LA QUINTA, CALIF. — Restaurant and foodservice sales bounced back significantly since the coronavirus (COVID-19) pandemic hit two years ago, fueled by strong consumer discretionary income, but the industry now faces significant headwinds that could derail the nascent recovery.

Specifically, the “big three” forces — labor shortages, supply chain challenges and skyrocketing food costs — pose major obstacles ahead as the industry struggles to maintain growth, and restaurant operators are looking for their bakery suppliers to help with these challenges, noted David Henkes, senior principal and head of strategic partnerships for Technomic during the recent American Bakers Association annual convention in La Quinta, Calif.

“The topline revenue looks really good for many restaurants, but the margins and cost pressures are more acute,” he said.

Mr. Henkes set the stage for a wide-ranging panel discussion on the baking industry’s changing role in serving the foodservice channel by outlining the state of the restaurant industry.

Overall, bakery shipments to foodservice operators fell approximately 20% to $12.0 billion in 2020 from $14.9 billion in 2018 as the result of the response to the pandemic. While the restaurant industry has yet to fully recover, Technomic forecasts that bakery shipments to the foodservice channel will reach $16.1 billion in 2023.

He cautioned that the rebound has had its up and downs. Technomic data indicates that overall restaurant sales have decelerated since peaking last summer, indicating the fragility of the foodservice industry, which has seen its sales supported more by the sustained popularity of off-premise traffic via takeout, drive-thru and delivery than on-premise dining.

Moreover, consumer perceptions of baked goods also have taken a hit from the pre-pandemic period. A recent Technomic survey showed an 11 point drop in the percent of consumers who say baked goods are somewhat or very important when deciding on eating at a restaurant or foodservice establishment.

Mr. Henkes suggested that decline poses a creative challenge for the baking industry.

“How do we reestablish baked goods across dayparts as a vital part of that foodservice purchase for a lot of consumers?” he asked. “In many ways, this is an opportunity to be figured out to recapture and recreate some of that excitement.”

To reignite the passion for baked goods, Robin Hernaez, division chef, Compass Eurest B&I, San Diego, said he relies on experiential and more memorable products in smaller portions that provide more variety than the traditional slice of cake that can feed a family of four.

Bakeries, he added, can support foodservice establishments from an operational level by supplying baked goods that can be incorporated into multiple menu items. In addition to making it easier for operators to prepare meals, such versatility reduces the number of stock-keeping units (SKUs) restaurants need, thus helping with foodservice distribution and supply chain issues.

Joe Turano, president of Turano Baking Co., pointed out that the Berwyn, Ill.-based company reduced its SKUs by 5% to 10% during the past two years while focusing on driving capacity of the bakery’s core products.

Today, he said, the emphasis is also on developing high-quality baked goods that are both healthy and indulgent and provide a point of differentiation for restaurant customers.

“We have to probably be much more aware of unique baked goods offerings that maybe weren’t so prevalent in the US before — maybe items that are from Europe or are popular in Europe that haven’t crossed the ocean from the US just yet in a major way,” Mr. Turano observed. “We’re going to see a lot of new product entry from a global perspective now finding itself more into the mainstream US both on menus and in retail.”

Susan Sarich, founder and chief executive officer of SusieCakes, Los Angeles, recommended focusing on quality over quantity.

“Like many things in life, bread baskets have gotten super overcomplicated,” she said. “Nobody needs corn bread and a crescent roll and a parmesan crisp. It’s just too much. My personal philosophy is to do less, but to do it high quality.”

The same, she added, goes for desserts.

“You go to a restaurant, and there are 85 desserts,” Ms. Sarich observed. “You don’t know what to order. If you go to a restaurant and there’s just one dessert, you think, ‘I have to get this shortcake. It’s the only thing they’re offering. It must be the signature item for them.’ Less is more and higher quality.”

With off-premise food, online orders and limited-service restaurants fueling foodservice sales, Mr. Hernaez urged bakers to come up with products that hold up better during delivery. As an example, he noted a hamburger that may be delicious in a restaurant is often not as good when consumers ate it at their home of office.

“It was a decent product, but the bun was not any good when it got to the consumer,” he explained. “Now I’m searching for a bun that holds up well during transportation.”

During the past two years, Mr. Turano said, the bakery has adapted ready-to-serve and par-baked breads and rolls that require less preparation in kitchens to address the labor shortage. As an indicator of the revival of the foodservice industry, he added, Turano Baking has stepped up new product development to levels seen prior to the pandemic.

“Our company would typically produce about 250 new products a year,” he said. “That was our goal for this year. We were a very aggressive foodservice developer of new items, and we’re now back on track with new items.”

Mr. Turano noted that the baking industry has been shifting to frozen products because of labor, shipping and supply chain issues.

“The movement to frozen on a national level is real,” he said. “We have more and more customers and distributors moving to that model as time evolves, and it will continue.”

The panelists concurred that supply chain disruptions have dramatically impacted the foodservice industry, with operators being forced to remove items from menus because they can’t get ingredients.

However, Mr. Turano advised that consistent service will be the key to surviving through such a challenging supply chain environment.

“The reliable suppliers will be the winners,” he said.