According to a book I’m reading, wheat prices plummeted in the late 90’s, down to an average of $2.25/bushel.
Google says that a bushel is 60 pounds of wheat, which I would imagine yields a considerable amount of bread.
A normal loaf of bread runs about $1.50 at a typical grocery store. This leads me to believe that, when you consider the amount of bread sold, someone along the line (though apparently not the farmer) is doing very nicely, profit-wise. I can’t imagine that many salaries need to be paid (assuming most steps of the bread-making process are now automated).
Is it just another case of the middleman (corporate bakeries) pocketing an enormous profit? Or is my understanding of the bread-making process woefully inadequate? Also: I assume that the more expensive, more ‘natural’ bread (eg, whole wheat, organic, etc) is less processed, thus, less expensive to produce. True?
I can only answer the last question, which is a resounding “false”. Whole grain breads require…wait for it…whole grains. The problem with whole grains is that the fats in them go rancid. A white flour has most of the oil containing part removed, leaving only starch behind. The oils in whole grain flour go bad under the influences of heat, humidity and time. This means a whole grain baker can’t buy a gazillion pounds of white flour when prices are low and store it in a warehouse somewhere. A whole grain baker has to buy often, at whatever price he can get, and store it in climate controlled warehouses or his own bakery. The resulting bread also goes bad faster, which means he loses more loaves to spoilage - a white loaf can sit on the shelf a long time waiting for a buyer - a whole grain loaf has a much shorter lifespan.
I baked my own bread for a couple of years. (should get back to that!)
It was worth it for the quality and freshness, but a losing proposition economically, even if I didn’t price in my time. In addition to flour, (which is more expensive to get whole grain, as noted) there was yeast, milk, honey, and butter to purchase. Even if I did 6 loaves at once, I probably had at least 10 minutes labor in each loaf, so you have to factor that in, and you can’t really take that labor offshore and still have fresh bread.
I used to work for some well-known supermarket headquarters on their purchasing systems. The way you phrase you question is common but really naive. I am always amazed to see how few people understand supply chains and their amazing efficiency even at an intuitive level. To start that, you just have to think about how that loaf of bread came into being and how it eventually reached the end consumer. We can go through it if you want but you can just start by envisioning bags of grain sitting at the bakery, followed by the baking, then the packaging, then the shipping, then the delivery, then getting it on the shelves, marketing it at headquarters, dealing with the damaged loaves, inventorying it, checking it out, and having it arrive back at the customers table.
Each of those steps has several textbooks written about them. There is a lot going on as well as a massive amount of people involved both directly and indirectly for every single load.
The basic answer to your question is that no one person or group is getting fabulously rich from it. If there were, there would be another group that would do it for less. Instead, basic economics dictates that the whole system seeks the most efficient route for supplying certain types of bread. No one is making money hand over fist but no one (typically) is going broke from it either especially if they are a mature company with very efficient processes.
I have a friend whose father is a baker. Genuine baked-in-store place. When challenged by customers over the cost of their basic loaves (‘that’s more than in the supermarket’), he just asks them what they would expect to be paid to get to work at 2am, six days a week.
Not to mention that organic grains/flours/eggs/etc. cost a lot more than processed, conventional ones. And the rancidity of whole grains/whole grain flour is not to be overlooked. I bake bread on occasion and can store plain white flour in the cupboard, but anything different like whole wheat flour has to take up valuable space in my fridge if I want to store any.
Depends on the brand. At our store, we have two bread markups, 20% and 30%. Now first you have to understand what a markup is. It is the profit on the sale price. So if we have something that costs 80 cents and mark it up 20% it will sell for $1.00 (we would make 20 cents, or 20% of the sale price, at 30% something that costs 80 cents will retail for $1.14 rounded up to $1.19.) Anyways, bread is usually one of the lower markup items (for us) becuase it is usually a guaranteed sale. What that means is that the bread man comes in today, loads up the shelves. Then tomarrow he comes in again puts all fresh back up on the rack, and whatever is left he buys back from us at the same cost we paid for it. Everything on that rack is guaranteed to sell. This rather common with bread becuase they take it back and turn it into croutons and breadcrumbs and can resell that again. We can afford to have a lower markup on it becuase NONE of it will be thrown away or sold as ‘day old.’ Some bakers, however, choose not to gurantee the sale, since we are taking all the risk we have a higher markup on those items.
So, you said a normal loaf of bread costs you $1.50, most likely the store paid (or the bakery put into it) about $1.05 to $1.20, let’s be generous and say the store made 50 cents off it, no ones getting rich off it. More then likely the owner of the place that’s selling it for $1.50 is going to be putting about 1 to 1.5 CENTS in his pocket from that sale.
I appreciate the informative answers. I had no idea that flour could go bad or anything like that, but then again, my only experience with it is the sack of white flour my mom always had in the kitchen.
Recently I have noticed a difference in the longevity of bread that happened to coincide with the closing of the day old bread stores. Not only does the bread stay fresh longer, it is different. I’ve always used Autumn Grain and now I just don’t like it.
We used to have at least 4 day old shops in town, now even the Pepperidge farm one is gone. There isn’t one left. What happened?
I have found links to articles dating back a few years, but the phenomenon I’m talking about has happened really in the last year. Either they tried a change earlier and it didn’t fly so they tried it again or something. Either way, the new bread is just…odd.
I think the assumption was that because they were already customers, they wanted the bread for a reason, and just suspected that the price was being hiked as a result. Whereas the price was being squeezed down at every opportunity - the local supermarket can make no profit at all on its bread and not break a sweat.
There is an Orowheat outlet store near me, where I can buy bread at about half the price I can get it for in the grocery. (And lots of other stuff too.) I don’t know if these are returns or overproduction - the bread is always in good shape, and is never squashed or anything.
Clearly freshness is worth a lot of money. I’m sure the stuff I buy is day old, since they also sell non-discounted bread at regular prices.
The sort of bread you buy in the supermarket has a lot of air and water in it, in comparison with the sort of bread you would buy from an artisan baker, which means the average supermarket loaf has less flour in it than a loaf from a good baker.
Google “Chorleywood Process” for more information about the production of supermarket bread.
It’s also a question of small scale production economics vs he efficiencies of large scale production. Artisan made bread demands more human handling and intervention than supermarket bread, which is all done by machine. A loaf of bread from a good baker might take 24 hours to produce, a loaf of bread from a large, commercial baker will take only a couple of hours.
Correct me if I’m wrong, but wouldn’t the markup be $0.30 - $0.45 in this example, while the profit would be $0.01 - $0.015?
IIRC, the markup is what is store charges vs. what they paid for it, while the profit is how much they have left after they pay their employees and the light bill.
I should have clarified a bit more. Markup is a percentage. What your talking about is the difference between gross profit and net profit (or net income).
Here is a sample VERY basic Profit and Loss Statement.
$10.00 Income (what an item was sold for)
-$8.00 Cost Of Good Sold
--------
$2.00 Gross Profit
-$1.98 Expenses
--------
$0.02 Net Income
Markup 20%
Markup is found by doing: Gross Profit/Income x 100
The assumption about organic food being cheaper, with all due respects, (reading, please take this as fighting ignorance and not as snarky) extremely naive.
Organic food is much, much more expensive to grow, store and process. Since chemicals for fertilizers and pesticides can’t be used on organic crops, there are far greater losses and lesser yields, as well as far higher labor costs. Food is cheap because conventional farming dumps chemicals and chemicals onto the land. To grow organic food requires land which has less then a certain amount of chemical residue. This means that the land can’t have been used for normal commercial farming for years, then suddenly switched to organic farming.
Organic food must be stored separately from the non-organic, processed separately to avoid cross contamination and records much be kept for certification and inspections. You can’t run a batch of non-organic soy sauce through a processor and then a batch of organic without completely cleaning the machines, tanks, etc. Non-organic sacks of wheat can’t be stored in the same warehouse as organic wheat because someone may grab the wrong bag to dump into the grinder. Inspectors have to be convinced that the process is correct and the certification company has to buy off on the paper trails. It ain’t cheap.
Not only that, but a farmer I know recently attened some sort of organic farmers convention and learned that fertalizers can be air/wind born and travel up to five miles. Technically (though I don’t know if this is part of the certification process) the farm where you from your organic produce can’t have any fertalizer spread within five miles of it. I’d imagine fertalizer travelling 5 miles probably has to come from a crop duster to begin with, but still, keeping the area around the organic produce fertalizer free is yet another expense.
