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SPECIAL EDITION: MINIMIZING COSTS THROUGH INGREDIENTS

On the cheap: Bakers must look beyond ingredients to cut costs

By Kacey Culliney+

07-Nov-2013
Last updated on 07-Nov-2013 at 12:40 GMT2013-11-07T12:40:06Z

Bakers have started to, and should, look beyond ingredients to cut costs, two experts say
Bakers have started to, and should, look beyond ingredients to cut costs, two experts say

Slashing costs at a formulation level can be done, but options have been exhausted and bakers should now turn to maximizing profit and reducing costs elsewhere, say experts.

In the quest to ensure a profitable business, bakers continuously look at ways to ensure steady costs and healthy balance sheets – from sourcing contracts, ingredient replacement and processing, package sizing and transportation through to employment cuts.

But two industry experts think the days of bakers tightening purse strings via ingredients are gone and should be replaced with new strategies.

“Most of the cost savings regarding ingredients have already been done,” said Sophie de Reynal, marketing manager at NutriMarketing SAS.

Bakers had already sourced cheaper ingredient alternatives and integrated new cost-effective blends but are now turning to adding value with premium ingredients like ancient grains, raw cane sugar or Fairtrade cocoa, she told BakeryandSnacks.com.

“I think that consumers are looking for value for money. The strategy of cost savings can be valuable for bakers to some extent, but the future is on adding values with health, sustainability, naturalness, clean sourcing, pleasure and convenience,” she said. 

'It’s not just about cutting costs, it can be about maximizing profits too' Lauren Bandy, ingredients analyst, Euromonitor International

Lauren Bandy, ingredients analyst at Euromonitor International, agreed that industry should be more focused on building profit as a way to stabilize overall costs.

“Manufacturers need to think about how to maximize their cost benefit. It’s not just about cutting costs, it can be about maximizing profits too,” she told this publication.

Bakers could consider fortifying bread with omega-3 or adding fruit or extra cocoa to cakes, she said.

What’s been done and the fear of radical reformulation

In terms of reducing costs at a formulation level, Bandy said “there is quite a large scope”. The option to replace ingredients with cheaper alternatives is probably the easiest, she said, as doesn’t require formulation changes.

Egg replacement is an obvious cost cut that bakers have invested in, says Bandy

Egg replacement is an obvious cost cut that bakers have invested in, says Bandy

Egg replacement across Europe is a good example of this, she said. “I’ve spoken to two or three manufacturers who say that up to 40% of ingredients costs can be from egg alone – so it’s quite a significant area.” Bakery manufacturers have replaced eggs with alternative proteins like whey, milk and soy.

However, when it comes to radically changing formulations to cut costs by using cheaper alternatives, emulsifiers or blends, manufacturers are taking a risk, Bandy said.

“It is a challenge to persuade manufacturers in the first place to so radically reformulate.”

 When replacing ingredients, there are obvious things manufacturers have to take into consideration beyond costs, like quality, consumer perception and labeling, she said.

“Obviously quality is the primary thing but the consumer is going to think about content too. Consumers are quite wary and concerned if a baked cake is missing eggs, for example.

“…A lot of these more innovative ingredients can also come at a cost themselves. Manufacturers often have to change production lines and also need to be able to guarantee the same product at the end. Manufacturers really need to look at every aspect.”

Formulation cost cutting has limitations

De Reynal said that for some bakery manufacturers, there are limitations in what costs they can cut at a formulation level because of the product itself.

For some bakery products, it's impossible to make formulation changes, says De Reynal

For some bakery products, it's impossible to make formulation changes, says De Reynal

“For a French baguette you only have wheat flour, water, salt and yeast. If you change one of these ingredients, you can’t call it a baguette anymore. I don’t believe that removing key ingredients of a formulation is the right solution,” she said.

For those products with a more complex ingredients list, the most expensive ingredients like eggs, chocolate and butter could be removed and replaced, she said, “but they are also the ‘soul’ of many products".

Alternatives for saving the pennies

Bakers should look elsewhere to cut costs, the experts said.

“Now savings can come from process steps – like a yeast or bread improver that can reduce processing times – or in the plant with green energy and water reduction or packaging,” De Reynal said.

Bandy suggested that bakers look at waste to reduce costs. “It’s a more holistic approach to look at the whole system and whole company. Formulation needs to be looked at on an individual basis. Looking at waste is looking at the whole package, rather than individual packets,” she said. 

For more on this special edition:

Bakers look to commodity supply for cost management

Understanding key commodities: Wheat buying tips for European bakers

Enzymes have money-saving potential, says Campden BRI

Pick your bread side: Cheep and cheerful or health value?

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