down a path toward increased automation. “From our standpoint, orders for automation equipment are higher than before, as well as anything that can improve efficiency for the baker to offset their raw material costs and labor shortages,” says Campbell.
Top initiatives
ABA continues to work with the U.S. government to improve the baking industry’s business climate. “As a part of the broader business community, and with actions that led all the way to the Supreme Court, ABA educated the federal government on how the baking industry works to ensure a healthy and safe environment for all employees,” says MacKie. “We advocated for our industry with the White House, Office of Management and Budget, Environmental Protection Agency, USDA, Small Business Administration, and Congress for critical access to soybean oil—and that fight’s not done yet.”
Governmental assistance has proven essential to keeping some bakery businesses viable over the past couple of years. “Seeking relief for our members who struggled through the pandemic, we secured additional funding for Paycheck Protection Program (PPP) loans and successfully lobbied for the tax deductibility of those loans,” says MacKie. “We also assisted individual member companies with specific challenges with the PPP loan process.”
MacKie notes ABA has worked to help control cost inputs related to labeling regulations. “We secured regulatory flexibility and enforcement discretion for labeling change deadlines,” he says. “This allowed bakers to shift their supply chains as conditions merited without running afoul of rigid labeling regimes.”
Other initiatives relate to strategic communication between ABA members. “Talking about complicated issues with customers, suppliers, the media, and consumers can be tough,” says MacKie. “That’s why we created members-only, easy-to-use messaging toolkits for tricky topics such as supply-chain challenges and soybean oil supply concerns.”
“In order to try and prevent additional increases, we are stressing value engineering where we can reduce the cost of the machines, ensuring only the features the bakers really need are designed in.”
— Bruce Campbell, vice president, dough processing technologies, AMF Bakery Systems
Workforce solutions
The past few years have dictated a shift toward more virtual offerings to support the industry. “ABA’s events team built a successful virtual meetings program to ensure the baking industry stayed connected when they could not do so in-person,” says MacKie. These virtual opportunities included the NextGenBaker Leadership Series, specialty webinars, professionals groups, and the 2021 ABA Convention.
MacKie notes ABA has also expanded its online course offerings with the Bakers Manufacturing Academy to include Baking Basics 101 in English, Spanish, and Portuguese. “Now students can take courses on variety hearth breads, tortillas, hamburger and hotdog buns, and sheeting and laminating,” he says. ABA just launched the Bakers Manufacturing Academy advanced course in Bread Manufacturing in Spanish and English. “It’s focused on bakery’s most common product, white pan bread, and we’re excited for the industry to take advantage of this training,” he says.
“While BakingWorks continued to promote industry careers to potential employees, we amped up our workforce recruitment resources, including an exclusive Salary and Benefits Survey, a baking industry careers video, virtual informational session, veterans’ webinar, and career pathways template,” says MacKie. “We also launched ABA’s Diversity Equity and Inclusion Working Group in association with the NextGenBaker Program and recently published a members-only look at diversity, equity, and inclusion issues in the baking industry. Our Recruitment Trends & Best Practices study unveiled new insights to help our members assess challenges and best practices for workforce recruitment and retention.”
For 2022, the business climate is shifting back to in-person events—including for key events like the ABA Convention, which took place in Palm Springs, CA in March, and the BEMA Convention in San Diego in June.
“Now that we’re starting to shift back to in-person, we’re delighted to have seen so many in the baking industry at our convention in March 2022 in Palm Springs,” says MacKie. The 2023 ABA Convention will take place in March 2023 in Amelia Island, FL.
Future perspectives
This year will also present the biggest show in baking, the International Baking Industry Exposition (IBIE), taking place September 17 to 21 in Las Vegas. “I don’t recall a more important IBIE in my 25-plus years working for the baking industry,” says MacKie. “IBIE will be where the industry strategizes, finds solutions, and conducts business to make us even stronger.”
The 2022 election cycle will also factor into future strategies. “We need to let our elected leaders know we are here with one, united, strong voice for the industry,” says MacKie. “We understand and appreciate strong, focused, and competent leadership. This November, we have the opportunity to let our voice be heard in selecting those leaders. I implore our industry to be informed and engaged voters, and ABA has plenty of tools to help do that. It also will be vital to hold our leaders accountable for the commitments they make.” SF&WB
