Compared to other years in recent history, 2008 was one of the most challenging for bakery businesses in every sector of the industry. Unprecedented ingredient costs and skyrocketing gasoline prices combined with a downturn in the economy left many bakery operators scratching their heads, wondering how to cope. Most raised prices, some cut back staff and a few incorporated cheaper ingredient alternatives in their product lines. All were forced to make some difficult business decisions this year. And, while gas and ingredient prices have eased some, the state of the economy in 2009 does not hold much promise either.

On the surface, the situation looks dire, but fortunately for the baking industry, people always need to eat, and some parts of the industry even benefit from the poor economy. Most importantly, the industry is filled with leaders who are always moving, thinking and capitalizing on new opportunities. On behalf of Bay State Milling Co., Baking Management and Modern Baking magazines brought together some of these leaders from different segments of the baking industry to talk about business challenges and learn their thoughts on future innovation and where the industry is headed.

Moderated by Heather Henstock, editorial director, Baking Management and Modern Baking, the roundtable included the following participants: Tom Gumpel, director of research and development, Panera Bread Co., St. Louis, Mo.; Kristen Repa, owner, Dessert Works, Norwood, Mass.; Simon Stevenson, pastry chef/bake shop/Hampden DC manager, University of Massachusetts, Amherst; Joe Piantedosi Jr., owner, and Lino Dischino, production manager, Piantedosi Baking Co., Malden, Mass.; Karen Trilevsky, founder/C.E.O., and Frankie Whitman, vice president, marketing, FullBloom Baking Co., Newark, Calif.

Baking Management: Today we want to focus on new opportunities in the baking industry, but I want to start first with the challenges you are facing. What is the number one thing you worry about in your bakery business?

Joe Piantedosi: Rising costs. Ingredients, mainly flour. Fuel costs, labor costs, insurance, utilities and trying to make a profit. We're feeling squeezed now more than ever. And just selling bread, we're charging more when flour goes up and justifying price increases, but how much can you charge for bread? Also, we supply restaurants where bread is not a total necessity or at least it can be cut back.

Kristen Repa: Absolutely. We of course are also dealing with flour costs, but dairy, eggs and other ingredients also are following this upward trend. For me, finding qualified bakery labor is a big issue as well. In a small business like mine, we're looking for trained employees, somebody with some experience, personality and talent. So, along with our flour prices doubling, my labor costs have practically doubled in the last year.

Piantedosi: We have labor concerns too because we have lots of equipment. So, we need mechanics and engineers, and I find it very hard to find these people. Also, the cost of living is so high, and to pay these people is very expensive.

Lino Dischino: We invest in equipment to produce faster and more efficiently, so our people can get more production out of an hour. It's tough to find a qualified baker or mechanic today. So, we're computerizing our equipment as much as we can.

Karen Trilevsky: At the same time labor costs are rising in this economy, customers are looking for increased value. Transportation is a rising cost, packaging, all of it is. On every front we're getting hit with increased costs, and the customer is looking for decreased costs.

Tom Gumpel: I look at fuel as obviously a huge piece for us. We are a company that has 19 fresh dough facilities. All we have in them are mixers and people moulding. It's a huge operation of 50,000 sq. ft. times 19 factories. So, when you see a Panera truck go by, there's bread fermenting on that truck, and we have to get to the stores. Do that math times $5 a gallon for gas. You can't just pass that on to the customer.

BM: Where do you see opportunities for innovation in your business?

Stevenson: At U Mass, we've gone the route of trying to integrate more fresh fruit into our products. We're looking at using more whole grains, particularly in products that aren't traditionally thought of as whole grain, such as cookies or brownies. And, we're definitely serving smaller portions. Smaller portions have been huge for us and have gone over a lot better than I thought they would.

Trilevsky: Yes, we're seeing the same kinds of things, especially for healthier products.

Repa: Something I've done along similar lines is scale back the extra stuff that we add to our products. They're still high quality products, the portion sizes are the same, but we're not adding so many foo-foo things to it. We're streamlining on the simple elegance.

BM: What about opportunities with natural and organic products?

Frankie Whitman: More and more people now are asking for it. Even our customers who haven't been asking are now asking. Other suppliers who are in our division are not using all natural. So, we have opportunity for expansion because natural ingredients are something we've always used.