Baking is en vogue: since the lockdowns, when mainly flour and yeast were sold out in supermarkets, another habit has been established: People are buying more from their friendly baker next door, whereas the bakery-restaurant sector has declined.
The "culprit" is the home office and resulting less crowded city centers, train stations and airports. The figures speak a clear language. And the signs? The signs are still clearly pointing to change.
What opportunities should bakeries seize now, and how do they succeed in reorganizing operations professionally? Dr. Tim Bauer, Managing Consultant at enomyc, reports on four proven success factors.
For more than two decades, long before the pandemic, the bakery trade had been undergoing fundamental change. If we look at the last eight years, there were over 13,000 there were over 13,000 businesses in Germany in 2013. Seven years later, the number has shrunk by almost a third to 10.000, according to a recent press release by the Zentralverband des Deutschen Bäckerhandwerks e. V. (Central Association of the German Bakery Trade). Sales, on the other hand, have risen almost across the board: more than 15 billion euros in 2019 – a record figure. This positive trend is likely to continue again in 2020 and 2021 following the pandemic-related decline in sales.
What remains to be said is this: As sales increase, the number of operations continuously decreases, while the size of each individual operation increases. In some cases, bakery chains achieve annual sales growth of over ten percent over several years. How? Primarily by expanding their branch network. In only a few cases has the organization of these companies adapted to the size of the company. The result is typically an overstretched and increasingly inefficient organization. These companies are not sufficiently resilient to drastic changes, such as the Corona pandemic.
In addition to growth-related factors, a dynamic market is influencing bakery operations. While consumers' shopping habits had already changed before the pandemic began, Corona has further accelerated that change. One effect is the trend toward home offices. It leads to less frequented city centers, train stations and airports. At the same time, delivery services are experiencing a boom. The food sector is facing new challenges that mean not only risks but also opportunities for bakery producers.
What do successful bakeries do differently?
They proactively adapt to a dynamic environment. They recognize and seize opportunities as they arise while continuously developing their organization. Failure to do this will sooner or later affect profitability in the competitive marketplace and threaten their very existence. The need to reorganize operational processes is not the result of past bad decisions: reorganization speaks to far-sighted corporate management that aims to increase competitive advantage, expand market share, and secure operations in the long term.
This is holistic reorganization
Adding a few new attractive products to the range and giving the stores a contemporary look is not reorganization. Baked goods manufacturers can only successfully establish their position on the market if the reorganization of operations happens holistically from administration to production to logistics.
Let's take the example of changing eating habits: introducing a vegan product range affects not only distribution, but also purchasing, production and quality assurance. After all, certain raw materials must be completely replaced. And what about modern means of payment? Customer cards, payment by app and other applications must be integrated into the existing IT infrastructure. This ensures a successful implementation in the market.
Experience shows that there is no shortage of good ideas. Rather, many bakeries face the challenge of successfully implementing these ideas in their organization. The result is often half-heartedly implemented concepts that lead to higher costs, but discernible yield. Skeptics, who were already attached to the old concepts, feel vindicated. However, they disregard the fact that different conditions applied over time. It is precisely this persistence on the best practice of times gone by that endangers the existence of companies.
To turn a good idea into a successful, profitable project, there are four key factors to consider when reorganizing bakeries:
1. Timing is everything
The quicker necessary adjustment processes are initiated in a bakery, the better the chances of success: If companies have the time, financial and human resources, restructuring is more likely to be implemented successfully. However, if change processes are not initiated until the effects have already been felt in the company's earnings situation, or there is external pressure from shareholders or lenders, it is often already too late. Companies then already find themselves with a lack of resources to keep the existing business running. Against this background, managements right now should ask themselves whether they are prepared for the challenges of the future. Often, it also helps to have the company's current positioning objectively evaluated by an external view and thus to identify trends and opportunities at an early stage.
2. Holistic view and interdepartmental cooperation
An important aspect of reorganization in bakeries is the holistic view. Friction often arises at the interfaces between the respective functional areas, which inhibits efficient process organization in the company. Typical of bakeries is the conflicting view of production and sales. It is an important management task to form a proverbial bracket around the different departments and to ensure that any friction losses are prevented. The second management level is often characterized by "departmental thinking", so that the first management level has the task of placing the respective reorganization processes with all departments through targeted communication. In this way, the focus can be on the success of the company rather than on the success of the individual department. If there are historical ties within the company, it can be advantageous to have this process moderated and accompanied by neutral third parties.
3. Act progressively with an eye to the future
Medium-sized, family-run bakeries, with long-standing management structures that have evolved over time, find it difficult to cope with change. They focus on the successes of the past. This false, backward-looking perspective does not reflect the challenges of the future or the factual conditions in the markets.
To adopt a realistic future-looking perspective, an objective stocktaking with the support of external experts is often the key. In addition to company-related data, the survey of the market environment and the consideration of possible future developments are also important components of a holistic analysis. All managers from all departments should be involved here. If this process is professionally moderated, it is possible to adopt a self-critical perspective and identify shortcomings in one's own organization. This, in turn, can be used to derive forward-looking recommendations for action.
4. Personnel resources and reorganization
To carry out a reorganization in a company, sufficient human and financial resources must be available. Any reorganization must be carried out under the main responsibility of the company and must be cleanly separated from day-to-day business. If this is not the case, typically when managers are heavily involved in day-to-day business, the reorganization project runs the risk of being interrupted or being pushed into the background. It has proven effective to involve managers who are mainly responsible for the reorganization in the company, while keeping an eye on the set time frame. This also enables the change processes to be implemented quickly and effectively. If this cannot be guaranteed within the company due to a lack of personnel, it makes sense to have the project managed and driven forward by external experts.
In addition to a good idea, change processes in bakeries require one thing above all: a high level of implementation expertise. This is the key to making reorganization projects successful. To find out how bakeries can adapt their business models to changing consumer behavior, read the blog article "A bakery without bread? How companies can benefit from structural change" by our partner Dr. Stefan Frings.
Which questions do you have about the reorganization of bakeries? Please contact me. I look forward to hearing from you.