As neighborhood bakeries close down one after the other, Bäckerei Hug expands. Over the past decade, the number of sales outlets in Switzerland has decreased by nearly 20 percent, according to data released by the Swiss Baker Association, SBKV.
"Each successive generation has tried to reinvent the business and embrace the challenges of its specific time," says Paul Philipp Hug to explain why the 136-year-old bakery founded by his great-great-grandfather Joseph Hug-Meyer has managed to flourish into a fifth-generation business. "Tradition combined with innovation is probably an essential part of our long-term success."
Switching From Consulting to Baking
Hug took over the helm as CEO from his father in 2009 at the age of 31. "I wanted to have freedom of action to be able to decide about the company's long-term development on my own," says Hug, who had been working at The Boston Consulting Group until then. "It was a chance of a lifetime, which few people ever get. I just could not let it slip through my fingers, so I decided to take up the challenge." He has since been focusing on leading the bakery into the 21st century, notably by investing in new machines, streamlining the company's operating processes, introducing a new enterprise, resource planning (ERP) system and modernizing the information communication technology (ICT) systems used.
"We've also focused on marketing, brushing up of the corporate logo and introducing new product labels," Hug adds. Less pleasant tasks have been to close unprofitable branches. "The sector's profit margins have been drastically squeezed over the past two decades. The way we eat and shop has radically changed, so we have instead opened up branches at key locations such as in train stations where numerous commuters walk by."
1,000 Products on Offer
Bäckerei Hug makes more than 1,000 different products, which vary during the course of the year. "We bake bread, braid bread, make chocolates, confectionary and tarts. But our most characteristic product is the Luzerner Sauerteigbrot, a dark bread loaf in two pieces. Two years ago we also filed the Grobian trademark for a new bread baked without yeast, only composed of organic meal, water and sea salt. It takes 72 hours to produce this leaven bread, which has a long shelf life," Hug says. "Lucerne is a small town. We need to offer a large range of products to cater for the needs of all client segments." The company currently has 20 branches, including 6 cafés and restaurants, generating two-thirds of Bäckerei Hug's revenues. The other third stems from business-to-business deliveries to hospitals, canteens, retailers, wholesalers and restaurants. Its more than 150 commercial daily clients place Bäckerei Hug among Switzerland's 10 largest commercial bakeries. The company employs 30 bakers. The majority of Bäckerei Hug's 280 staff are, however, shop assistants.
Expansion Needed to Reach Critical Mass
Size is crucial in the baking industry, and with annual sales of around 30 million Swiss francs, Bäckerei Hug does not quite reach the needed critical mass. "This is the reason why we requested funding from Credit Suisse Entrepreneur Capital Ltd. We're using their support to grow," underlines Hug. The company is currently present in four cantons – Lucerne, Nidwalden, Zug and Zurich since 2013. "We want to open up additional branches in Zurich. It has a much greater market than the other cantons, so we're right now looking for good locations there," Hug says. The target is to open up four more branches in Zurich in the coming years, in addition to the one opening up in Schmiede Wiedikon in May 2013. Another growth project, announced in April 2013, is a distribution deal with Pistor – a Swiss purchasing association focusing on buying products for bakeries. "This cooperation will give us access to many new clients across the entire country, while enabling us to reduce costs," Hug notes. Bäckerei Hug now prioritizes the expansion of its sales team, to be able to meet the additional demand expected from this deal.