Bakery business is shifting into informal spaces, neighborhood kitchens and sold online as it increasingly becomes difficult to produce cake as a small business.
Bakers say that as costs of production increase, businesses are adapting by going informal. This way, they avoid layers of taxation and enjoy lower costs on the digital space to be able to sell cake.
Ever increasing number of licenses, heavy taxes, monthly and yearly payments to counties and other authorities are becoming huge burdens to shoulder for small entrepreneurs. Instead when operating online, bakers can maximize reach to get clients. What’s more, they only do it on order leaving them at better positions to lower the costs and risks.
Heavy taxation pushing up costs
“People who do the craft in their homes and sell online are at better positions of making progress and profits since they aren’t exposed to the heavy taxation nor do they pay rent for the spaces they use,” said Clement Githua, a pastry Chef in one of Kenya’s leading hotel chains, who also runs his bakery business.
The bakery business has been hit by rising input prices on primary ingredients including wheat, sugar, eggs, butter, sweeteners and various flavorings. All these products have all experienced significant price increases in these recent times.
Bakers say electricity prices have jumped almost threefold hitting nearly all players in the industry including big bread bakers.
Packaging too has become almost unbearable, two years ago I’d get packaging materials worth Kes150,000 and it would last for a year. Currently I need over Kes300,000 to get packaging materials that’ll last me a year.
And now wheat prices are pacing up on impact of the global market scarcity and fluctuations, due to the ongoing war in Ukraine, which happens to be Kenya’s biggest wheat suppliers.
“Two years ago I used to get electricity worth Kes800 and I was sorted for the day’s activities. Right now I spend a little over Kes2000 for the same activities still using the same machinery, odd isn’t it? It’s like we’re working for KPLC, says Clement Githua, a pastry Chef in one of Kenya’s leading hotel chains who also runs his bakery business.
Cost of sugar increasing
Bakers say they have seen sugar rise to unprecedented levels with a 2kg packet retailing a little below the Kes500 mark.
Eggs too have seen a surge in their price and we’re anticipating an increase in the wheat prices due to the decreased supply. These are all primary ingredients used in cake making.
Other factors like weather events, newly imposed taxation measures and supply chain disruptions, have all contributed to this surge in raw material prices.
Cake had slowly gained prominence in Kenya marking birthdays, holidays, weddings and small personal milestones.
The cake industry in Kenya has flourished these past few years. There is a vibrant array of new and existing bakeries, pastry shops and supermarket bakery business units all over. Online bakers, pastry chefs and home-based baking haven’t been left behind as they’ve all been catering to the nation’s sweet tooth.
Did you know “stressed” spelled backward is desserts, coincidence? I don’t think so! This is your sign to have dessert first whenever you’re stressed.
Cake prices going up
Talking about dessert, you definitely have to think about cake. The sweet aroma of freshly baked cakes has long been an essential part of Kenyan culture. From birthdays, weddings, and various celebrations, cakes always find their way in.
But today cake prices have gone up. Biscuit sizes and numbers in a packet have reduced. Some firms have lowered the quality of the product to avoid losing clients. Others have resorted to substituting the ingredients with less expensive ones.
So for normal entrepreneurial bakeries or SME’s dealing with baked goods, the high costs of production, surging cost of ingredients, and taxation are squeezing their margins. This eventually means laying workers off. Others are cutting down on productions or shutting down business. For many bakeries, they have nothing to pay the workers with or make the businesses sustainable.
Even big businesses are feeling the pinch. “Company’s kubwa kama Broadways sasa pia wameanza kuleta bread only on specific days and skip others yet walikua wanaleta daily”.
Some supplier are terminating deals as it becomes expensive to bear costs from older contracts with such drastic price changes. A supplier who used to supply to restaurant chains (which he prefers to keep anonymous) and is a big exporter has recently given notice that they won’t be able to continue supplying as per their agreements.
People now face dilemmas when budgeting for celebratory events like birthdays. As cake prices go up, people are reevaluating cake consumption during these occasions. As kids we used to say “birthday bila cake ni mkutano”. Unfortunately, it seems like we’ll be having more “mkutanos” going forward.
Consumers have also opted to switch their preferences. As a result, the frequency of cake consumption has become lower. Consumers are also opting for cheaper and more affordable options. Instead of getting a piece of black forest, one may decide to get two or more cupcakes.
To survive many people are learning baking at home, buying cakes online and neighbourhood from kitchens.
Another group with a higher possibility of making it are the bakeries partnering with colleges to train the craft. Students often pay their fees which is normally inclusive of the raw materials costs. This usually covers their supply for raw materials leaving them in positions to make profits.