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Mandatory low price practice kills bread quality

06 April 202110 min reading

Murat Totoş Kıtır Bakery Products

“It is not the bakers who produce the wheat or the flour. The bakers who purchase flour for a higher price from the flour companies and make bread with it are being blamed. Because politics is being done in our country over the product they are producing. This is not compatible with the free market economy at all. If the state says bread shall not be affected by inflation, then it has to subsidize the bakers' loss. Otherwise, hard times will await the bakers in the face of the exorbitant increase in the prices of raw materials.”

Perhaps in no time the value of bread, the blue-eyed boy of our tables, and of the bakers has even been understood more clearly than it is today. In the first days of the Covid-19 pandemic, while everyone is housebound, bakers distributed their bread door by door without interrupting their production and delivered bread to the citizens. During this period, many of them tried new expansions and headed towards online sales. They increased product variety. They also observed the hygiene rules more strictly. The packaging practice, which has not been implemented for years, came into effect quickly. In the light of these experiences, we listened to Murat Totoş, the owner of Kıtır Bakery Products, also a member of the Board of Antalya Chamber of Commerce and a member of ATSO Bread and Bakery Products Professional Committee. Murat Totoş shared the problems and solutions of the sector with BBM readers.

Can you give us some information about yourself and your company? I am from Erzurum province, Turkey. Since 1986, I have been dealing with bread and bakery products as a profession inherited from my father in Antalya. I started my professional career in the bread and bakery products sector in Bursa in 1991. I worked as a salesperson at Phillip Morris SA between 1998 and 2005. Between 2005 and 2009, I worked as a manager in our family company operating in the field of bread and bakery products. In 2009, I founded Kıtır Bakery Products and I have been a councilman of the province's chamber of commerce and industry (ATSO) in 2013-2018. I am still a Board Member in ATSO organizational elections.

On top of being a business owner, you are a Board Member of the Antalya Chamber of Commerce and Industry and a Member of the Bread-Bakery Products Professional Committee. What kind of problems do you experience as a baker or bakery producer? One of the biggest problems in our industry is the existence of unlicensed businesses, which we call underground. This situation creates an unfair competition environment against businesses that fulfill the legal requirements. In order to prevent this, when commercial enterprises request to start water and electricity subscription, they must be forced to submit a license or pre-conformity certificate issued by the relevant municipalities to which the enterprise is affiliated to the institutions that will provide the water and electricity subscription.

Another main problem negatively affecting the sector is the bakery sections opened in the supermarkets. Unfortunately, article 5 of the Regulation on Workplace Opening and Operation Licenses No. 4729 is being misinterpreted. Although the regulation allows only the bakeries in shopping malls possessing an area of 1,000 square meters or more, as a result of a misinterpretation, we can see that most of the businesses that do not have a shopping center with a total area of 1,000 square meters and only a market are getting these licenses.

Besides, businesses that obtain bakery product license and start to produce bread relying on this license cause unfair competition in the sector. When granting bakery product licenses, local governments must take a legal commitment from relevant businesses on not producing bread. This will be binding and eliminate unfair competition.

Do you think there is an excess capacity in the sector? Yes, there is an excess capacity, for sure. Substantial inflation of workplaces has occurred in the bakery industry. The opening of businesses with personal preferences, not with the consultancy or guidance of any institution, has created a supply well above the demand in some regions and this situation drags all businesses in that region into an economic impasse. This situation avoids the sector from developing itself, creating employment and economic added value. Even worse, enterprises that fall into economic bottlenecks in the bakery sector may resort to practices that threaten public health. On the other hand, the state also suffers tax loss due to the closed businesses.

To prevent this, bread production should be done in a planned way and a population-based system should be developed (e. g. one oven per 10,000 population). In addition, a distance of 1,500 meters must be imposed between the bakeries. If this is achieved, bakery enterprises will use their capacities effectively and efficiently, they will be able to closely monitor the developments in the sector and reduce costs. This will provide the consumer with the opportunity to reach higher quality products at a much lower cost.

What would you like to say about the big supermarket chains' selling bread cheaper? The fact that supermarkets, which have recently increased and hold a wide sales network, make bread as a trading material and resort to the method of attracting customers by selling it below its cost is a crucial blow to the sector. In this case, our bakers who struggle to survive face unfair competition. The current system directs the bakers to low cost and poor quality production. Determining the base price together with the ceiling price in bread will eliminate both unfair competition and loss of quality. In this way, bread, which is closely related to public health, will cease to be a trade material and come to our tables more healthily.

When wheat prices increase, flour companies may increase their prices. However, why is it always a problem for the bakers, to increase their bread prices although they bought the flour with the increased price? It is not the bakers who produce the wheat or the flour. The bakers who purchase flour for a higher price from the flour companies and make bread with it are being blamed. Because politics is being done in our country over the product they are producing. This is not compatible with the free market economy at all. If the state says bread shall not be affected by inflation, then it has to subsidize the bakers' loss. Otherwise, hard times will await the bakers in the face of the exorbitant increase in the prices of raw materials. Unfortunately, there will be a significant amount of bankruptcies in the sector in the forthcoming period.

Commissions are established for the increase in bread and sometimes even bakers' representatives can object to the hikes among themselves. What is your problem? In fact, a commission didn't use to have been established before. The commission started to be established after the chambers are authorized to impose prices and they are obliged to take opinions from the ministry. In my opinion, this is completely against the rules of trade. Because in an inflationary environment, a commission is being established and you are subjected to a certain process for getting a price for the product you produce. As such, you cannot reflect the hike made on your raw material to the product you have produced during that time. What is this, if not pure injustice?

How much should the bread be in order for the bakers to survive without using poor quality materials and to sustain their business without worrying about the future? Under today's conditions, the price of 200 grams of bread should be 2 lira so that the bakers can produce quality products and provide added value. However, considering the exorbitant hikes in raw material inputs, the price policy of bread should be constantly updated so that there is no problem with the quality and service of this product, which is closely related to public health.

How did the Covid-19 pandemic affect you? How did your revenues and expenses change during this period? How did it reflect on the sector? I can say that the Covid-19 process has revealed the significance of bakery for the first time. Our dear colleagues sensitively showed what a valuable profession it is and what it means to serve from pillar to post. Of course, the fact that the people could not go out has led to an increase of 20-30 percent in our business. During this period, the sector had taken the opportunity to move to the digital platform.

Which area is the trend in the industry heading towards? There is a trend in the industry towards traditional bakeries. I think traditional bakeries will be popular also in the future. When we look at traditional bakeries and industrial bakeries, I can say that the number of industrial bakeries is decreasing.

When we compare the machinery and equipment used by Turkish bakers with the world, what is the situation? Turkey has launched successful businesses when it comes to bakery machinery and equipment. However, since bakers cannot make enough money, they tend to use their equipment until the last point.

The increase in the exchange rate increases the costs of flour and yeast. What kind of measures do you take against this situation as the owner of a small business? The attitude that the owner of a small business can take would only be to increase the exchange rate and to survive with increasing product variety and selling profitable products. This can be done by heading towards boutique bakeries more.

What kind of conveniences do flour and yeast producing companies provide for you? Flour and yeast producers can provide conveniences for us only through extending maturity. However, in the face of these price increases, both flour and yeast companies know that they will have difficulty in getting the money of the product they give with these prices. Therefore, companies that thought that they could not get the money for the product they gave to some bakers began to act selectively against bakeries and canceled maturities.

Does the sector have difficulties in terms of qualified personnel? There are serious problems regarding qualified personnel. The reason is quite simple. In fact, neither our own children nor any apprentice approaches this profession because they know that they will not make enough money.

A lot of Syrian or foreign workers are being employed in our sector. What are the advantages and disadvantages of this? I am personally against employing foreign workers. I think that only competent people should do this job because those who do not have serious qualifications cannot do this job and also because of the high unemployment figures in our country. However, unfortunately, we hear that there are too many businesses employing foreign workers in order to reduce cost expenses and to employ cheap labor.

What are the popular types of bread lately? Are people interested in purple bread? The rapid increase in interest in products such as purple bread and variety bread, such as rye, sourdough, and whole wheat, leads the industry to develop itself in this direction. We will have to keep up with this change so that our struggle for existence continues. In this sense, I want to thank Istanbul University Sankara Brain and Biotechnology Research Center Founder Prof. Dr. İhsan Kara, the inventor of purple bread produced as a result of 12 years of work, and also his team. It has been a beneficial product in terms of health. At the same time, thanks to this product, diabetic patients will be able to eat bread. I can say that it attracts great attention from our customers.

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