Bakeries fall victim to coronavirus pandemic
May 29, 2020 at 1:34 PM ,
Der AUDITOR
Market in transition
Long queues of people waiting to buy fresh rolls in their local bakeries are normal in Germany, especially on Sundays. Bakeries have a long-standing tradition in this country offering a wide variety of fresh bread, cakes and other products. The market has, however, changed drastically over the years as large bakery chains are frequently replacing small family-run businesses (some of which existed for more than a hundred years), discounters and supermarkets provide cheap bakery products and the recruitment of young people, who are willing to train as bakers, has become difficult. Many bakeries also blame EU regulations for rendering business less attractive. The Umbrella Organisation of the German Bakery Trade estimates that 4% of businesses closed in 2019 alone, thereby bringing the number of remaining bakeries down to 10,491. The number of employees declined nominally by 1.6% to around 266,000 people. By contrast sales rose by 3.7% to EUR 15.22 billion.
Pandemic accelerates developments
The restrictions put in place in mid-March to contain the spread of the coronavirus have accelerated these developments. As the organisation states, bakery sales have declined by around 40% in general. Much, however, depends on where the bakery shops are located and on the business model. Bakeries located in tourist hotspots at stations or in airports have witnessed a sharp decline in sales of 90%. Sales are also drastically low for bakeries that include a café. Although these cafés have been open for several weeks, only few visitors are being attracted. Bread is reportedly in high demand, while sales are down for cakes. Consumption is far from recovery in Germany. Stephan Tromp, the vice president of the German Trade Association (HDE) states that retail sales may decline by at least EUR 40 billion on 2019, which correlates to 10-15% of total retail sales.
Wave of bankruptcies imminent
Michael Wippler, the president of the Umbrella Organisation of the German Bakery Trade has recently warned that customer support is essential “if we do not want to see the number of businesses and employees cut by double digits.” A number of large bakery chains have already filed for bankruptcy. In addition, the Bäko cooperative, which supplies most bakeries with bakery products and equipment, has cut staff working hours. Just how bad the situation is is also illustrated by the fact that the Swiss based bakery products supplier, Aryzta, has called an extraordinary general meeting as shares have plummeted. Traders also report that consumer demand for bread has shifted to the food retail markets and that industrial bakeries are running four shifts a day to keep up with retail demand. A recovery is, therefore, nearly impossible and the industry is calling on the government to ease administrative burdens.
