KANSAS CITY — When the coronavirus (COVID-19) hit the United States, it changed the game for commercial baking almost instantly, from supply chain disruption and operational shifts to concerns over worker health and safety.
National guidelines aimed at slowing the COVID-19 spread were announced on March 16, sparking foodservice shutdowns and panic buying that emptied supermarket shelves across the country.
Anticipating the massive shift that was about to take place, Baking & Snack commissioned Cypress Research to survey national and regional wholesale bakers to gauge their industry outlook and understand the current and potential disruption.
The survey reflects participation from Baking & Snack readership, including 162 executives representing small, mid-size regional and national commercial bakeries that service regional and national accounts. Survey participants self-reported their company size, and small companies may not service at regional levels.
Industry confidence impact
Because the survey was conducted in the early stages of the outbreak, Cypress was able to gauge the immediate and specific impact the virus — and the measures taken to contain its spread — had on bakers’ industry outlook.
Overall, commercial bakers’ general attitude remained positive in the outbreak’s early stages, with 45% of all respondents indicating a positive outlook through 2020, while just 20% had a negative one. Overall, 35% of bakers said they were unsure what 2020 would look like.
Marjorie Hellmer, president of Cypress, noted a correlation between general outlook and bakery size, with 56% of large national wholesale bakeries indicating an initial positive industry outlook in the survey.
“Significantly more mid-size regional manufacturers reported uncertainty than their counterparts,” Ms. Hellmer said. Forty-five percent of this sample indicated “unsure” in the survey.
Longer-term predictions for small wholesale bakery manufacturers revealed more than half (54%) foresee a decrease in production. For large national bakeries, there’s a relatively even split between those that expect increased production and the ones unsure what to anticipate, 45% and 40%, respectively.
“The smaller companies are contributing a disproportionate amount of concern for loss in production while the national manufacturers have a more uncertain outlook about the long-term impact of COVID-19,” Ms. Hellmer said.
This could be attributed to the fact that many smaller bakeries serve those foodservice outlets that have been forced to either limit their business to curbside-only or have shut down completely.
Supply chain disruption
At the time of the survey, overall operating capacity was holding steady in the manufacturing plants. Since then, however, some large manufacturers have announced temporary shutdowns at facilities where workers have tested positive for COVID-19, which may have shifted production to other plants and increased capacity at those locations.
Almost half of the bakers also reported that, in early stages of the crisis, they experienced almost no supply chain disruption with ingredients, equipment or packaging, but they do expect that to change in the coming months.
Currently social distancing measures and other steps to protect workers’ health has halted some equipment installations and prevented service technicians from entering plants.
According to the survey, the main business concern remains the availability of staff for operations, with 40% of bakery executives saying they are “extremely” concerned. And it’s also one of the top ranked business concerns for these bakeries as well.
“When we zero in on the acute concerns, you can see that at least 20% of baking executives rated their highest concern levels for long equipment lead times, planned startups and also worker safety practices,” Ms. Hellmer said. “These are great concerns during the pandemic.”
Maintaining constant communication
During this critical time, communication is more important than ever, and bakers are taking a proactive approach. To ensure supply chain continuity, mid-size and large national bakeries are also enlisting backup supply options.
Bakers are taking the same approach with their own customers. Nearly all survey participants (96%) noted that they are communicating with their customers on finished product continuity and their company’s food safety practices. And 93% said they are communicating about their worker safety measures, while 86% are sharing info on supply continuity.
“This, of course, makes communication key during the virus outbreak, regardless of a bakery’s size,” Ms. Hellmer advised.
The way bakers are communicating, especially with suppliers has also seen a shift. While, not surprisingly, 100% of respondents indicated email as the preferred form of communication with suppliers, 57% said they are also relying on good old-fashioned telephone calls.
That said, video conferencing tools such as FaceTime and Zoom are seeing an uptick as 17% of survey participants indicated it as a preferred method.
About a quarter of small and national baking companies are leveraging online vendor portals, but only 3% of mid-size bakeries are tapping into that technology.
“Building in efficiencies at this time is an important move on the part of suppliers looking for opportunities to more efficiently communicate with their customers,” Ms. Hellmer said.
And as the “in this together” sentiment grows throughout the country, it’s resonating in the baking industry, too.
One large national bakery executive shared a thought on communication during the pandemic:
“Be candid, be transparent, be proactive. Don't hide challenges or concerns. Collaborate with competitors to share insights and actions. Be a global citizen. We must work together.”
The survey sample reflected a mix of producers that sell into grocery and club stores (87%), restaurants and other foodservice (75%), distributors (60%), c-stores (56%) and dollar and drug stores (36%). Additionally, 27% of participants sell products via e-commerce and 22% out of their own retail locations.
This study is the first in a series that will explore the unprecedented impact of the COVID-19 pandemic on the commercial baking industry. Baking & Snack and Cypress Research will partner again for a second phase of the study to examine the longer-term impacts on the commercial baking industry as changes unfold.
As the shifts in production happened quickly and dramatically at the outset of the crisis, the speed and magnitude at which it changes again will largely depend on how — and when — the country emerges from the outbreak and the shelter-in-place protocols used to slow it.
“The longer-term industry impacts of this outbreak are still to be realized,” Ms. Hellmer observed.