MARCO ISLAND, FLA. — The baking industry outlook remains strong despite shifting concerns around supply chain, input costs and workforce. That’s the key finding of the BEMA Intel 2020-21 Culminating Report, released at the BEMA Convention 2021, held June 22-26.
With a year of BEMA Intel now fully reported, Marjorie Hellmer, president of Cypress Research, walked the association’s members through what BEMA Intel has to offer each quarter as well as how the industry indicators changed over the 12-month period from 2020 to 2021.
Cypress Research conducts the BEMA Member Pulse Survey every quarter and compiles the data,
“In this age of technology, we have access to an ocean of data, but that can cause confusion when you’re trying to parse out the data,” Ms. Hellmer said, explaining the challenge BEMA Intel was designed to address. “Along with this ocean of data comes a real struggle for industry professionals to discern the value of the data that you’re viewing.”
Ms. Hellmer was joined onstage by Tim Cook, chief executive officer, Shick Esteve, and first vice chair of BEMA; Jason Ward, president of AMF Bakery Systems and BEMA board member; and Josh Sosland, president of Sosland Publishing Co.
Mr. Cook expressed how important BEMA Intel has been in providing a broader picture of the industry as a whole and how shifts in the economic environment are playing out on a quarterly basis.
“It gives us a broader perspective because my specific business may be doing well, but that might not be true of the industry as a whole,” he noted. “Following this data every quarter through 2020 and Q1 of 2021 confirmed that we had come out of the worst, and things were continuing to get better.”
The review of BEMA Intel data also shows how the industry responded to the coronavirus (COVID-19) pandemic in outlook, investment and how the supply chain challenges started to play out in input costs and industry concerns.
In Q2 of 2020, for instance,only 13% of equipment manufacturers reported that their quarterly bookings were up and 45% reported that bookings were down. In Q1 of 2021, however, 44% of equipment manufacturers reported that bookings were up and only 7% reported bookings were down.
Moreover, this increase in bookings is reflected in equipment manufacturers’ outlook of the industry. In Q2 of 2020, only 76% of equipment manufacturers had a positive outlook for the next six months, but at the end of 2021’s first quarter, that number surged to 95% of respondents
The annual report went a step further, asking bakery producers their industry outlook, which more than 90% reported a very positive or somewhat positive outlook.
That shift may largely be attributed to skyrocketing demand in the retail channel.
Commercial aisle bakery dollar sales reached $65 billion, according to IRI data for the 52 weeks ending March 28, 2021. That represents an 8% increase in dollar sales compared to the previous year. This was driven mainly by sales of hamburger and hot dog buns, other fresh rolls, buns and croissants, bread, and salted bakery snacks.
Even the in-store bakery, which saw 6.2% dollar loss in that same period proved its resiliency, Mr. Sosland noted. Unit volume fell 26%.
“That data showed how in-store bakeries were pivoting and coming up with different packaging configurations as grab-and-go was disappearing, and it’s a pretty amazing reflection of resiliency of in-store bakery,” he explained. “As unit sales were plunging and their business model was undercut by the pandemic, they were able to only be down 6%, and I think in the data there are opportunities to find nuggets like this that make you think how is this possible or what’s going on in the industry.”
In other channels, even as foodservice begins to recover, retail has maintained its strength of sales. One hundred percent of equipment manufacturers reported a positive six-month outlook for retail channel. At the same time 70% of equipment manufacturers are reporting a positive outlook for foodservice.
“We see retail continuing on a strong trend, and it doesn’t seem to be letting up,” Mr. Cook said. “We’re also seeing a resurgence of the foodservice and restaurant business. Will both segments be going strongly now, which would be unusual, or will we see a leveling out of one as the other gets stronger? The data helps us understand that picture.”
The upbeat attitude was not limited to North America either. Outlook for the global baking industry was also positive, with much of that positivity tied to recover progress from the pandemic.
Specifically, 89% of bakery producers reported a very or somewhat positive global outlook while 95% of equipment manufacturers were very or somewhat positive. Much of this optimism is centered on North America and Asia Pacific where recovery has been the strongest.
“The regional look reflects the countries and regions that are more advanced in vaccination deployment and overall recovery,” Mr. Ward explained. “These countries have a stronger outlook for the next six months, specifically that’s China and the United States. The question is how fast will the other regions recover.”
Data from Euromonitor International included in the annual report show that the regions most poised for bakery growth, however, are Middle East and Africa, Latin America and Asia Pacific.
All this positivity is reflected in bakers’ capital spending projections as reported in the Baking & Snack/BEMA US Commercial Baking Industry Capital Spending Survey that is included in the BEMA Intel Culminating Report.
Overall, 52% of baker respondents indicated that there would be an increase in their company’s capital investments in 2021 compared to 2020. That’s compared to 45% of respondents who said capital investments increased from 2019 to 2020.
In 2021 compared to 2020, only 12% of respondents projected investments would decrease, compared with 34% who said investments decreased from 2019 to 2020. Leading the reasons for those projects was increased capacity with 68% of respondents and decreasing labor costs and improving quality each with 65% of respondents.
This hunger for investment is all within the context of the continued challenges presented by the pandemic.
While COVID-19 challenges have fallen in the minds of bakers — 85% reported it was a top challenge in Q2 of 2020 with only 54% listing as a top concern in Q1 of 2021 — the impacts of the pandemic have risen in concern.
Specifically, increased raw material costs and transportation and logistics costs each had 54% of equipment manufacturers concerned. That’s compared to 18% and 10% respectively a year ago.
Attracting and retaining a quality workforce persists as a top challenge with 39% of respondents reporting that as a top challenge. That’s a slight drop from Q3 and Q4 of 2020, but a steady hold on the industry.
“Normally, workforce issue would be at the top of this list, and some really crazy things are going on with COVID, material costs and transportation, but those are still some really high numbers for workforce, and there’s no reason to think those are going away,” Mr. Sosland said.
Still, the baking industry and investors seem confident that these supply chain and transportation challenges are temporary. and the strength of the baking industry has been proven by the pandemic as the Grain-Based Foods Share Index for the past 12-months has shown.
Calculated and contributed to BEMA Intel by Milling & Baking News, the Grain-Based Foods Share Index closed at 28238.76 at the end of the first quarter of 2021, up 25.5% from the end of March 2020.
“The real advantage for including this data is that it is forward-looking in an objective sense; this is not what we as the baking industry thinks, but this is what the investment community thinks about the future of the baking industry and food industry in general,” Mr. Sosland explained. “To see in the past year, the stock market for staples keeping up with the S&P 500 during the recovery is a powerful affirmation of what the pulse survey shows is that there is good reason to be optimistic.”