‘Closed’: German bakeries go bust due to climbing costs amid Ukraine war

Ibrahim Aydil has been a baker since childhood but doesn’t recall such gloom in a sector that has been the soul of Germany’s socio-cultural landscape.

“We can feel the crisis in Germany… it’s unbelievable, too much,” the 54-year-old Aydil tells TRT World as he captures the mood of the country’s bakery sector, which is facing the most crippling crisis in its history.

Rising wheat and energy prices – triggered by the Russia-Ukraine conflict – have pushed the bakery industry to the brink.

The economic powerhouse depends on Russian energy more than any other European country, but as Moscow reduced gas supplies to Europe as a countermeasure against US-led sanctions, the continent has scrambled to find alternative energy sources to mitigate the unfolding crisis. 

And energy-intensive sectors such as bakeries were first in line to take the hit. 

Aydil says mathematics doesn’t work anymore.

“I am currently running two bakeries, and my electricity bills increased to $22,000 a month compared to $6,000 last year before the war in Ukraine. In addition, the price of flour has seen an over 10-fold increase, from 33 cents per kg to 80 cents,” says Aydil, who opened his first bakery in the western city of Dusseldorf in 2016.

And ‘dough’ shall eat

While bread happens to be a staple in many countries, it has a special place in Germany which has 600-odd different types of the wheat-based food. The basic fare is so integrated into their daily life that Germans call their supper “abendbrot”, meaning the evening bread custom.

And keeping the Germans’ plates full were 1,000-odd bakeries, but many have gone bankrupt in recent times. The list is only getting longer.   

Kristoffer L, who works at a 116-year-old family-run bakery in the northern city of Bremen, tells TRT World that local bakeries are struggling to stay afloat as most use gas-fired ovens and electricity-operated cooling rooms for their products.

He adds that bakeries are being forced to recycle bread – use leftovers to make fresh bread – to lower energy bills, which have increased 10-fold, from $3,800 monthly last year to $38,000 at present.

Aydil knows that a solution is unlikely soon.

“Things do not fall into place. I say, okay, everything will be fine three-six months later, but nothing gets better in the current situation,” he says, adding that bakers are not getting any government support, the profit rate has been set to zero, and the future is too uncertain.

Chain of bankruptcy

Thilmann Brot, a traditional family firm established in 1937, went bust in October with its 20 branches in and around southwestern Koblenz city. 

The 90-year-old Schlechtrimen from Cologne city became another victim of the financial bottleneck resulting from the hike in power prices and declared bankruptcy in September. 

The Hampe chain from Neunkirchen, Manufaktur Gaues from Hanover and Stoehr-Brot from Dinklage previously could not cover the sharp costs and kicked off the snowball effect of bakery bankruptcy in the energy-dependent country.

In reaction to the soaring prices, 800 bakeries in northern Germany protested against the government by turning their lights off and serving their customers in the dark in September, the Bakery and Confectioner in North Incorporated Association said in a statement. 

In October, the Bakers’ Trade Association organised a demonstration under the hashtag “#Alarmstufe_Brot” (Alarmlevel_bread) in Berlin, Dusseldorf, Hannover and München und Magdeburg. Bakeries in Dusseldorf even distributed doughnuts to passers-by and drivers to draw attention to their financial plight.

According to a report published by the German Federal Statistical Office released in October, energy prices soared 43 percent compared to the same month last year. Natural gas has more than doubled by almost 110 percent.

Yet, the challenges bakeries face do not end with the hike in energy costs. 

The price of wheat is currently almost 2.5 times higher compared to 2021, and a litre of oil – another crucial ingredient for the bakery industry – is selling at three times more, at around $3. 

Just as the cost of energy and raw material for bread has risen sharply since the Ukraine crisis, bread prices have increased by almost 20 percent since last October.

Dr Frank Umbach, head of research of the European Cluster for Climate, Energy and Resource Security, tells TRT World that “there are several reasons for the rise in electricity price, but it is also partly interlinked to gas prices. Natural gas is the most expensive source of electricity generation. 

A new electricity price/market design is currently being worked out by the European Commission. But it will take years to end.”

Winter angst

The reaction of German authorities to the energy crisis has led to panic and anger among bakers. 

Though the centre-left government has announced relief measures to the tune of about 100 billion euros to tackle the staggering inflation, the bakery sector has not found institutional support. Moreover, the attitude of leaders has also angered bakers. 

Economy Minister Robert Habeck found himself in the line of fire when he said in September that he expected possible bankruptcies based on the energy crisis, mentioning the bakery sector as an example because it “depends on people spending money”. 

Moreover, the head of the country’s Federal Office of Civil Protection and Disaster Assistance, Ralph Tiesler, recently said that Germany should expect “a regional and temporary interruption in power supply” in January and February but later retracted and apologised for the statement.

As the harsh winter settles over Europe, bakeries are expected to feel the pinch more. 

Umbach says that if Germany faces a more significant gas supply crisis, bakeries will be the first to be hit as “private households will not be forced to decrease their gas consumption”. 

Germany is struggling to find alternative sources of gas since supplies from Russia –  formerly its biggest supplier  – was fully stopped in August.