Change the size, change the recipe: how this NZ exporter is grappling with a global egg-price rise

Venerdi director Tim Grainger is looking nervously ahead to April when he expects rising egg prices to hit the gluten-free and paleo bread business.

With costs rising across the board but an egg-price shock now playing out, Grainger says the manufacturer is considering its next steps; should it change recipes and trim the cost of a loaf, or should it increase prices?

Grainger says egg prices have risen 240%, with a number of factors influencing the cost to buy eggs but he doesn't name the changes to NZ legislation banning caged eggs as one of them.

Egg producers in the US are complaining of increasing cost of feed for hens, electricity and even the egg cartons. Then there is the not insignificant issue of avian influenza hitting US egg producers in 2022, which has seen laying hens culled in their thousands.

Venerdi, of course, does have a vegan range that is insulated from these egg price-rises, but Grainger says it has to react.

"We've certainly suffered margin loss. Despite everything, we've only really put one price rise through since this inflation and cost inflation have happened. But we're well overdue for another one. And it's tough, because how do you respond to things costing a whole lot more? And you don't know how people will respond to [price rises]."

The Venerdi products Grainger knows are on the pricier end when compared with a basic loaf and potentially at risk of being dropped from the grocery shop as budget-conscious shoppers face rising food price inflation, with loaves priced above $12. He says the firm did a survey of its customers and asked: would they still buy a Venerdi product if the price rose? Grainger says the feedback was evenly split, at 50% yes to 50% no.

"We can do our best but we are faced with the decision, should we redevelop products to try and make them cheaper and try to hit price points? Or should we just be as efficient as we can and not change our quality? Those are big decisions to try and make. And mostly we're saying let's try and uphold the recipes and and do the best we can to minimise those rises."

Grainger says the firm is looking at different production methods to offer innovations on its range and introducing "different value propositions", and a range of new products should be launched in the middle of the year.

It is a business that sells a lot of bread. It has some 80 staff at its plant in Kelston, west Auckland, and annual turnover of about $17 million.

Venerdi has always made “hot” products and kept up with trends, Grainger says; first gluten-free bread, then paleo bread which is sometimes dubbed "caveman food".

Its Australian business is only slightly smaller. Grainger says it fluctuates, but at the moment Venerdi's business activity is divided between about 55% New Zealand to about 45% Australia.

It has both retail bread products which are sold in the major supermarkets in New Zealand while its branded-bread product is sold through independent retailers in Australia. It has pizza dough products, burgers, pita breads and bagels it sells through its quick service restaurant arm to brands including Auckland's Burger Burger.

Despite a number of near-death experiences for the business across its 20-odd years of operation, such as rival bread-maker Vogels (owned by giant Goodman Fielder) entering the gluten-free bread market, Grainger says the Venerdi team have been able to make a go of it on both sides of the Tasman because of some key business decisions.

When the Vogels-brand entered the gluten-free bread market, it was good timing that Venerdi was in discussions with Dominos Pizza to supply pizza bases, Grainger says. That helped to smooth over Venerdi suffering an immediate and significant drop in sales due to Vogels' new gluten-free offering.

Grainger says you need to be on the ground, meet people face-to-face and make deals happen. Without this approach Grainger says the firm wouldn’t have made some deals in Australia, including striking up a relationship with a supplier at a taste testing and getting a pizza base in front of a buyer which led to a quick deal.

"Once we started visiting Australia, we would be in Australia 10 times a year. And those visits would lead to growing your network of people. Once we had pizza success, we approached some other pizza chains over there, and some of them became customers. But that was that when you're dealing with these kind of bigger customers, it can take two-to-four years before you get from your first talk to getting your product across the line. So you've got to be patient."

Grainger says Venerdi sticks with what works and what is tested, and says other businesses don’t need to reinvent the wheel in Australia.

"It's not as scary as some people might say, I think the consumer trends for us have been relatively similar. But they have a much bigger independent channel over there."

Venerdi's paleo bread was going well in New Zealand, Grainger says, and paleo was a hot trend. At the time, Venerdi's supplier was looking for something "to really give them a boost", and Venerdi had its paleo product.

"It was kind of a chance meeting where my parents were over there for our pizza business and happened upon some displays, some tasting and an organic shop and followed up with a distributor. So it was one of those things where they got a sample in that wasn't planned. And then within an hour or so one of the owners gave me a call and said 'hey, the bread's great'. And I think within about four weeks, we had a container over there."

Grainger says business owners should think hard about whether to diversify their product or keep refining and honing what they are good at. 

"We make four different products; we make pizzas, breads, buns, and bagels. Every time you divert your capital into new lines, new machinery, it means that you can't spend more on making your existing lines more efficient ... We've made a decision to not divert into any new channels, any new product types. There is potential for us to look to other manufacturers for that, but we're already spending a lot of money on machinery just on the lines we do have."