{"id":13347,"date":"2020-05-02T15:16:13","date_gmt":"2020-05-02T19:16:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/the-need-to-knead-how-the-bread-boom-is-forcing-adaptability\/"},"modified":"2020-05-02T15:16:13","modified_gmt":"2020-05-02T19:16:13","slug":"the-need-to-knead-how-the-bread-boom-is-forcing-adaptability","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/the-need-to-knead-how-the-bread-boom-is-forcing-adaptability\/","title":{"rendered":"The Need to Knead: How the \u201cBread Boom\u201d is Forcing Adaptability"},"content":{"rendered":"

Like many Americans, I may have gotten a little zealous with my apocalyptic preparations and now find myself the proud owner of no less than FOUR jars of peanut butter.\u00a0 Fortunately, I love peanut butter.\u00a0 Unfortunately, I don\u2019t love Wonder bread.\u00a0 Not only is it unsatisfyingly plain and tasteless, but I now have to risk pandemic disease to go to the store to get it.\u00a0 My quarantine routine of pajamas, zoom calls, Netflix binges, yoga, and Mario Kart just isn\u2019t compatible with showering, real pants, Uber, facemasks, and risking COVID19 for Wonder bread.\u00a0 Additionally, many people are finding that bread and other commodity food items just aren\u2019t available at many stores\u2014the shelves are still wiped clean.\u00a0 While \u201cthere is plenty of food in America,\u201d the perception of shortages has led to excessive consumption and increases in demand across all grocery categories of over 30%. [1] \u00a0The more store shelves are empty due to panic buying, the greater the perception of shortages which in turn fuels the cycle of panic shopping.\u00a0 Thus I am faced with a common dilemma\u2014I\u2019m hungry and have a lot of peanut butter but nothing to eat it with.<\/p>\n

However, as I reminisce back to my childhood, I vaguely remember my mother using the kitchen oven for something other than frozen pizza\u2014bread!\u00a0 Homemade bread!\u00a0 Eureka.\u00a0 A unique combination of circumstances has led an unprecedented number of Americans to the same conclusion: baking bread is a great idea.\u00a0 First, it takes lots of time.\u00a0 My mom is an expert bread maker and often spends 3 hours or more on each batch.\u00a0 In our modern lives, three-hour stretches have always been hard to come by\u2014until now.\u00a0 Suddenly we find ourselves immensely bored of the standard litany of quarantine events, longing for an activity that is time-consuming but fun and rewarding.\u00a0 Baking bread is giving Americans a perfect yummy outlet for creative expression: it is iterative, so it rewards repeated trial and error; there are tons of new recipes to try; it is a fantastic virtual-social activity via zoom sessions with friends; and best of all, it produces a delicious medium for peanut butter consumption!\u00a0 Suddenly a new phenomenon has emerged\u2014the so-called \u201cbread boom!\u201d [3] \u00a0The prevalence of social media like Instagram has further encouraged new bakers to show off their creations and inspire their connections with the same great idea.<\/p>\n

\"\"<\/a><\/p>\n

Google searches for \u201cbread\u201d have spiked [2]<\/p>\n

With this sudden interest in home baking, who stands to benefit?\u00a0 It turns out that nearly all bread shares two common ingredients: flour and yeast.\u00a0 These essential ingredients have thus experienced huge surges in demand\u2014flour demand has increased 155% and baking yeast 457%!\u00a0 While these industries are highly fragmented, it\u2019s helpful to understand the problem by looking at some case examples.\u00a0 Kentucky-based Hopkinsville Milling Co. claims they are packing twice as much flour as normal.\u00a0 \u201cIt started to look like Thanksgiving and Christmas all rolled into one,\u201d according to president Robert Harper. [4]\u00a0 Another mill which supplies flour online, Central Milling, is running all three production mills at maximum capacity despite COVID shutdowns.\u00a0 Still, it is hopelessly unable to keep up with suring demand. [4]\u00a0 Yeast supply showcases a similar story.\u00a0 Red Star, a major yeast producer, states on their website: \u201cThe current demand is simply unprecedented.\u00a0 Rest assured, we are making yeast around the clock.\u201d [5]<\/p>\n

While a surge in demand seems like a promising opportunity in any industry, the flour and yeast industry is struggling to keep up.\u00a0 As a fragmented commodity industry, classical price hikes in response to changing demand are impractical and result in consumer outrage.\u00a0 Thus, capturing value through increased prices is a risky proposition.\u00a0 Most producers have attempted to increase production in response, but the central problem is that these industries typically employ \u201cjust enough\u201d production in normal time periods.\u00a0 They don\u2019t possess a significant amount of excess production capacity because they must maintain efficiency in a narrow-margin business.\u00a0 Additionally, long production lead times make adapting to sudden changes in demand difficult.\u00a0 Fleishmann’s Yeast producer AB Mauri complains that \u201cyeast takes a certain amount of time to go from one cell to two cells\u2026 there\u2019s a hard limit to how fast they can double.\u201d [7]\u00a0 Finally, the problem is partially rooted in operational norms.\u00a0 Many suppliers have traditionally shipped as much as 96% of their flour production in bulk to bakers and food manufacturers.\u00a0 In the UK, consumer consumption of these raw goods represents only about 4% of total production. [5]\u00a0 Thus, shortages are largely due to packaging constraints and established supply chain channels.\u00a0 Some producers are tackling this problem by shipping larger bulk packaged items through consumer channels, simultaneously relieving demand pressure and making available a product that satisfies panic shoppers.<\/p>\n

This demand surge dynamic with constrained supply has had several prominent effects.\u00a0 One is a rapid flourishing of secondary markets.\u00a0 On Ebay, for example, flour and yeast prices are approaching 10x their normal prices, allowing secondary resellers to capture value from increasing consumer demand.\u00a0 Meanwhile, some consumers have sought substitutes such as grinding their own flour from seeds or using sourdough to replace the need for yeast.\u00a0 Some have even leveraged their existing skills in creative ways to harness this new demand.\u00a0 Danny Mayhugh, a photographer struggling for employment amid the pandemic, has turned to photographing his baking creations and selling them on Instagram! [8][9]<\/p>\n

\"\"<\/a><\/p>\n

A creative combination of baking and photography skills leveraged into a new business [9]<\/p>\n

Ultimately, surging demand due to both new interests and panic buying in a commodity industry puts a great deal of strain on supply chains, temporarily benefiting producers who can scale production the fastest or re-engineer their packing and supply chains in creative ways.\u00a0 The relevant question now becomes: will this demand last?\u00a0 Unfortunately, history indicates that panic buying often reverses once the fear catalyst resolves.\u00a0 Producers will likely only benefit short-term from scaling production unless<\/em> the \u201cbread boom\u201d results in a lasting change in consumer behavior.\u00a0 Yet with millions of people discovering so many delicious new ways to enjoy a peanut butter sandwich, perhaps it will!<\/p>\n

 <\/p>\n

[1] https:\/\/www.nytimes.com\/2020\/03\/15\/business\/coronavirus-food-shortages.html<\/a><\/p>\n

[2] https:\/\/www.eater.com\/2020\/3\/25\/21194467\/bread-tops-google-trends-searching-for-recipes<\/a><\/p>\n

[3] https:\/\/www.baltimoremagazine.com\/section\/fooddrink\/bread-baking-coronavirus<\/a><\/p>\n

[4] https:\/\/time.com\/5819006\/flour-shortage-coronavirus\/<\/a><\/p>\n

[5] https:\/\/redstaryeast.com\/contact\/<\/a><\/p>\n

[6] https:\/\/www.theguardian.com\/food\/2020\/apr\/14\/grains-flour-shortage-tells-us-about-who-we-are<\/a><\/p>\n

[7] https:\/\/slate.com\/business\/2020\/04\/yeast-shortage-supermarkets-coronavirus.html<\/a><\/p>\n

[8] https:\/\/www.baltimoremagazine.com\/section\/fooddrink\/bread-baking-coronavirus<\/a><\/p>\n

[9] https:\/\/www.instagram.com\/dmayhugh\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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