ISSN: 1391 - 0531
Sunday April 27, 2008
Vol. 42 - No 48
Financial Times  

Future of the baking industry of Sri Lanka

By Sunil Keppetipola

The bakery and biscuit industry in Sri Lanka needs to re-invent the industry and prepare its human resource asset base to face the challenges ahead.File photo shows a biscuit factory.

As we are all aware, the global economic environment is changing rapidly and the consumer eating habits are subject to change at a faster rate creating many challenges for those in the food industry.

The food raw material shortages and escalating prices, the increasing cost of power and energy and cost of production, administration and distribution will greatly influence the determination of the final finished product pricing.

Will the finished product pricing be affordable and acceptable to the consumer? This is yet to be seen and identified in the future since income levels of consumers have not increased proportionately in relation to cost of living. As far as the baking industry (bakery and biscuit industry) in Sri Lanka it is time for a major change to re-invent the industry and prepare its human resource asset base to face the challenges in the future.

The sharp price increases of wheat flour, bakery ingredients, cost of power and energy and fuel and LPG will take place due to external factors which the industry will not be able to control. The effect on these factors will have a major impact on the final pricing of the finished product.

New product innovation based on changing eating habits of consumers, developing cost effective recipes while maintaining quality of the finished product, reduction in overhead cost (production, administration and marketing cost) will be some of the key factors the personnel in the baking industry will have to carry out in a systematic manner and face the challenges. Manufacturing of baked products at cost effective rates and priced at an affordable rate to consumers will be the key factor to be in business successfully.

Wheat flour is the key base ingredient in the baking industry. Sri Lanka is a country where wheat is not grown and the country’s entire requirement is imported from wheat producing countries. Due to the drop in production of wheat internationally and the product also being channeled for the preparation of bio fuels the future pricing of this product will be very uncertain and increasing prices will be forecasted. The government of Sri Lanka is also discouraging the consumption of wheat based products in order to promote rice based products and increase rice production locally in order to save the massive amount of foreign exchange that is used up for importing wheat grain and wheat flour. As a result the baking industry will not receive any subsidy from the government of Sri Lanka in order to keep the prices of wheat flour at a lower level.

The other key bakery ingredients too have increased and will increase further in the future. Fats and margarines, bakers yeast, vegetable oils, sugar, skimmed milk, flavours and colouring, and dried fruits are some of the other ingredients which are imported to the country or produced in Sri Lanka with imported raw material (palm oil, palm olein, palm stearine) which cost the country a large amount of foreign exchange.

The prices of locally purchased ingredients like salt, spices, fish, meat and vegetables have increased over a period of time and if cultivation processes are not managed efficiently and productivity not increased the prices of these items too will alsoincrease in the future.

With these major changes taking place will the baking industry survive and continue to manufacture traditional baked products at affordable prices to consumers in Sri Lanka? During the past 20 years the production of fast foods (junk food) has increased sharply in Sri Lanka mainly to cater to the busy, present day younger generation.

These products are mainly wheat flour based products or fried food. Consumption of these foods which do not confirm to required standards (Sri Lankan hygiene and food safety regulations) on a regular basis has resulted in many consumers saddled with cardiac diseases, diabetes, cancer related diseases, gastric problems, etc. The National Health Services says that there are a large number of Sri Lankans saddled with the mentioned diseases and the number will increase in the future if the junk food is consumed by the younger generation, which is prepared by the food processors who do not meet the safety standards in Sri Lanka. The eating out habit which came in as a fashion or tradition in urban areas towards the latter part of the 1990 s may change once again and consumers will revert to home cooked traditional foods. This will happen mainly from the health conscious segment of consumers who will want to avoid junk foods. This too will have an impact on the food industry and the industry personnel should be concerned and take precautionary measures in order to stay in business.

New product innovation is required in order to cater to the now generation. Therefore a major change is necessary in the baking industry to rediscover and face the challenges in the future. Initially, reducing the wheat flour usage by 10% - 20% and blending of kurakkan flour, red rice / white rice flou and corn flour (which is available locally) will certainly make a nutritious loaf of bread / biscuit with fibre. It could be done with other baked products like buns, cakes and pastries. This will certainly help to reduce expensive wheat imports by 10% - 20% and will help the government to save valuable foreign exchange which could be channeled to promote locally grown wheat flour substitute crops which could be made available to the industry at competitive prices.(On the long term it will be cheaper than imported wheat flour prices.)

During the second phase of the process of reducing the wheat flour usage by 50% there is an option of blending other types of flour. However wheat gluten will have to be mixed up to 15% to the wheat flour / rice flour or kurakkan flour blend (35% wheat flour, 15% wheat gluten and 50% rice or kurakkan flour). Wheat gluten will have to be imported from a wheat producing country. This product is used for preparation of bread and other yeast raised baked goods the in rice growing countries like Japan, China, Taiwan and Vietnam. The baking industry should also look at options to change over to locally available raw materials as far as possible since imported raw materials are not going to be cheaper any more. Selection of raw material is very important and the quality of raw materials should be of industry approved standards which will eliminate waste and loss of money. The industry staff should be motivated to prepare cost effective fillings and creams for the products they make while maintaining quality. This could be done only by training the staff to carry out trials and get them involved in the innovation process of new product development.

A key area that has to be addressed urgently is to make available milled flour (rice, kurakkan or corn) where the particle sizes will be very fine. At present locally produced flour is pounded flour where the particle size is very coarse and the structure is damaged. Hence there will be new business opportunities for small time and medium term local business community to start up flour mills regionally to support the baking industry.

Also the industry should insist that suppliers make available fats, margarines and vegetable oils which confirm to global standards regarding trans fatty acids and as far as possible ensure the brands are trans-free products. One organisation who observed this policy globally was Unilever. Since trans fatty acids have similar effects to saturated fats on blood cholesterol, the industry should educate the staff in selecting the most suitable brand and the correct procedures in using the product. Deep frying and shallow frying is another area where the industry should critically look at specially when re-using the oil. Re-used cooking oils may break down at high temperatures and trans fatty acids are formed and consumers will suffer in the long term.

The industry should also look at milled rice flour based products acceptable to the local consumer palate. Promoting of traditional Sri Lankan sweetmeats will be one option. India, Japan, Taiwan and China manufactures a large range of rice flour based products and these product recipes could be modified to suit Sri Lankan consumer tastes.

Organisations like Unilever Ceylon in partnership with US Associates, Singapore contributed immensely to develop the baking industry in Sri Lanka. Masterline Baking School was an institute set up by Unilever to train the industry personnel while ensuring the proper application of bakery fats and margarines. They also guided the trainees to use standard recipes and the use of correct process procedures in order to produce quality baked products. Unilever Ceylon has moved out of this trade and no longer actively supports the baking industry in Sri Lanka. However Ess Kayee Enterprise is another company which has genuinely supported the development of the baking industry. The main wheat supplier to the country (Prima) has not contributed enough for the development of the baking industry. Though they have the facilities to train industry personnel and upgrade the bakery trade their key objective is to look after the commercial interest of the organisation.

At present the other bakery material trading companies provide services in order to trade their products which are imported from Malaysia or Indonesia. However the support services provided by these organisations are not adequate for the future development of the baking industry based on the changing global economic environment and catering to the rapidly changing consumer eating habits.
Therefore it will be up to the ownership and the decision makers in the baking industry to act fast and deal with the change and get their human resource asset base educated to meet the challenges of the future.

Whoever acts fast will re - innovate the industry and enjoy a successful growth in their business operations while the others will drop out in stages as and when the consumer rejects their services. This was clearly shown when most of the large industrial cake manufacturers, who produced and distributed cakes added with preservatives in order to extend shelf life for approximately 30 days and have gone out of business since the modern generation has rejected their product and changed to fresh cakes that are freely available at the local bakery or pastry shop.

The eating out habit which came in as a fashion or tradition in urban areas towards the latter part of the 1990s may change once again and consumers will revert to home cooked traditional foods. This will happen mainly from the health conscious segment of consumers who will want to avoid junk foods.

(The writer has over long years of experience in this industry having worked for several multinational groups. At present he works as an advisor on Product Marketing in the Sri Lankan operations of MOI Foods International Malaysia / Singapore.)


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