While the Scottish bakery sector – like many others – remains concerned about shrinking margins, Smith said there is ‘cautious optimism’.
“From members I've been speaking to over the past few weeks and months, what we are hearing is of quite strong demand for product, so that's quite reassuring for us as an association and for the trade as well,” Smith told Bakery&Snacks.
“Of course the flip side of that is concern over margins: what with the rising energy costs and commodity costs that every business has been experiencing over the past six to eight months or so. But I think there’s definitely a sense of very cautious optimism about the future of the trade.”
Talking costs
The industry’s biggest talking point is, without a doubt, the cost of doing business.
“Costs still dominates every single discussion that I have,” said Smith.
“Although energy prices are now starting to come back quite significantly from the highs that we experienced in the autumn of last year, we’re still seeing businesses paying 3-4 times what they once were for their energy needs.
“And, as you'll be only too well aware, the baking trade is energy hungry … so that does represent quite a chunky part of the overall running costs of any business. The other side of the cost equation is the cost of ingredients and commodities and those have all been steadily increasing over the past year or so. [Again,] we’re seeing a little bit of easing off, but we don't think we'll ever see the kind of prices for commodities that were [once] there.”
While Smith believes the cost-of-living crisis has impacted consumer spend on outside entertainment like “going to the bar or a restaurant, they are not cutting back on indulgent treats that they can take home and have with a cup of tea or coffee.
“I think our trade always prides itself on being providers of an affordable treat for everyone, [which is] a positive aspect of the challenges that we face … Demand is quite robust and strong just now, so we’re grateful for that,” he added.
Thankfully, the industry has survived the cost of COVID.
“The practices within bakeries are now back to what you might call ‘normal’: the distancing and barriers that had to be put in place to maintain production at the height of the pandemic have largely all gone. But of course, bakeries are hygienic environments in any case, so hand washing and sanitisation of surfaces is something that goes on all the time.
“But I don't want to go through that again.”
Ramping up communication
A positive outcome from the dark period has been a change in doing business.
“We are seeing more businesses now getting online, doing online sales and remote deliveries,” said Smith.
“My hope is that more of our members will explore opportunities there to reach new customers and expand their businesses as well. We’ve seen a lot more of the members getting much more active on social media, so they're promoting their businesses in different ways, too.”
Communication, in fact, was high on Smith’s agenda as CEO of Scottish Bakers.
“The first thing I’m proudest of is that, as an association, we are now communicating better with our members than we've ever done before,” he said.
“When I came into the job, we were still very reliant on sending out a very traditional paper newsletter and I felt that wasn't really responsive enough. So we invested in a new CRM [customer relationship management] system and new digital tools to enable us to communicate with members.
“That really came into its own at the beginning of the COVID pandemic … we were sending out daily email updates to members with information on guidance and rules and regulations and such like. Thankfully, we've been able to ease back from that, but we now email our members without fail every 4:00 o’clock on a Thursday afternoon with new information, guidance and details of things like government consultations where we want input. That email is read by 50%-60% of recipients, which, in terms of email campaigns, is a great return rate.
“We’ve also worked hard to bring our allied trade partners closer so we can help our members access the fantastic range of offers and services available through them.”
Training the next gen of bakers
Smith added the past year has seen a dramatic increase in the association’s lobbying and advocacy activity, too.
“We make sure that we always submit responses to government consultations [on new regulatory measures to ensure the association is] a clear, identifiable representative voice for the trade that’s credible and authoritative.”
Talking advocacy, on 12 April, Bakery&Snacks reported on Scottish Bakers’ disappointment over the Scottish Government’s ‘inexcusable delay’ in confirming funding for new apprenticeship starts, which was ‘bad for business’ but more worryingly, possibly signalled a withdrawal of vital support.
When we chatted to Smith on 20 May, he said there is a light at the end of the tunnel.
Bakery&Snacks has subsequently been told that Scottish Bakers has indeed received confirmation from the government that it will receive funding.
“Questions were asked in Parliament today and we believe contracts for new start apprentices should be with us by the end of this week, which gives them approximately 24 hours at the time of this recording to come good on that promise … so, we’re optimistic on that,” he reported.
“That’s been about a three-week delay in getting this information out to our trading providers, which means we are a little on the back foot when it comes to registering the apprentices. But our team works hard and they’ll get these people signed onto programmes just as quickly as they possibly can and we’ll be ready to go.”
This is vital support as the sector continues to struggle with labour shortages, despite Scotland currently punching in with the lowest unemployment in recent history – “clearly a pinch point for the industry,” said Smith.
“[Labour shortages] has been an ongoing challenge for us,” he added.
“It's eased off a little bit from the period 12 to 18 months ago – reflected in our apprentice numbers this year already; I think the total at the moment is about 85 apprentices – but yes, there are challenges in recruitment and retention.
It’s something that a lot of our members are trying to make their businesses a more attractive place to work … offering not just a good wage, but other benefits and non-financial incentives like extra leave: anything that will make them the employer of choice.
“Of course, training is a big part of that, but the bottom line is there are still not enough people in the pool of potential workers.”
Scottish Bakers is a major independent provider of apprenticeships to Scotland’s food and drink manufacturing industry, delivering industry-standard training through its specialist training arm, National Food and Drink Training (NFDT).
These efforts are underpinned by the association’s ‘for the good of all’ mission to make the baking industry – which employs around 12,000 people and delivers more than £1bn to the Scottish economy – more competitive and sustainable through skills development.
“Our firm belief is that staff training and development is good for businesses and creates great career paths for individuals enriching the industry as a whole,” said Smith.
“The most important aspect of our [apprenticeship] programmes is that, first and foremost, it’s a proper job. It’s not about students going to college; they get employed as an apprentice baker or food production operative, on a proper contract of employment with all of the usual rights that go with that.”
He added, “The programme itself is built up of a number of different units covering different aspects of the job, from basics like food hygiene and health & safety, right through to specific elements about preparing dough, baking off and packaging products.
“Every single programme will be slightly different because we can tailor the content. That’s what makes it particularly valuable; it’s tailored around the particular ambitions of that business.”
“All our trainers are seasoned industry professionals – they’ve been there and done it,” said Smith, noting that quite often, trainers will roll up their sleeves along with the learners to show them the practical skills.
“Businesses they work with all regularly report improvements in things like staff morale and attitude, but also in very practical terms that can point to reduced wastage, fewer faults and greater efficiency, greater productivity. All of that helps at the end of the day when you’re looking at the bottom line.”
Sector’s responsibility
Regarding the introduction of the UK government’s HFSS regulations (products deemed high in fat, salt and sugar), Smith said pointing a finger at the industry will not create a much-needed long-term solution to the rising obesity crisis.
“A lot of our businesses either have done or are looking at ways of cutting back on some of those ingredients, whether it’s cutting back the volume of the ingredients or producing smaller portions, for example,” he told this site.
“I don't think you would find a member across our base who disagrees that there is an issue with an increasingly obese population. Where we are very clear is that we believe the greatest solution is to influence and educate individuals on their own responsibilities and behaviours.
“While the industry will do what it can do – and there are limits because a lot of the ingredients singled out are structural ingredients and can’t easily be replaced.
“So, while the industry will take its responsibility seriously, we think the longer term solution is very much about an increased personal responsibility [of the individual].”
Industry acclaim
Next week, bakers will be gathering in Glasgow to attend one of the biggest – and arguably most glamorous – annual events on the Scottish bakery calendar.
According to Smith, this year’s Scottish Baker of the Year Awards undoubtedly reflects the growing confidence within the sector.
“The competition was our busiest ever. We had 630 products for judging from 70 businesses – up from about 480 from 57 businesses last year,” he said.
“Judging was a very intensive process. The business part was the most closely [contested] that I ever remember in my time of overseeing the competition, so when we make the announcements for the Bakery Cafe of the Year, the Craft Baker, the Retail Craft Baker and the Wholesale Baker, it’s worth remembering that there really wasn’t much to separate those who walk away with the trophy from the other finalists.
“Again, I think that’s reflective of the trade that is more confident in itself. They’re working hard on every part of their business, from the products to the way they communicate with their customers to the way that they train their staff and the way they present themselves,” said Smith.
Winners of the Scottish Baker of the Year Awards will be announced at the Scottish Baker’s Annual Conference, being held in Glasgow on 5-6 May.
Listen to the podcast to hear more of Smith’s insight into the industry.
