8 minute read
Ingredient Supply Chain
The Perfect Storm
Ingredient suppliers are innovating amid supply chain disruption.
BY BELLA FOOTE
Rising ingredient costs are just one of several ongoing issues impacting commercial bakeries.
Supply chain, a topic of conversation typically confined to those working within manufacturing industries, has now become a hot-button topic for many. Its disruption has impacted everyday consumer activities, with 79% of people noticing product shortages according to Momentive, an experience management company formerly known as SurveyMonkey. Within the baking industry, the American Bakers Association (ABA) noted nearly every bakery operation has seen price increases. The consumer economy has always been at the mercy of the supply chain, but it’s one that has often worked tirelessly and quietly in the background … until now.
Although a spotlight has been shone on the consumer-related fallout, it’s important to understand what’s happening on the ingredient supply side. What does the environment look like for ingredient suppliers, and how are they navigating shortages and disruptions?
This torrent of supply chain disruption has been the perfect storm. Dave Hufford, SVP of procurement and quality assurance and regulatory compliance at AB Mauri, a global supplier of yeast and other bakery ingredient products, described the conditions at hand.
“We have been dealing with a series of never-ending challenges since February 2020,” Hufford said. “That includes multiple global impacts associated with the pandemic, weather events, container shortages, extended lead times on most items, the impact of the conflict in
Russia and Ukraine, avian flu, and heavy inflation, just to name a few.”
Storms, droughts and fires — all amplified by climate change — have dealt blows to the raw ingredient supply. According to the UN Food and Agriculture Organization, the month of January alone saw a 4.2% surge in vegetable oil prices due to South American droughts and Malaysian typhoons. Additionally, the war in Ukraine has had reverberating effects with the country being the top supplier of sesame seeds and an important grower of crops such as wheat, corn, soy and barley.
What’s more, the baking industry, like many others, suffers from serious workforce challenges, with more than 12,000 jobs available on ABA’s career website.
Raw material shortages — and their rising cost — have been the biggest focus for Corbion, which supplies emulsifiers, functional enzyme blends, vitamins and minerals. “For our baking business, we buy between 1,000 and 1,500 different raw materials,” said Abby Ceule, senior director of ingredient solutions at Corbion. “It’s been almost exactly a year since we started to see the raw material delays and shortage start to creep up on us. It’s been a rolling trend; starches right now are a hot topic for our business. We’ve seen different issues with gluten, emulsifiers and different food assets at various times.”
The ingredients and commodities that were commonplace five years ago are now beginning to dry up.
“I’ve been absolutely floored by the sheer number of things that are extremely tight,” said Nesha Zalesny, a partner at IMR International, an industrial market research and consulting company in food hydrocolloids. “Even things as ubiquitous as xanthan gum, you cannot get it in the United States. That is really shocking.” Even if ingredients can be acquired, delayed shipments propose an issue.
“We typically can source most ingredients, but lead times are much longer and more difficult,” said Edward Mlotek, VP of sales and marketing for global ingredient supplier Repco Bakery Solutions.
In addition to price increases and lead times, bakeries in need of ingredients may overorder to account for inventory loss and potentially delayed material.
“Overordering, like hoarding toilet paper during the pandemic, creates a feedback loop that stretches an already dwindling supply,” said Ben Reusser, Innovative Center manager for Cain Food Industries. “That will cause our suppliers to cap new business or not even be able to add any at all.”
As outside factors become increasingly more difficult to predict and regulate, ingredient suppliers rely heavily on internal regulation and management.
Bakers face a number of roadblocks including labor, climate change, ingredients and more. Even so, ingredient suppliers are helping them formulate around those challenges.
Now that the industry is returning to in-person interaction, bakers are taking advantage of on-site product development with their supplier networks.
This takes the form of consistent and open communication.
“We manage our customer expectations with great care,” Reusser explained. “We let them know what we can get from our suppliers along with lead times and current pricing.”
Therefore, trust between bakers and their suppliers has become more critical than ever.
“Our customers trust us to keep them informed about sourcing challenges,” Mlotek said. “Our intervention and management of this issue is something we are proud of. When we run into a hiccup or we have an issue with sourcing an ingredient, we immediately communicate with our customers, keeping them updated on where we’re at and how the sourcing is going.”
Strong communication is also necessary to ensure the supply chain remains
fluid and that suppliers can pivot quickly when it comes to creative R&D. Ingredient shortages and delays have forced many suppliers to expand their network, sourcing the same product from various places.
“We started to ask, ’Who else can we get this from?’” Ceule said. “We’ve had to expand our own network of suppliers into our business.”
Network expansion is becoming more common throughout the supply chain. KPMG — a global organization of independent professional services firms — identified overreliance on a limited number of suppliers as a key trend impacting the current situation.
“As we emerge from the COVID-19 slowdown, many businesses recognize the need to better equip their supply chains by identifying alternative trading partnerships,” KPMG reported. “They are actively seeking a broader
list of suppliers, alternative markets/ customers, as well as different transport and logistics providers.”
Then again, sometimes certain ingredients are simply not available.
“Like everyone in this industry, we too experience some of the pains of the supply crisis with certain ingredients that our customers ask us to blend,” Mlotek said. ”So, we have worked with bakers to substitute ingredients or formulate a difficult ingredient out of a product.”
Ingredient supplier R&D teams have worked tirelessly to test and develop new ideations of certain recipes for their customers.
“For instance, gluten reduction is nothing new, so we have ascorbic acid, enzyme blends and other classic conditioners that have been used previously to great effect in reducing the overall gluten needed in a formula,” Reusser explained. “Emulsifiers have been an issue as well due to lack of oils. We also have enzyme blends that are also used to reduce or eliminate these ingredients.”
Ingredient suppliers often have an R&D team with baking expertise, so they can understand exactly what they are dealing with.
“We utilize our in-house bakery lab for experimenting with replacement ingredients and enzymes to offer replacements and unique solutions,” Mlotek said.
Suppliers often provide an ingredient substitute that doesn’t impact the nutritional claims or ingredient statements, especially when it comes to allergens.
“We are very careful about formulations that may involve a label change or affect texture or flavor profile,” Mlotek said. “We formulate in our Nutritional Lab and work closely with our customers to ensure we meet their specifications on the label and organoleptically with flavor and taste profiles.”
However, there are times when the ingredient change is more advanced, and that impacts not only the label but also texture and price point.
“We’re usually able to match the functionality 1:1, but there have been a few instances where customers had to accept different functionality,” Ceule said. “They said, ‘We can deal with that for a while, but if things free up, let’s go back to the original formula.’”
Even in the face of extreme conditions, baking industry ingredient suppliers have managed to not only ease the supply chain burden for consumers but also create new — and better — formulations. “After all, necessity is the mother of invention,” Reusser said.
If nothing else, this has been a learning opportunity that has the potential to change how R&D looks in the future.
“We have certainly learned a few things by testing replacement ingredients for those in short supply,” said Troy Boutte, Ph.D., VP of innovation and ingredients for AB Mauri. “For example, we have explored functional starch replacement and previously created a methodology for comparing options. These methods certainly came in handy when supply issues began.”
While the future is still uncertain, one thing is for sure: This is an industry that encourages change and ingenuity. Where there is an opportunity to innovate, ingredient suppliers will continue with a dynamic and fluid approach. CB
Suppliers are helping bakers accomodate for hard-to-obtain raw materials while also managing expectations.
