I don't know about you, but 2009 is one year that I'm glad to say good-bye to. Bring on 2010. It can't be worse, can it? Although, I think we said the same thing at the end of 2008. All of the optimism we had going into the beginning of the year seemed to have evaporated by the third or fourth quarter as sales declined.
The good news is that economists say the recession has ended and the gross domestic product grew 2.8 percent in the third quarter. However, that does not seem to be filtering down to consumer spending as they retain a tight hold on their purse strings.
The problem most likely is the high unemployment rate, which is at more than 10 percent, although experts say the rate of job losses is lessening. Good news, I guess. But what these unemployment numbers don't take into account is the rate of underemployment, which accounts for involuntary part-time workers, underutilization of skills (i.e. a doctor working at McDonalds) or overstaffing (i.e. seasonal workers).
Just as a comparison, the unemployment rate during the Great Depression hit a high of almost 25 percent, which is bad, but if you take a family of four adult siblings, that meant only one of them didn't have a job. While only one out of four were “unemployed,” when you factored in underemployment, the percentage jumped to 50, if I remember my history correctly. That meant one out of two people were, for all intents and purposes, out of work.
Our current underemployment rate is 17 percent. In the grand scheme of things, our unemployment and underemployment rates look just rosy, so why are so many businesses struggling?
Consumers are scared, and rightly so. Those pesky experts are throwing around the term “jobless recovery,” which is bad news for consumers and bakeries. Businesses are learning to do more with fewer employees. Good news for the businesses, but bad news for the people who are currently unemployed or underemployed. (And, bad news for those still working and struggling to keep up with the workload. I wonder just how long this can really last.) So, as a result, almost everyone seems to be in a hunker-down mode and are thinking twice before they make any unnecessary purchases.
Bakery has always seemed to be recession-proof because it is a relatively cheap indulgence. For the most part, that remains true, but what the Top 50 in-store and foodservice operators have seen in the past year is a willingness on the consumers' part to trade down in product size or skip a few visits.
In this issue, we take a look at how the past year has affected the foodservice chains with a large bakery component and supermarket chains with the most in-store bakeries. Across the board, both segments are relying on quality and the perception of a good value for the consumers' dollar to draw customers. Neither is predicting huge sales for 2010, but some chains are beginning to see a rebound in their markets.
Here's hoping for a better 2010.