BakeryBiz, Nov-Dec, 2020

The world has been reeling under the COVID-19 pressure. Every business segment seems to have been drastically affected, besides of course the ones associated with medical services and supplies. Typically, when we look at the travel and hospitality segment, things have been even worse. Bakery Biz interacted with some leading bakery business associates to know their Covid story.

Every segment of the industry, either supporting in terms of the supply chain or directly involved, have been adversely affected. Having said that, the impact has been harsher on the food service industry than the packaged food products and snack segment. According to a report, not necessarily true in every product category, retail index for packaged food products has grown – specially in the bread and
biscuits space.

In the recent past, the bakery industry has been seeing an annual growth rate of 8 to 10 per cent. The growth has been primarily due to the increase in demand for bread and biscuits. Rampant growth and mushrooming of bakeries in the urban and semi-urban areas has also added to the demand supply dynamics, resulting in overall industry growth. According to reports, the organised sector accounts for around 1.3 million tonnes of baked produce. Add to that the large number of smallscale bakeries, and the business volume becomes very high. The predicted growth rate of the market for 2020 was 12 per cent, before Covid disrupted the market.

With the lockdown, many hotels, restaurants, QSRs and Bakeries had sustenance problem and had to shut shop. At the same time, there were many who recorded business growth typically in the bread segment (Read detailed story on page 27). Organisations which had automated their facilities and had focused on their employee wellbeing and engagement, did surprisingly well. The industry at large has recovered well from the Covid scenario, and 2021 looks to be promising from the business growth perspective, hopefully sans Covid impact.

Covid impact

Our Business too was impacted by the lockdown. We faced sales loss especially in the months of April, May and June. July onwards the business started to limp back towards normalcy. We were able to get back to our 2019 sales figures in the month of October. The business from Food Service channel is still impacted. Our sales to the Bakery Channel saw some growth.

Business growth

All food business that cater to the consumption at home have generally seen a growth. This is because people could not move out and were spending time and money from home itself. Also as many other avenues for entertainment became unavailable, Food kind of substituted for that. Many consumers got into the mode of cooking as a hobby/ pastime during the COVID peak period. But for Bread the growth came in the early part of the lockdown as it became the easy medium to feed the needy. There was a lot of demand from the government and charitable institutions for bread in this regards.

Are we a bread eating nation?

No I do not feel. Indians do not eat bread as a matter of choice. Our own cuisine is so rich in breakfast items that bread is always a backup or last resort.

Tackling manpower issues

We faced some manpower issues at our factories initially but not much as our endeavour has always been to support the local communities and thus employing locals. So once the movement restrictions were lifted, we had our labour force back.

COVID like any challenging time has separated the men from the boys. Our organisation remains committed to its customers and associates to support them in their growth. We have effectively pivoted our strategic plans to be more effective in the current environment. The steps we took have been across the organisation starting with:

• Safe and Smart Manufacturing practices as per the government guidelines to ensure un interrupted supplies to our customers;
• Establishing virtual communications with our customers and updating them with the Best Practices to Re-open and Re-Emerge from the Pandemic;
• Updating customers with information on trends and consumer preferences based on Global Knowledge;
• Providing comfort to our associates to work from home as per convenience and also taking care of communities around us.

Rich’s as an organisation is based on sound fundamentals of extending beyond boundaries of imagination and a Strong Family Culture. We are committed to our customers, associates and communities and will continue to invest and build value for all.

Covid impact

An important thing noted from the industry point of view has been that the sales of bread, biscuits, and rusks were very stable across the country. More particularly, in Tamil Nadu the bakers could not manufacture the entire range, but bread, buns and rusk sold well. People discovered the convenience of bread during the lockdown. At the same time, the money spinners like cakes did not do well. As a contract manufacturer for Britannia breads, our business was impacted only for 3 to 4 days, which was good.

In the responsible snacking position (rusks, etc) did well. Across our six outlets in Madurai, we sustained our production and gradually increased it. People already in the field with automation were in a more beneficial position. Overall, the segment did well. In the contract manufacturing space, we are doing well, and the future looks promising. As far as the equipment business is concerned, based on the number of enquiries that we have been getting, I believe that we will see good growth in 2021 with the right partners and experience.

In the wholesale and retail baking facility we have seen growth. Our sales are good and we are doing better than what we were doing in the pre-Covid times. We have to remember that when there is an opportunity we should be responsible and not opportunist. The customers remember such behaviour and remember you for it.

As a general industry scenario, those who are giving good products and provide a value for money proposition, they will do well and grow in the future. While some bakers may have to exit their business, I see a per capita growth in the market.

Covid impact

Corona Virus has hit the world with not just health aspects but also economical. Industries across verticals and sizes have been affected by the ongoing pandemic. But industries like Food & Beverage have seen an up rise in their growth and functioning. Since March, when Covid-19 struck with a lightning speed, ARS Group has handled their work and responsibilities gracefully.

Business growth

The industry has been performing very well and has seen an upward trend in growth and demand of baked goods. In the months of April and May, the demand had shot up so much that there was a shortage of raw material supply and we were unable to deliver.

Challenges faced

ARS Group has faced many challenges during the Covid-era to meet the expectations and demand of their customers. Some of them are:

1. Operated with bare minimum staff in spite of the risk of getting infected with utmost care and safety measures.

2. Due to restricted inter-state movement, there were issues faced by staff to commute to and fro; and deliver the orders. The company had to apply for and obtain passes for their delivery fleet to deliver orders on time.

3. To meet the demand and expectation of the esteemed clients, ARS Group has paid extra for getting shipments cleared and in fact even got some ingredients airlifted to expedite the process.

Despite hindrances in operations and supply chain, we at ARS Group have successfully passed through that phase and brought the business back on track along with building various new business relations with upcoming bakeries. At ARS, our team is continually innovating and ensuring every safety measure while they deliver the world-class quality ingredients.

Covid impact

Our business had come down by 35 per cent in comparison to what we had aimed for. We lost business from the restaurant community as their business was severely impacted during the lockdown. However, our business for November has grown in comparison to the corresponding period last year.

During the pandemic and lockdown, we asked our team to stay safe and move out only when it was extremely important. As our customers rely on us for the supplies, and were looking forward to doing business, we offered them our online platform to cater to their customers. We helped them through digital promotional activities to resultantly increase their business. We were continuously coordinating with our channel partners and emphasised that they should work towards helping our customers during this difficult time. We also took a step to ask our associates to not push our clients for payments but to help them to overcome the situation created by the pandemic.

Learnings

We believe that it is extremely important that one remains positive and focused. One must allow people to settle and help each other grow. We were allowing our partners to grow, not pressurising them for payments and continued providing them the necessary supplies to ensure that their business did not get impacted.

Future plans

There are always new plans in place. Our customers have a lot of confidence in us and ask for more product range. We would be introducing new products keeping their requirement in mind.

Covid impact

The bakery industry, specially the cake segment, collapsed during the Covid lockdown period. Our business was impacted by almost 50 per cent due to the impending situation. The home baking trend in the rural areas also had an impact on our business. Also, since cakes have been our biggest sellers, slowdown in sale of those affected our business. However, dry items, like bread, khari, toast had a demand which helped us survive during that period. Interestingly, the sale of breads has doubled during the Covid times.

Future ready

We are being cautious about the future and utilising our resources carefully. There is a fear about another lockdown or operational timing restrictions. Keeping that in mind we have not allocated any new staff.

We are working on healthy products like cookies, healthy bars, etc. as the demand for such products has seen a spurt. We are also in the process of setting up a Jawaari biscuit (gluten free) plant for exports under the banner of Aishwariya. The project is being undertaken under the Ministry scheme for export oriented products. We were working with limited staff and have managed to garner good support from them during these times. Understanding the situation, our employees have been putting in an extra effort to ensure smooth functioning. We, at our end have also been taking good care of our staff members needs.

We have had two clear learnings from this situation:

1. Firstly, we must take good care of our employees and keep them with us while continuing to increase their learnings and taking care of other aspects  like hygiene, health, etc.

2. There is a definite need to maintain the cash flow and keep that handy at least for the next few months.

This is to ensure that in case of a situation like this Covid lockdown, one is able to sustain and take care of running the business.

Covid impact

We operate 15 outlets in the Vapi to Navsari region and fortunately we were not impacted much by the lockdown. Everything was operational in the bread segment. In fact, our sale of bread by volume increased by over 20 per cent during the lockdown. However, our cakes business was down considerably. The business was down by over 50 per cent. Staff shortfall was not a concern for us as we engage mostly locals. As a positive, after the lockdown was uplifted, during the last few months, the markets have supported us in expansion.

Way forward

The safety aspects have increased and our staff members have been trained to ensure that they follow the necessary guidelines taking care of hygiene and safety measures. Customers get more confidence when informed about the safety measures that we follow.

To ensure that there is continuous demand, it is very important that quality of the product is maintained and customer health and safety is given priority. Having a clean and hygienic environment is a must. Use of good quality ingredients is important to have a good end product. We are very happy with the use of Shineroad product as an ingredient and are thankful for the support that their team has provided to us during this difficult period.

Covid impact

Fortunately, we did not close our business except for 1 day initially. We organised to keep all our workers (400 plus staff members) within the premise of the bread plant and ensured that all statutory requirements were implemented. We also managed to have a doctor with us for taking care of our staff members. While we make 15 products, during the time of the lockdown, we were only producing bread and saw a growth of 30 percent in that segment. We are extremely thankful to the local administration and police for their support.

Manpower was the main concern. The bakeries and production units which did not take care of their workers, suffered. Others did well.

We suggest that one should never get into a panic situation. There is express need to follow government notifications seriously and social media posts must be verified before it is believed or acted upon. One of the bakers had to suffer due to a viral post on social media which was not true.

Increased number of QSRs, food delivery services and other related organisations are looking at more hygienic ways of delivery. More bakeries are now looking at minimising touch and personal interaction with the product, providing their customers untouched, healthy, hygienic baked fare. This increased awareness has been leading to some form of automation in the industry.

We found a decent number of enquiries coming to us for mechanisation. This was the result of a huge labour crunch in the northern and eastern part of India. The obvious question that followed was how to mechanise the bakery with less labour involvement. While the benefits may not be seen immediately, there would be a long term impact.

On the personal front, we found some interruption in our business during March and April, but from May our business restarted. On the operational side, we did face labour issues and thus are now looking at outsourcing some components. We need to be ready for any such future situation.