Every other year, Modern Baking takes a close look at the retail bakery industry. And, invariably, I run out of room in my story to cover all of the information that I find intriguing. So, I’m taking the space here to add to the article that begins on page 22.
It never ceases to amaze me how optimistic you retail bakers are. Even while you bemoan increased costs and government oversight, you remain upbeat about your business, your customers and the baking industry in general. That is completely refreshing, especially since we have been bombarded in recent weeks with media reports detailing the bleakest details of the economy.
While retail bakers are certainly not blind (or immune) to the economy around them, most, according to our survey, see the glass as half full. The economy, in general, seems to have taken a backseat to other immediate concerns. In 2009, 32 percent (the highest percentage) of retail bakers reported the overall economy as their top concern. Today, that percentage dropped to 15, and the concern over the economy has been replaced by increased costs. In this year’s survey, nearly half of retail bakers were most concerned about increased costs, up from 23 percent in 2009.
However, I was surprised that while costs are a concern, the percentage of retail bakers raising their retail prices had dropped from 2009. This year, only 70 percent of you reported upping your prices, down 10 percent from two years ago. Part of this may be explained by the fact that in 2009, bakers had a year to respond to the commodities rollercoaster seen during 2008 while in 2011, commodities have just begun their up and down swings. Also, commodities haven’t quite hit the highs we saw in 2008, leaving many bakers in a holding pattern to see what will happen.
For those who did raise prices, the majority stated increased cost of ingredients as the reason, but improving profitability saw a huge jump from 2009. In 2009, only 6 percent of bakers cited improved profitability as the reason they raised prices. This year, that explanation increased to 38 percent. Bakers may be finally taking the leap to price their products to receive the margin they deserve. Finding the balance between what customers will pay and what will give the business the profits it needs is often like walking a tightrope. Throw in a shaky economy, and finding that balance becomes even more difficult.
However, here’s where that bakers’ optimism comes back into play. Almost all bakers realize that if they offer the quality of product their customers demand, the product will sell. Finding the balance in quality makes walking the tightrope to profitability much easier.