- Susiko Bakers Managing Director Suwimal Rupasinghe on the bakery industry and changing consumer demands
Susiko Bakers was named best bakery of 2023 (medium scale) at the recently held Pinnacle Awards, organised by MUGP International Organisation. The company also received the gold award under the bakery and cereal products sector (medium scale) at the National Industry Excellence Awards 2023, organised by the Industrial Development Board (IDP).
The awards recognise Susiko Bakers’ achievements within the local bakery industry, but the company has also been expanding its global footprint gradually. Susiko Bakers Managing Director Suwimal Rupasinghe, who is also the Group Chief Executive Officer (CEO) of Srinko Group, Susiko’s parent company, joined The Daily Morning to share more details about Susiko’s presence within Sri Lanka and overseas.
Following are excerpts from the interview:
Tell us about Susiko and your role in the company.
Susiko started in 1999. Like any other bakery, we started with manufacturing breads and pastries, but expanded our product portfolio into lunch and breakfast ranges; we are one of the only bakeries with a full breakfast range like milk rice, string hoppers, thosai, gram, and coconut roti, every day in our stores. We have the traditional rice and curry for lunch, and our trademark is using a banana leaf in every lunch we put out. Our slogan is “game thaleta bath ekak” (village-style rice).
We have also diversified into the sweets ranges, like milk toffees, coconut rock, pani cadju (honey cashew), rulang aluwa (semolina toffees), and other traditional sweetmeats you typically find during the Sinhala and Tamil New Year. We have them throughout the year.
I am the owner and managing director of the company. We have 25 stores in and around Colombo. Our company mostly uses eco-friendly products and our packaging is 100% recycled. The recycled manufacturing plant is a group company, so we make our own boxes, and we also have a printing press, so most of the packaging is done in-house. This is how we remain competitive.
We now export a lot to the United States (US) and Australia, exporting items from roast bread to “kimbula” buns and Chinese rolls. We have about 80 products that we export to the US and Australia at the moment.
What made Susiko look into exports? What are the main challenges you face?
In 2019, after the Easter Sunday attacks, there were a lot of curfews and people were not going out. We rely on day-to-day sales to make payments to banks and suppliers. It ran like clockwork, but when these issues came about, everything came crashing down, with a massive drop in customers and sales. I thought to myself: if this happens again, it’s going to be a massive issue to the company, so we need to find a market which we felt wasn’t affected by Sri Lanka’s economy or politics. The best way to do that, I felt, was to export products, but exporting these types of items was somewhat unheard of, and people asked how we would go about it.
I found a way to preserve the food by blast freezing it. I went to New York, spoke to a couple of people, and found a really good distributor who came about as a right place, right time situation. My distributor in New York made a bet with me, because I didn’t have any export experience and no Sri Lankan bakery, apart from one brand, nor any export experience with food. We did one container and it was okay. We send over 20 containers now to the US.
Once the Covid-19 pandemic broke out, my presumptions were right. Everything shut down, everything was at a standstill, and a lot of bakeries closed down. We are a life member of the All Ceylon Bakery Owners’ Association. There were over 8,000 bakeries registered with them, but after Covid-19, 4,000 bakeries closed down. It was a massive hit for everyone, but because we had our exports, we were able to ride out that storm.
The main challenges we faced were during these times. There was no electricity, so we had to run on generators, which needed fuel. Now we have so many other issues with new taxation in place, and also food inflation.
My distributors in the US or Australia don’t care about inflation here. If I can’t match the prices the others are giving products at, then they are not going to buy from me. So I have to then dig into my profits and sell certain products at a loss, hoping our volumes will be good enough to cover our losses.
Food inflation is a major issue, with the cost of ingredients, gas, and electricity being high. We have to keep digging into our margins, and we can’t cut the quality of it as well, because the moment we cut the quality, there is going to be an issue. We are not dealing with the local market; we are dealing with the international market, and once something goes wrong, the US Food and Drug Administration (FDA), for instance, is going to come in.
At the moment, the US market is really saturated so we are mostly in Australia. And we are looking to get into the United Kingdom (UK) market.
Who do you target in these overseas markets?
We target the Asian market. The products go to the Asian shops, so that’s India, Pakistan, Nepal, Bangladesh, and Sri Lanka, which go under the Asian shop category. You do have your Sri Lankan-only food stores, but because our distributors are well established, they distribute our items to other Asian stores as well. But the majority of our customers are Sri Lankan expatriates.
Regarding the UK market, are there any considerations when making this expansion?
The main issue with the UK is the importation of meat items, as the suppliers need to have European Union (EU) certification. Our main concern is ease of entry into the market, and the easiest way to enter into the market is through non-meat items, which is where our sweet range comes in handy. It’s about getting into the market, gaining the trust of the customs authorities, and then developing and building the meat items as we go along.
Are you looking at introducing new products in these countries, especially given the cost of production?
These markets aren’t really looking for something new. If we come up with some really cool product that isn’t 100% traditionally Sri Lankan, they are not going to buy it, because it’s already available in these countries. That’s why we don’t do pastries; pastries in England, or US or Australia are way better than what we get here, due to higher quality ingredients.
At the moment, there is no solution to the cost of ingredients, and there is now an added 30% tax on exports. So apart from the fact that everything has gone up in price, now the Government is also taxing the profits we get from exports. That is deterring people from exporting. It’s a very fine line we are walking.
Are you hopeful of measures that will reduce costs or taxes? Have industry stakeholders reached out to the Government?
The discussions we have as an association do not matter because, at the end of the day, we have to pay back the International Monetary Fund (IMF) and other loans, so the Government has to tax people. There is no choice. We can whine about it all we want, but if that’s not being done by the Government, we are not going to be able to repay back any of these loans. For example, the 30% tax on exports is an IMF regulation that we are following. These are the rules and regulations we have to follow in order to get the loans that we got. Yes, people are suffering, but at the end of the day, the damage is already done.
However, the (IDB Industrial Development Board) is now actively helping out a lot of people, visiting companies and seeing what they can do. They have a lot of contacts and have been helping us as well, on how we can use preservatives to enhance shelf life of items. They are helping in that aspect but other than that, there is nothing much they can do. Previously, they used to fund our travels to attend exhibitions, but they don’t have the funds for such programmes now.
Looking at the local market, how has demand changed over the years?
There have been massive changes. The New Years – the Sinhala and Tamil New Year and December-January – are the two seasons of the bakery industry, during which we see a marked increase in cakes. Two or three years ago, we manufactured a lot during these seasons, but this 1 January, we didn’t even do half the production. Production had fallen by 65-70%. We used to do overproduction during this time, but now it’s our regular production.
We made the right call, because some bakeries had manufactured a lot and ended up selling products at high discounts, like 60%, not even covering the cost of the cake.
People don’t have enough disposable income to buy these items anymore. People are finding it hard to buy rice and vegetables and meet daily needs, making items like cakes a luxury. Buying a cake is a luxury now, so we try to make the cake as small as possible, thus reducing the price of it. Some places sell a whole cake for Rs. 3,000, but I say we make a cake that feeds five people and sell it for less than Rs. 1,000. We find that such items sell, while the bigger cakes aren’t going as much.
True, the customer who will buy the bigger cake will always buy it, but the majority of the mass market just don’t have the money to purchase items like they used to.
Are there any trends in the food industry that you are preparing for in 2024?
The vegan market is rapidly growing in Sri Lanka, and not many people are targeting the vegan market. If you go to any bakery in Sri Lanka, you wouldn’t find products for vegans. So that’s a market we are thinking of expanding into. At the same time, it’s difficult, because our clientele is not those who engage in veganism. Sri Lanka still hasn’t moved towards that trend, but it’s definitely something that can be explored, because there are a lot of vegans in Sri Lanka now. And their options are very limited.
What’s in the pipeline for Susiko?
We are trying to move into longer-shelf-life packeted items. As I said, we got help from the IDB to develop that range, so we are now aiming at having the entire range of traditional sweets in supermarkets, not just in Colombo, as opposed to only in our stores.
Susiko is part of the Srinko Group, and because of that we have logistics that go out of Colombo, from Galle to Jaffna. We are trying to make use of our logistical power and distribute our longer-shelf-life items like the sweets throughout the country and have an islandwide reach.
At the moment, growing and expanding isn’t a key goal; survival is. If we can survive these rough patches, then, when the country does get better, we’ll be there with all the infrastructure, people and the knowhow of how to get through these situations.