Prices of wheat are increasing. This is partly due to an increased demand from foreign markets such as Asia where economic growth is creating a new middle class. Stem rust, Australian drought and weather problems elsewhere have also caused crop shortages, causing world prices to spike. Many fields previously used to grow wheat are being shifted to corn production for biofuel. This is squeezing the industry hard as bakeries try to avoid passing the costs on to the consumer, but if they’re going to stay in business, they really have no choice. The Canadian Wheat Board sees another 18 months of high prices. Defensive strategy: Diversify your product line by introducing more non-wheat-based products (although some of these products are also facing increased pricing). Portion control and production processes that minimize scrap will help control costs as well. You will be able to command higher prices for artisan breads so look for ways to recoup those costs by adding value to the end product with unusual twists.
As of March 2008, gas was hovering around $1.11 per litre. It’s predicted to potentially go as high as $1.40 per litre by summer. We know that gas prices like these keep tourists at home. We also know that it will put pressure on cost of goods and discretionary income for consumers. Defensive strategy: Make sure the people who live within two kilometres of your business know you’re there. According to AC Neilson, 54 per cent of Canadians cite “closest store” as the most important reason for choosing where to shop for food. Eating local is a trend gaining momentum. If you use ingredients that are sourced locally, promote that fact by noting it on your signage and advertising. Place a few ads in the local paper to remind folks that they can walk or ride their bikes to your bakery. Bicycle Product Suppliers Association reports regular “commuter” bike sales are up six per cent for 2007. Show that you’re bike friendly by putting in some bike racks so people can park and lock up their cycles.
|Small decadent treats like individual cupcakes become more popular when disposal incomes are suddenly smaller than they used to be.|
Many economists have indicated that the U.S. is already in a recession. Though Canada has a more solid economical footing than the U.S. right now, we still read the same gloomy headlines and U.S. woes have caused many Canadians to think more prudently about where to spend their dollars. A recent joint survey by Harris-Decima and Investors Group indicates Canadian consumer confidence has reached its lowest point in over two years. Defensive strategy: Position your product line to target in-home entertaining, since restaurant meals may be an early casualty of a tighter budget. Consider developing a series of seminars focused on menu ideas for special meals at home. People often indulge in a small decadent treat when budgets are tighter. Gourmet cupcakes, brownies and chocolate truffles packaged one or two at a time will target this sector nicely.
More Canadians are claiming to have gluten allergies. According to CSPI Canada, it’s estimated that one in 250 Canadians is gluten intolerant (i.e., has celiac disease). For them, ingesting even small amounts of wheat, barley, rye, etc., can cause mal-absorption of nutrients and, increase the risk of a number of diseases. Organic products are posting double-digit growth and functional foods – those that have health benefits – continue to be popular. Defensive strategy: Offer alternative breads and promote the fact that you have wheat-free options. Pilot some organic products on a trial basis to see if they resonate with your customer base. Have fun with exotic ingredients. Chai cupcakes are hot in the Pacific Northwest. Green tea muffins and cookies are popular recipes on sites such as Recipezaar.com .
Everybody is eating each other’s lunch these days. Consumers can pick up groceries at Costco, Wal-Mart and Shoppers Drug Mart. Large chains are expanding into each other’s territory, often building new stores close to each other. Loblaw has responded with deep discounts in an effort to lure customers back to its aisles and this is putting more pressure on margins for all food retailers. Defensive strategy: If you’re a small business, don’t bother trying to compete on price alone – you don’t have the economies of scale. Yes, consumers may want value for their dollar but they’ll consider your signature baked goods a bargain if they are delicious, fresh and attractive. Be clear about your strength as a business and communicate this point of difference through your service, your marketing and your products. Businesses with strong brands are more profitable because they’re able to charge reasonable fees for their products and services.
Clichés about creating opportunity from challenge are as common as white bread. It’s not about being a Pollyanna – it’s about looking for the opportunity presented by the change. Next time you read a headline that causes you to worry, try asking yourself, “What’s great about this problem?” The answer may just be your best defence.