Bakeries struggle to keep prices down amid rising costs

AS the prices of various food items increase, bakeries are also being challenged with their pricing structure, but this is not just related to raw materials for the baking process.

Two bakeries — Puff n Stuff in San Fernando and Chee Mooke bakery in Port of Spain – said they will try to absorb price shocks for as long as possible.

Both said they understood the economic challenges their customers faced and realise they cannot be greedy with their prices at this time.

Already Linda’s bakery has increased its prices on some items by 50 cents-$1, owing to the impacts of the covid19 pandemic such as increased costs in imports, freight, production, maintenance of machinery and other labour outputs.

Puff n Stuff owner Gregory Laing said he too has been experiencing price rises in other materials: most items rose between ten and 20 per cent.

“Over the past year not only have raw materials gone up in food items, but office supplies, packaging, security, gloves, maintenance, through chemical usage and extra staff needed to control customers, and additional maintenance staff needed to continually sanitise the production areas incurred heavy increases.

But, Laing told Business Day. “We are committed to holding our prices unchanged till September 30. After which we may increase certain items that have been affected.”

He said the profit margin on all the company's products has been in constant decline, and it was starting to see a strain on the business. And while the latest covid19 health regulations worked in his favour, where customer volumes increased, Laing said it still was not enough to meet the demands for increasing raw materials daily.

“We do have greater flow of clients presently, and that has allowed us to hold our prices for the time being."

But, he said, "The number of customers that we presently have would return to normal in about three months, but I do not think the prices on our raw materials would.

“While some of our suppliers have not increased prices yet, they have indicated that increases were forthcoming in the last quarter of the year.”

Staff were not laid off at Puff n Stuff: instead, Laing said, the company implemented a shift system to reduce the number of people at the various workstations. He said this was done to ensure covid19 health regulations were observed and the workers were able to earn a salary during the pandemic.

“The staff now work longer hours for about three or four days per week per group, so everyone gets a chance to earn a living in the middle of this crisis.”

The bakery employs about 100 workers at its only location on Circular Road, San Fernando. Its products are supplied to other bakery depots but without its brand name attached.

In Port of Spain, where Chee Mooke bakery is based, price increases were also being absorbed because of similar circumstances, but it was uncertain for how long.

Human resource manager Nathalie Phillips said the bakery has been withholding price increases their baked goods despite the higher costs of raw materials since March 2020, but by holding the current prices it has incurred significant losses of about 20-25 per cent over the period.

“We are holding our prices for the next three months, given the situation, and we will monitor it as it progresses, but there were no plans to raise prices soon because the economic situation was bad all round.

“We have less revenue, like a lot of other businesses and individuals, so we have been fighting up to pay our bills too,” she said.

Phillips added that the state of emergency and in particular the curfew hours strained operations, but the bakery strategise in order to maximise workers and the workload.

She said this included implementing a shift system of its 70 workers and outsourcing delivery vehicles rather than using its own.

“We had to adjust workers' incentives and people were now working for their flat hourly or daily rates. Workers' schedules have been adjusted and instead of working six days per week, they work five days per week.

“We do not have a normal eight-hour day, because of the 9 pm-5 am curfew: we have six and half hour-work days.

"We did not have any layoff pertaining to the covid19 pandemic, but we did have layoffs on other HR-related matters,” Phillips said.

Phillips said the curfew has also added expenses because Chee Mooke has organised transport to and from the bakery for its workers to ensure they were not caught up in the public transport hustle and bustle.

Suppliers' conundrum

One of Chee Mooke’s middlemen, who did not want to be named, said she lost most of her clients during the pandemic.

She sells packaging materials to bakeries, groceries, clothing stores, and salons, among other business enterprises, but the lack of products from distributors has forced her also to reconsider her pricing structure.

Since March 2020, she explained, her clientele slowly declined and by May 2021, the business was able to retain only a few stores, among them five small bakeries.

“We have seen a steady decline in the imports of finished products, and local manufacturers have indicated that prices in their raw materials, such as resins, have increased. So the impact is multi-layered.

“In August last year we were hit by an eight per cent increase and by February this year it went to 15 per cent. With the shocks in imports, forex and international pricing, we anticipate a 50 per cent increase in most of our purchases by September. which will have to be passed on to our customers.

"It may feel like blackmail but this is our reality.”

Puff n Stuff purchasing manager Shastri Neemah said it had been experiencing a shortage of packaging materials which has led to increased prices in some instances.

He suspected this was because of covid19 policies on the ports, which have delayed the timely clearance of the goods.

“We have a shortage of packaging goods because the distributors from whom we take our goods have indicated that their containers have been on the port for months without being cleared.

“Bag prices have increased between ten and 20 per cent because of a shortage of resin to make it. Other increases included pie bags by six per cent, forks by ten per cent, biodegradable items by 19 per cent.”

Business Day also spoke to local manufacturer Resin Converters Ltd managing director Christian Quesnel, who said his company was hit hard by foreign-exchange shortages, resin shortages and price increases from their suppliers in the US.

As an effect of this, he said, it has increased the prices of its finished products.

“Resin prices went from 50 cents per pound to nearly $1.45 at one point in time during the height of the pandemic. It has decreased, but not by much.

“We had to increase our prices to our customers based on other operational costs as well. The manufacturing and packaging sector in my opinion continues to struggle.”

Business Day also tried to get feedback from Caribbean Packaging Industries Ltd and R&C Distributors, but was told they were unable to discuss the matter at this time. AP Scott could not be reached for comment.