The impact the cost-of-living crisis is having on bakers
The European bakery products manufacturer commission Sapio Research to survey 250 UK businesses over the summer months to find out how significantly the runaway inflation had impacted trading.
2023 has been a year of flux. The UK was gripped in a cost-of-living crisis at the beginning of the year, the UK has been in the grips of a cost-of-living crisis with the annual rate of inflation, as measured by the CPI, reaching a 41-year high in October 2022 – at 11.1%.
A year later, there are small signs of improvement – with inflation dropping to 4.6% in October 2023 – but conditions remain challenging.
UK inflation remains the highest in the Eurozone, which came in at 2.9% in the year to October 2023. France was close at 4.5%; Germany 3.0%, while Belgium had the lowest inflation rate (-1.7%).
In an inflationary environment, rising prices inevitably reduce the purchasing power of consumers, so it’s not surprising that the UK’s Office of National Statistics (ONS) reported falling demand as the leading concern among businessowners in the lead up to Christmas, with 23% expecting turnover to decrease in December 2023.
Baker & Baker’s own cost-of-living research – conducted in June – finds a similar sentiment among bakery and other foodservice owners, with 59% reporting that trading has been down on the previous 12 months.
Additionally, 63% have experienced a decrease in their premium products sales, while 73% are finding that shoppers are veering more towards value products.
The biggest pain points and other key outtakes
What price increases have had the biggest impact on their bottom line?
- The cost-of-living crisis has caused a decrease in overall sales of fresh sweet bakery with 45% of businesses having experienced a slight decline in sales, while 10% report a significant decline.
- Three fifths of companies have also seen a decrease in average spend per customer compared to the previous 12 months.
- 86% have seen an increase in the number of customers switching products.
“It looks like we’re in for a bit more pain before things start to improve,” said Helen Sinclair, UK marketing manager at Baker & Baker.
“When we posed the question ‘when will the cost-of-living crisis end and things return to some sort of normality’, more than half (54%) expect things to improve by the end of the year, and nearly a third of businesses (29%) are either unsure or think it will be later than summer 2024 before we start to see light at the end of the tunnel.”
On the plus side, 35% of businesses say things are already starting to improve.
While the cost of doing business rises in sync with inflation and places many SMEs at risk of financial instability, there are some tips on how businesses can remain competitive.
Included in the report – the third in the Bakery Bites series – is a plethora of ideas on how to make products look the part, utilising multi-product baking and leveraging different formats.
How are you looking to maintain sales of sweet bakery products?
Many are looking at the format of products to remain competitive, and while there is movement across many formats such as scratch and mix, respondents have increased the usage of frozen unbaked products (50%) and frozen baked products (47%).
More than 50% are planning to change the range of products they stock with products carrying lifestyle, health and sustainability claims.
Tips to help businesses reduce costs and maximise sales
- Take the time to understand your audience.
- Have a solid core range. Based on experience, Baker & Baker recommends a double choc cookie, milk choc cookie, double chocolate muffin, blueberry muffin and iced ring doughnut as a great base for a sweet bakery range.
- Mix and match formats for better availability and lower waste.
- It’s important to have sweet bakery products that look fresh, so don’t put everything out at once and keep refreshing throughout the day.
- Find the sweet spot by baking similar products together to reduce energy costs.
