What is the single biggest concern regarding production costs right now? Commodities, in a big way.

What are bakers doing about it? Many are raising prices, and a good number did it by 10% or more over the last year.

   Those are the results of a survey conducted by the American Society of Baking in late February and BakingTech, the society’s annual meeting held in Chicago last month.

   Although unscientific, the online poll provides a good test of the pulse of the baking industry during these challenging times.

   With the recent spike in prices, it should come as no surprise that wheat and commodity costs are the overwhelming concern on the production floor. In fact, seven out of 10 members were concerned about the skyrocketing price of wheat and other ingredients.

   Commodities easily beat out the runner-up, energy and fuel prices, which was listed by only 12% of those who took the survey. Rising health care benefits and the lack of skilled labor are perennial concerns for the baking industry, but they’re not the single-biggest ones at this time. In fact, only 8% listed health care while skilled labor came in with 7% of the vote. Only 1% of members participating in the survey mentioned government regulations as a leading issue for them.

   Even compared with other issues, commodities’ prices are top of mind. In fact, 63% of ASB members who took the survey said it’s the biggest challenge facing the baking industry. That compares with 17% who listed the lack of skilled labor as the hottest issue. Less than 10% listed pricing pressure from customers, decreased consumption of baked goods, a lack of new product innovation or other issues as the industry’s major hurdle today.

   So what are companies doing about it? The society asked its members to list all of the ways they are offsetting rising overhead. Some 67% said their companies are hiking prices, 37% note they’re making capital investments, 28% are hedging against rising costs and 23% are reducing labor costs.

   Only 18% are adjusting product mix and 14% investing in training. It’s a shame that companies spend so little on developing their employees’ skills set, especially with Baby Boomers beginning to retire. Their skills are not being replaced by the youngest generation of workers.

   So how much have bakers raised prices over the last year? Some 38% of ASB members report their companies increased prices 10% or more, 15% raised them by 6-9%, 22% hiked them 4-5% and 18% by only 1-3%.

   Only 7% of survey participants said their companies did not raise prices. How about that for a change?

The society also asked its members to address a number of topics that are top of mind with Americans today. For example, which party will win the presidential election? In our survey, 54% of ASB members thought the next president will likely be a Democrat compared with 46% for a Republican.

   As for the economy, 48% say a recession is their biggest worry while only 21% listed inflation, 15% mentioned the housing and credit crunch, 9% said stagflation and 7% noted stock market woes.

   Despite these concerns, 45% were positive or extremely positive about the outlook for 2008 and the state of the baking industry. Some 28% were neutral about the near future while 26% did not feel too good about it.

   Maybe they’re positive because of popularity of whole grains. A whopping 68% called whole grains “a real trend” for the baking industry, although 11% felt consumers needed more education and another 11% felt the market needed more new product innovation. The good news is that 8% think it’s “more hype than reality” and only 2% called it a fad.

   So, how much money should the industry spend in promoting the increased consumption of whole grains? About 45% wanted incremental increases on an annual basis while 21% called for a huge promotion program like the dairy industry has. Still, 17% said funding should remain about the same while 14% didn’t know the industry had such a program. Only 2% called such efforts a “waste of money.”

   Certainly, these are challenging times for the baking industry, and issues such as the historically high price of wheat and other commodities aren’t going away soon. Check out the society’s upcoming columns as we explore these issues in greater depth and provide insight, if not alternative solutions, to these problems.


Editor’s Note: For more information on the recently held BakingTech conference or to contact the society, visit www.asbe.org. Survey numbers may not add up to 100% due to rounding.