Fred Stewart
03-15-2008, 01:51 AM
http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20080314/NEWS/803140337/1006/NEWS
For 52 years, Armand Argenio churned out rolls and loaves at his Milford bakery. For families and foodies alike, his ovens brought a warm touch of joy to each day.
Today, the ovens are cold. Soaring wheat prices are forcing independent bakeries like his to close. Flour prices have quadrupled in the past 18 months, driven by a deluge of bad news -- drought in Australia, rising transportation costs, farmers switching wheat crops to corn, a plunging dollar and a demand from developing nations that drives the market ever higher.
"It really hurts me," said Argenio, 77, who closed his bakery March 1. "I've been serving the public and I enjoy my artisan trade."
"It's gonna drive the little man right out of business," predicted Tommy Serpe, co-owner of Serpe & Sons Bakery in Elsmere, supplier to such well-known Delaware shops as Casapulla's.
Bakers agree that price pressures have not been this bad in their careers.
They predict the downstream impact soon will become painfully obvious in area supermarkets, sub shops and pizza parlors, which are also being hit by soaring dairy prices.
"I tell people it's going to be $5 for a loaf of Wonder Bread come August," said Joe Amalfitano, second-generation baker at Amalfitano's Italian Bakery in New Castle, which supplies such restaurants as the Dog House and Capriotti's.
"It's supposed to break in September," Amalfitano's owner Ralph Jacobs said of the ongoing price spike. "But I don't know if I can last that long. I'm digging into my savings right now."
Through 2006 and 2007, Amalfitano's was paying between $15 and $16 for a hundred pounds of bulk flour -- or about $8,000 every two weeks. The last load they took on was priced at $48 per hundredweight -- at a cost of $22,000. Pizza shops and smaller bakeries that buy by the bag are paying even more.
In response, bakeries have been raising their prices by degrees since last summer, but potential customer backlash is limiting how high and fast they are willing to go. To fully compensate for the rise in flour costs, baker Jeff Falini would have to hike his prices 150 percent, a risky move in an age of cut-rate deals at the local Wawa or supermarket.
"How much are people going to pay for a bagel?" asked Falini, owner of D & D Bagels & More in Milford. "They don't understand how a bagel can go up that much."
At the same time, bakeries are trying to endure spikes in fuel and energy costs that are straining so many small businesses these days. "And Washington tells me there's no inflation," Serpe said. "Oh, boy. You name it, and the price of the ingredient goes up."
Argenio's bill for propane and gas was $1,500 last month, and even the relative luxury of owning his bakery mortgage-free was not enough to help him past this crisis.
It's even more painful for him to close at a time when business was so strong, when demand for his handcrafted goods was being driven to new heights by the professionals from New York and New Jersey who are increasingly coming to Sussex.
"Several people were actually crying, sent me flowers" when the bakery closed, Argenio said.
Supplies at record lows
The issue holds great potential to reach beyond bakeries, owners warned. The price of rolls has been one of many such problems at sandwich chains such as Capriotti's, which has shops in several states and has become a multimillion-dollar business. "I hate to keep raising the prices, but we kept getting eaten up on the bottom line," said Lois Margolet, Capriotti's founder.
The impact on shoppers has been mixed. Bread prices are up about 10 percent from a year ago, but pasta prices in the supermarket don't appear to have risen significantly, said Josh Sosland, editor of Milling and Baking News.
Not only is flour expensive, it's becoming increasingly hard to buy. This week, the Agriculture Department predicted that the U.S. wheat supply would soon hit historic lows, depleted as a weak dollar accommodates rising overseas sales.
"It's getting scarce. They're putting limits on how much you can get," Serpe said. The relative stability of contract pricing, once a refuge from market fluctuations, is getting more difficult to secure for larger bakeries.
"You try to book in, and you can't now, because the mills don't have enough flour to go around," said Jacobs, whose bakery produces tens of thousands of rolls each month.
"It's just crazy right now," Amalfitano said. "You don't know what to do."
'It's too late' to raise prices
On Wednesday, bakers organizations pushed lawmakers in Washington to help find solutions. The government needs to limit exports so that Americans don't become the victims, said bakers, acknowledging they have little confidence anything will be done.
At the American Institute of Baking International in Wichita, Kan., the head of its school predicted that survival will also depend on prudent business practices.
"In situations like this, usually those that have a little deeper staff, have their operation pretty well dialed in, have very little waste and good relationships with their customers, probably will be fine," said Kirk O'Donnell, vice president of education.
"We have to be able to ask our customers to pay a fair price," he said. "As long as we do a good job and an efficient job, we shouldn't apologize for our prices."
At Black Lab Bakery in Wilmington, a focus on a more gourmet-minded product has helped it weather the wild market and given it more room to raise prices. Customers who demand quality are usually more willing to pay for it, said Black Lab baker Barry Ciarrocchi. "A place like ours, we can make small batches, we can make them very well, and we can get fair prices for them," he said.
O'Donnell suspects that many were too slow to begin raising prices last year, though bakers in Delaware said they held on to hope that costs would ease.
"I wanted to do it in January, and I was afraid," Jacobs said. Amalfitano's has eased pressures by asking wholesale customers to pay up sooner, a move that helped somewhat, but did little to ease a sense of pessimism.
"It's too late," Falini said. "They should have done something about a year ago."
"It's just a matter of time before the small bakeries go out of business, because they don't have the volume," said Jacobs, who predicted that smaller bakeries soon may be forced to accept buyouts from large-scale bakeries. "It's bad news.
For 52 years, Armand Argenio churned out rolls and loaves at his Milford bakery. For families and foodies alike, his ovens brought a warm touch of joy to each day.
Today, the ovens are cold. Soaring wheat prices are forcing independent bakeries like his to close. Flour prices have quadrupled in the past 18 months, driven by a deluge of bad news -- drought in Australia, rising transportation costs, farmers switching wheat crops to corn, a plunging dollar and a demand from developing nations that drives the market ever higher.
"It really hurts me," said Argenio, 77, who closed his bakery March 1. "I've been serving the public and I enjoy my artisan trade."
"It's gonna drive the little man right out of business," predicted Tommy Serpe, co-owner of Serpe & Sons Bakery in Elsmere, supplier to such well-known Delaware shops as Casapulla's.
Bakers agree that price pressures have not been this bad in their careers.
They predict the downstream impact soon will become painfully obvious in area supermarkets, sub shops and pizza parlors, which are also being hit by soaring dairy prices.
"I tell people it's going to be $5 for a loaf of Wonder Bread come August," said Joe Amalfitano, second-generation baker at Amalfitano's Italian Bakery in New Castle, which supplies such restaurants as the Dog House and Capriotti's.
"It's supposed to break in September," Amalfitano's owner Ralph Jacobs said of the ongoing price spike. "But I don't know if I can last that long. I'm digging into my savings right now."
Through 2006 and 2007, Amalfitano's was paying between $15 and $16 for a hundred pounds of bulk flour -- or about $8,000 every two weeks. The last load they took on was priced at $48 per hundredweight -- at a cost of $22,000. Pizza shops and smaller bakeries that buy by the bag are paying even more.
In response, bakeries have been raising their prices by degrees since last summer, but potential customer backlash is limiting how high and fast they are willing to go. To fully compensate for the rise in flour costs, baker Jeff Falini would have to hike his prices 150 percent, a risky move in an age of cut-rate deals at the local Wawa or supermarket.
"How much are people going to pay for a bagel?" asked Falini, owner of D & D Bagels & More in Milford. "They don't understand how a bagel can go up that much."
At the same time, bakeries are trying to endure spikes in fuel and energy costs that are straining so many small businesses these days. "And Washington tells me there's no inflation," Serpe said. "Oh, boy. You name it, and the price of the ingredient goes up."
Argenio's bill for propane and gas was $1,500 last month, and even the relative luxury of owning his bakery mortgage-free was not enough to help him past this crisis.
It's even more painful for him to close at a time when business was so strong, when demand for his handcrafted goods was being driven to new heights by the professionals from New York and New Jersey who are increasingly coming to Sussex.
"Several people were actually crying, sent me flowers" when the bakery closed, Argenio said.
Supplies at record lows
The issue holds great potential to reach beyond bakeries, owners warned. The price of rolls has been one of many such problems at sandwich chains such as Capriotti's, which has shops in several states and has become a multimillion-dollar business. "I hate to keep raising the prices, but we kept getting eaten up on the bottom line," said Lois Margolet, Capriotti's founder.
The impact on shoppers has been mixed. Bread prices are up about 10 percent from a year ago, but pasta prices in the supermarket don't appear to have risen significantly, said Josh Sosland, editor of Milling and Baking News.
Not only is flour expensive, it's becoming increasingly hard to buy. This week, the Agriculture Department predicted that the U.S. wheat supply would soon hit historic lows, depleted as a weak dollar accommodates rising overseas sales.
"It's getting scarce. They're putting limits on how much you can get," Serpe said. The relative stability of contract pricing, once a refuge from market fluctuations, is getting more difficult to secure for larger bakeries.
"You try to book in, and you can't now, because the mills don't have enough flour to go around," said Jacobs, whose bakery produces tens of thousands of rolls each month.
"It's just crazy right now," Amalfitano said. "You don't know what to do."
'It's too late' to raise prices
On Wednesday, bakers organizations pushed lawmakers in Washington to help find solutions. The government needs to limit exports so that Americans don't become the victims, said bakers, acknowledging they have little confidence anything will be done.
At the American Institute of Baking International in Wichita, Kan., the head of its school predicted that survival will also depend on prudent business practices.
"In situations like this, usually those that have a little deeper staff, have their operation pretty well dialed in, have very little waste and good relationships with their customers, probably will be fine," said Kirk O'Donnell, vice president of education.
"We have to be able to ask our customers to pay a fair price," he said. "As long as we do a good job and an efficient job, we shouldn't apologize for our prices."
At Black Lab Bakery in Wilmington, a focus on a more gourmet-minded product has helped it weather the wild market and given it more room to raise prices. Customers who demand quality are usually more willing to pay for it, said Black Lab baker Barry Ciarrocchi. "A place like ours, we can make small batches, we can make them very well, and we can get fair prices for them," he said.
O'Donnell suspects that many were too slow to begin raising prices last year, though bakers in Delaware said they held on to hope that costs would ease.
"I wanted to do it in January, and I was afraid," Jacobs said. Amalfitano's has eased pressures by asking wholesale customers to pay up sooner, a move that helped somewhat, but did little to ease a sense of pessimism.
"It's too late," Falini said. "They should have done something about a year ago."
"It's just a matter of time before the small bakeries go out of business, because they don't have the volume," said Jacobs, who predicted that smaller bakeries soon may be forced to accept buyouts from large-scale bakeries. "It's bad news.