Harry-Brot: reports stable development on broad basis

Schenefeld / DE. (eb) Ten production sites in Germany, 39 sales outlets in the North, Central, West, North-East and South-East regions, 4,775 employees and a development that is set for growth. From 2010 to 2020 alone, Harry-Brot GmbH, headquartered near Hamburg, significantly increased its sales from 669 million euros to 1,031 million euros. In 2021, the target will be not different, even if the focus may have shifted for Germany’s largest bakery group with a view to Covid-19.

The subsidiaries Backshop Tiefkühl GmbH, Backfactory GmbH, Harry-Brot Export International GmbH and, for the first time, Wittener Bäckerei GmbH, which was established in 2019, are included in the analysis.

  • Harry-Brot GmbH produces bread and other baked goods at ten locations in Germany. Via its own distribution points and external storage areas, the wholesale bakers supply customers’ food retail outlets and their central warehouses on a daily basis. The main focus of the company’s activities is the German bread market. In addition, customers in other European countries are also supplied.
  • The Wittener Bäckerei GmbH produces bakery products exclusively for Harry-Brot at the Witten site.
  • Harry-Brot Export International GmbH supplies frozen baked goods to U.S. retail customers.
  • Backshop Tiefkühl GmbH distributes frozen products worldwide for bulk consumers, wholesalers and industry. For this purpose, Backshop operates its own frozen food warehouse in Saxony-Anhalt. The main focus of the company’s activities is the German market.
  • Backfactory GmbH operates around 90 stores in Germany, both under its own management and in the franchise model. The stores offer a varied selection of baked goods, hot and cold snacks and coffee specialties.
  • The wholesale bakers have not yet really taken notice of their latest development: the UpperGreen food service concept. This may be because the systematized kebab shop of the future was abruptly thwarted by Covid-19 shortly after Inital ignited in late 2019 / early 2020. It is equally likely that the kebab concept does not appear on Harry’s screen because it is a brand of Backfactory GmbH.

In any case, after the spread of SARS-CoV-2, it quickly became clear that the weights would have to shift successively analogous to the course of the pandemic. It is obvious that Backfactory, with its 90 or so stores, is not having a brilliant run at the moment, but can rely on a strong parent company. The situation is similar in the bakery trade. One only has to imagine what it’s like when foodservice and other large-scale consumers are suddenly swallowed up by the lockdown and there’s hardly anyone left to do business with. Fortunately, the global foodservice industry quickly resumed its recovery and there are market participants who today already see 2019 levels being reached. But from March 2020 to March 2021, there were certainly critical moments when other market participants had to learn to look differently. In short, the Harry-Brot Export International will have quickly seen opportunities again. While Backshop Tiefkühl GmbH may have had to look around first, before to find ways off the routine.

Harry bakers can benefit from known trends

Meanwhile, Harry bakers have benefited and continue to benefit from well-known trends. This is expressed, for example, in a small report from April 2020, according to which the wholesale bakers found their way back to a «certain normality» – after the well-known hoarding purchases. On the other hand, from a hygienic point of view, packaged bread and baked goods have a different status today than before the pandemic. In addition, there is the well-known trend toward one-stop shopping, which was further intensified under the impact of Covid-19. In short: On the one hand, Harry Brot will reach its sales targets faster than expected. On the other hand, the parent company has to steer subsidiaries through the pandemic that are currently unable to fully exploit their potential. Or to put it more objectively: Control and profit and loss transfer agreements exist between Harry and its affiliates Backshop and Backfactory. The risk arising from the obligation to absorb losses is hedged by controlling the shareholdings.

In the first quarter of 2020, the Group was not yet able to conclusively overview and assess the economic impact of SARS-CoV-2, we read in the commentary on the 2019 annual financial statements. Like other companies, Harry-Brot has taken rapid and extensive measures to protect employees and prevent chains of infection as part of its crisis management. A major loss of employees could be prevented so far. As mentioned, demand for self-service packaged bread in the retail sector has increased by leaps and bounds. In addition, wholesale bakers expected higher basic demand in this segment in perspective due to greater consumption at home. Harry scooped up and continues to scoop up all available capacity to ensure supply.

At the beginning of the pandemic, Backfactory had temporarily suspended operations at its own stores to protect its employees and their customers. The majority of franchise partners followed suit. In the past year, further closures, limited openings, regional specialties – and, and – were oriented to the constantly changing course of the pandemic. The known restrictions led and lead of course to sales losses. On the other hand, Backfactory (at least in Bremerhaven …) is one of the companies that continue to serve customers under specific conditions.

Backshop has also experienced declining sales due to Covid-19 due to a high share of sales in food service. Impending payment defaults due to customer insolvencies are mainly covered by insurance or guarantees. Further protective assistance is provided by the parent company. In addition, for several months the bakery trader is working intensively on new services.

Broad-based business models can compensate market shifts

For 2020, at any rate, Harry-Brot was aiming for stable business development overall in the Group despite changes in the underlying conditions, and was not disappointed. The broad-based business models within the Group were and are able to compensate for the market shifts. Of course, Harry-Brot was not yet able to estimate the length of the pandemic and the resulting macroeconomic consequences in the first quarter of 2020. Nevertheless, the Group assumed a comparable result for the 2020 financial year compared with the previous year. A forecast that the Harry bakers exceeded, as mentioned at the beginning. By contrast, the Group has refrained from issuing a forecast for subsequent years. It will adjust its business models to the further course of the pandemic – and take into account the fact that the global export engine has long been humming again.