Baking industry leaders reflect on the challenging year
and share ideas for business success and innovation next
year and beyond.
Compared to other years in recent history, 2008 was one of the most challenging for bakery businesses in every sector of the industry. Unprecedented ingredient costs and skyrocketing gasoline prices combined with a downturn in the economy left many bakery operators scratching their heads, wondering how to cope. Most raised prices, some cut staff and a few incorporated cheaper ingredient alternatives in their product lines. All were forced to make some difficult business decisions this year. And, while gas and ingredient prices have eased, the state of the economy in 2009 does not hold much promise.
On the surface, the situation looks dire, but fortunately for the baking industry, people always need to eat, and some parts of the industry even benefit from the down economy. Most importantly, the industry is filled with leaders who are always moving, thinking and capitalizing on new opportunities. On behalf of Bay State Milling Co., Modern Baking and Baking Management magazines brought together some of these leaders from different segments of the baking industry to talk about the year and share their thoughts on future innovation and where the industry is headed.
Moderated by Heather Henstock, group editorial director, the roundtable included the following participants: Tom Gumpel, director of research and development, Panera Bread Co., St. Louis; Kristen Repa, owner, Dessert Works, Norwood, Mass.; Simon Stevenson, pastry chef/bake shop/Hampden DC manager, University of Massachusetts, Amherst; Joe Piantedosi Jr., owner, and Lino Dischino, production manager, Piantedosi Baking Co., Malden, Mass.; Karen Trilevsky, founder/C.E.O., and Frankie Whitman, vice president, marketing, FullBloom Baking Co., Newark, Calif.
Modern Baking: Today we're going to get into new opportunities in the baking industry, but I want to start first with the challenges you are facing. In your business, what is your biggest challenge to profitability?
Joe Piantedosi: Rising costs. Ingredients, mainly flour. Fuel costs, labor costs, insurance, utilities and trying to make a profit. We're feeling squeezed now more than ever. And just selling bread, we're charging more when flour goes up to justify the price increases, but how much can you charge for bread? Also, we supply restaurants where bread is not a total necessity, or at least can be cut back.
Kristen Repa: Absolutely. We of course are also dealing with flour costs, but dairy, eggs and other ingredients are also following this upward trend. For me, finding qualified bakery labor is a big issue as well. In a small businesses like mine, we're looking for trained employees, somebody with some experience, personality and talent. So, along with our flour prices doubling, my labor costs have practically doubled in the last year, too, to stay competitive producing high-quality products.
Karen Trilevsky: At the same time labor costs are rising in this economy, customers are looking for increased value. They're [wholesale accounts] are asking us how we can get the cost out of it. Transportation is a rising cost, packaging, all of it is. On every front we're getting hit with increased costs and the customer is looking for decreased cost.
Tom Gumpel: I look at fuel as obviously a huge piece for us. This is a company that has 19 fresh dough facilities. All they have in them are mixers and people moulding. It's a huge operation of 50,000 sq. ft. times 19 factories. So, when you see a Panera truck go by, there's bread fermenting on that truck, and we have to get to the stores. Do that math times $5 a gallon for gas. You can't just pass that on to the customer.
Fuel is always an issue, but because we are a café, the biggest thing is transactions. Transactions at the register and the number of people walking through the front door. You may be getting fewer people coming to the door, and they're making trade offs.
Their menu mix changes. Instead of that extra latte or a baguette to take home with their sandwich, now they're getting a cup of free water.
MB: Clearly this has been a challenging year for all sectors of the baking industry, but let's think forward. Where do you see opportunities for innovation in your business?
Simon Stevenson: At U Mass, we've gone the route of trying to integrate more fresh fruit into our products. We're looking at using more whole grains, particularly in products that aren't traditionally thought of as whole grain, such as cookies or brownies. And, we're definitely serving smaller portions. Smaller portions have been huge for us and have really gone over a lot better than I thought they would.
Repa: Something I've done along similar lines is scale back the extra stuff that we add to our products. They're still high quality products, the portion sizes are the same, but we're not adding so many foo-foo things to it.
I'm talking more about our pastries, so the desserts are specialized and cakes are custom made. But, in our retail store, we have individual size and miniature size pastries with not as much labor in regards to garnish. We've scaled back just enough to not have to hike our prices too much. We're streamlining on the simple elegance.
MB: What about opportunities with natural and organic products?
Frankie Whitman: In fact, more and more people now are asking for it. Even our customers who haven't been asking are now asking. Other suppliers who are in our division are not using all-natural. So, we have opportunity for expansion because natural ingredients are something we've always done.
MB: It sounds like for all of you, concentrating on what you do best is where the most opportunity lies?
Gumpel: In this change in the economy, I think the next big thing for us is just trying to hold onto your brand and not to do something stupid right now. Make moves within your brand, within who you are.
If we took the bread wall out of Panera Bread because retail bread sales were declining, what would happen? If we didn't sell bread, we'd be just another sandwich shop competing with everyone else who makes sandwiches and soup. We would be taking the bread out of Panera Bread.
It is not so much, “What's the next big thing?” The majority of our work is probably 5 percent innovation, and the rest is fixing things, maintaining things and staying true to our brand.
MB: Any other trends you see that might bring in more business? How about gluten-free?
Gumpel: They're a small group of people with a serious health issue. It's not a gluten allergy. It's celiac disease, and they're a small group of people who are very vocal. We're hearing more from celiacs. It's a totally serious situation, so I called the celiac association president to get her take on the this. She told me, “Tom, two words: Panera Bread. Anybody who has celiac disease isn't coming to Panera Bread.” That's why we don't have gluten-free items.
Piantedosi: What about other allergens? Lino and I are on the same page on this, but we have a compliance department now because we are a national company that requires the word allergen-free. I mean, what is allergen-free? Everything under the sun has allergens in it.
So, we had to cut back on nuts in our products. And like you said, that's a small percentage of the population. We find it challenging in our bakery; we don't have time to create new and exciting items because we have to worry so much about compliance issues.
MB: What about the trans-fat issue? How have you dealt with that?
Repa: Our products didn't have too many ingredients with trans fats, so I didn't have to play around too much. But, I saw the trend, and just said, I'm going to do it now. I'm going to be the first in the area to be able to say our products have zero trans fats.
Stevenson: That is exactly the way I looked at it. I heard about it in New York and said, this is going to come to Massachusetts, and it did. And, we're a state university. We have to make this change now before it becomes legislation. It was tough in the beginning, but we found companies that were producing trans fat-free oils and other ingredients. We tested a lot of them with varying degrees of success. But, we're all set now. We're trans fat free, and it's great.
Gumpel: You're not off the hook because you use butter. There are added trans fats and natural trans fats, and governments around the country, whether it is a county or city, are having trouble defining that. It's a pain in the neck.
Frankie Whitman: We use a software for our nutrition labels, and even if you use butter, it doesn't come up. It still says zero trans fat.
Lino Dischino: We have to purchase trans fat-free oil to put on the pans for customers that request it. But that's for production that day. It adds cleaning and sanitation time. You are looking at four hours for the crew to clean the line for the next product, and that's very costly.
MB: What are the rest of your customers asking for these days? Is there anything new that you're researching and developing based on customer requests?
Repa: I look at research and development at the very basic level. What are some of my alternative ingredients, and could I work with something new without getting into strange substitutes, something that's not natural?
Stevenson: My guests are notoriously fickle because their age group is 18 to 21. Anything out of the ordinary kind of blows their minds. When you start adding whole wheat to muffins or cookies, they get worried that it's a health food now. Once you get them to actually try it, you get positive response, and they're interested in it.
MB: I would have thought the younger, college-age customer base would be more open minded?
Stevenson: Right. You would have thought that. They complain there are not enough healthful options, yet the most popular station in the dining hall is chicken fingers, French fries and hamburgers.
We also do a lot of vegan. We have a 21-day rotating menu for our regular guest, but last semester, we started a 21-day rotating cycle for a vegan menu. It's proven popular.
Gumpel: As we talk about it, students are not putting cash down. It's interesting to see trends when money is not an issue. So, they can do their own thing, but when people are putting money down, it all changes.
The quietest group that has the most impact on my future is diabetics. Diabetics are out spending money, and I don't mean to be disrespectful, but there's a portion of the diabetic community that is diabetic because of poor eating habits. They are eating out, and it is already a big health issue. Sugar substitutes, diets and smaller portion sizes are all part of our future.
MB: So, what are your biggest barriers to going after some of the new opportunities you see on the horizon?
Repa: Cash flow. I don't know what else to say. That's always the problem at the end of the day.
Stevenson: We try to keep up with the industry and see what's going on out there. By attending conferences like this, it's a good way to network and see what other people are doing. Then, I go back to my kitchen and start mapping out some new products with my team when I have the time to do this.
I will test new products by working them into specials during the week. I'll get a feel for what works. In the end, I always come back to: there's nothing better than a warm chocolate chip cookie and a glass of milk.
Piantedosi: I think there's nothing better than a warm piece of bread.
Stevenson: Keep it simple. In the end, it's still the most important thing. You can over-complicate things way too much. Staying true to who you are is what's most important.