In North America, bakery products including bread, pastries, dessert mixes, frozen baked goods and cakes sales reached $65.2 billion and $65.9 billion in 2018 and 2019, respectively, according to Euromonitor International. In 2018, production of these required sourcing of 14.9 million tons of ingredients. Likewise, Zion Market Research reported that global demand for baking ingredients market was valued at more than $11.8 billion in 2015 and is expected to reach above $15.7 billion in 2021.
For a variety of reasons, many companies are reconsidering whether they should be buying products from international sources. In terms of the baking industry — besides the main advantage of cost-savings — there are other reasons to globally source, including consumer demand, global competition, global attitudes of the company and proximity to raw materials that may be unavailable domestically.
According to C. Mark Worthey, corporate director, procurement and supply chain, Lallemand, Inc., international trade can support North American baking supply chains.
“The addition of new supply sources for bakers provides greater supply chain security by expanding the supply base and provides increased flexibility for sourcing as international trends and economic cycles may be different than domestic markets,” he said.
A worldly perspective
Today’s globalized food system consists of highly interconnected social, technical, financial, economic and environmental subsystems, and a shock to the system can lead to political and social ripple effects. The most recent example of this is the coronavirus (COVID-19) pandemic.
“Although harvests have been successful and food reserves are available, global food supply chain interruptions led to food shortages in some places because of lockdown measures,” said Franziska Gaupp, PhD, research scholar, International Institute for Applied Systems Analysis.
While global pandemics are rare events, diversifying ingredient sources can help insulate against these types of interruptions.
“For our part, we’ve always worked to maintain a geographically diverse set of supply sources from which to draw,” said Belinda Roberts, global vice president of procurement, Corbion. “We certainly look more deeply at sourcing in some regions, but we also recognize that diverse sourcing is an important, long-term effort that requires an understanding of the raw materials involved, the risks associated with each source and an effective sourcing management strategy. This isn’t a new approach for us, and it’s something that has served us well, particularly now, as the coronavirus has made it more challenging for manufacturers to maintain a secure supply chain.”
Corbion does this by ensuring that it is sourcing from different regions. If Corbion is sourcing from only one country, it relies on other ways to secure that supply as well.
“If we are sourcing solely from a particular country, we try to mitigate risk with in-country stocks or work with a broker that stores product for us within the United States,” explained Janel Keep, senior quality manager, Corbion.
Food fraud is another challenge to keep in mind as bakers enlist international suppliers.
Beyond a global crisis, international ingredient sourcing has also been shaped in recent history by changes in international trade.
“Additional tariffs on imported ingredients have really forced the industry to evaluate internationally sourced ingredients and the costs and benefits of continuing to rely on them,” said Jack Satterstrom, North America procurement manager, Kemin Food Technologies. “The uncertainty surrounding trade talks has made it challenging to determine whether to transition from an established partner, either domestically or internationally.”
Mr. Satterstrom compared a smoothly running supply chain to a reliable car. A person takes the car for granted as long as it starts easily, but if the engine won’t start, it’s obvious how important it is to everyday life. The uncertainty in international markets and the pandemic have exposed the global supply chain’s weak points that need to be addressed.
“The need to maintain multi-regional secondary sources for critical ingredients has been amplified by the COVID-19 pandemic as entire countries have been shut down for periods of time,” Mr. Satterstrom added.
Weighing the risks
When sourcing ingredients internationally, baking companies should be aware of the challenges and risks that exist.
“Currency fluctuations, trade tariffs and customs clearance requirements are all technical aspects that become part of the new considerations for off-shore sourcing,” Mr. Worthey said. “Additionally, cultural differences could lead to misunderstandings in communication and sometimes actions as well.”
Food fraud is another challenge to keep in mind as bakers enlist international suppliers. This encompasses the deliberate and intentional substitution, addition, tampering or misrepresentation of food, food ingredients or food packaging. It can also include making false or misleading statements about a product for economic gain.
“History tells us food fraud is not a new issue; however, due to increased oversight and detection tools, it seems more prevalent than ever,” said Allie Sequera-Denyko, manager of quality assurance, AIB International. “A few decades ago, sourcing ingredients from international suppliers into North America may not have seemed as difficult as it is today. As consumers care more about how their food is sourced, the challenge is in continuing to source the international ingredients they love while making sure those foods are safe for consumption and have not
been subject to food fraud.”
This article is an excerpt from the September 2020 issue of Baking & Snack. To read the entire feature on ingredient sourcing, click here.