EconomyFinancialSmall bakeries manage to resist the rise in raw...

Small bakeries manage to resist the rise in raw materials

“We have done everything to try to resist increasing the prices of our products, but now we can no longer endure it,” reads the social networks of Mexikan Pan, an artisan bakery located in Iztapalapa, in Mexico City.

This business, founded by Nancy Mercado a little over three years ago, withstood the onslaught of COVID-19 and now also the rise in supplies, from flour to butter. However, with the recent rise in raw materials, they are still thinking about how to turn around the high prices, although it has been impossible to contain an increase in the final price.

These rises occur while the conflict between Russia and Ukraine seems not to end; instead, the environment continues to put pressure on wheat and corn prices. On March 21, for example, the price of soft red winter wheat on the Chicago Stock Exchange hit a new high, rising 3.1% to $10.97 a bushel, a unit equivalent to 27 kilos.

The disadvantage for small producers is that, unlike large companies, they cannot store large quantities of inputs because they run the risk of hatching larvae or stopping serving them, in addition to the fact that they cannot negotiate to buy raw materials in large quantities.

“Costs become more expensive for large companies than for bakeries, only that companies have the conditions to generate even more efficiencies and the livelihood opportunities of large companies to withstand these price shocks are greater than small producers,” he says. Marcela Muñoz, director of analysis at Vector Casa de Bolsa.

For now, businesses remain in the fight to survive. Nancy says that about six months ago a 44-kilo bag of silver leaf flour was priced at 450 pesos, and a couple of weeks ago it rose to 650 pesos, which represents an increase of 44%. In Click Abasto, the online page where some vendors from the Central de Abastos sell their products, the price of the package is 966 pesos.

“People find it difficult to increase, because it is a little more than they plan to spend and yes, we had been very resistant to modifying prices, because it is difficult for all of us to get a raise,” says the founder of Mexikan Pan. ” These rises unbalance the entire product because we don’t want to put lower quality materials, that affects the durability of the bread in the cupboard,” he adds.

The increase in the artisanal breads of Mexikan Pan was 2 pesos, with which the marzipan shells were priced at 15 pesos, the vanilla and chocolate shells at 10 pesos, and the chocolates and croissants at 20 pesos, according to the latest prices they shared on their Facebook page, from where they receive orders for home delivery.

Israel Vargas, owner of the La Vida en Rosa bakery, considers that the increases in raw materials that have been going on since the year have been irrational, while he hopes that the increases will be regulated to recover from the COVID-19 crisis. “There is no raw material that has not risen: flour, sugar, margarine, vegetable fat, milk, oil, eggs, whipped creams and it has been a dead end, and the outlook still looks difficult,” he says.

Draw the hikes

Producers have managed to avoid boiling prices. Elizabeth Beltrán Mora, the entrepreneur behind Garapiñado, has put aside the production of her edible flower cakes to offer individual pieces of cornbread and chocolate and condensed milk, or other desserts such as jericallas, which has helped her avoid the high cost of butter and flour.

“The profit margin can be more than 100% on an individual dessert. Especially since the large cake traditionally has eggs, milk, butter, of which a kilo is 180 pesos, almost 70% more than in 2019, and a recipe for a cake for 10 people has almost 200 grams of butter and is expensive. . With desserts, people are encouraged because it can be cheaper than buying a cake, “he says.

And although it is also complex to avoid price increases so as not to affect business profits, it is not an option for entrepreneurs to reduce the portions of breads or desserts. They even explore the possibility of using alternatives to flour such as bananas or packaged egg whites, although it can also be complex because they change the recipes that customers are already used to.

“This is my livelihood. I know that I have to work harder and try to grow my sales, although it is difficult, but as long as we continue to float in chaos, we are going to continue resisting increases as long as we can”, assures Nancy Mercado.

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