As inflationary pressures persist through 2025, leaders in the North American bakery and milling industries are grappling with supply chain complexities that continue to reshape procurement strategies and product portfolios.

On the sidelines of the recent Agri-Food Americas 2025 conference in Chicago, executives from Sara Lee Frozen Bakery and Bay State Milling outlined to Expana how ingredient costs, tariffs, and operational uncertainties are driving adjustments across their businesses.   

Cocoa & Eggs Key Drivers

Jason McDonald, Senior Manager of Procurement at Sara Lee Frozen Bakery – a leading US producer frozen bakery and desserts – pointed to cocoa and eggs, especially liquid eggs, as major cost drivers this year.   

“Costs have come down for liquid eggs, but we are still feeling some of the impact,” he said, citing the continuing effects of Highly Pathogenic Avian Influenza (HPAI) on supply stability. McDonald stressed, however, that his company has strengthened contractual safeguards to incorporate risk components and is exploring supplier diversification and product reformulations where feasible.  

Meanwhile, Ed Fish, Senior Vice President at Bay State Milling – a provider of flour and plant-based ingredients to the grain-based foods industry which was established in 1899 – underscored the relative insulation his company enjoys due to strong North American sourcing. “Most of our customers and our suppliers are North American based, so we are not so exposed,” he said, pointing out that tariff exposure is limited primarily to Bay State Milling’s smaller volume imports like cinnamon.   

Non-ingredient Costs Challenging

However, Fish flagged rising non-ingredient costs as a critical challenge. “The real changes for us are in non-ingredient costs, such as energy prices, but that impacts all industries. Our paper packaging costs have gone up a lot, and that’s an item we can’t switch away from,” he said.   

Aluminum tariffs have also posed challenges for Sara Lee’s packaging procurement. “In that category, we are more in a negotiation pattern than we are hedging. We’re procuring those items the more traditional way,” McDonald explained.   

Speaking specifically about supply chain resilience, McDonald noted, “Mostly everything we buy is as local as possible and close to our bakeries, be it grains or items like blueberries. We have looked at cocoa alternatives, but it takes a lot of time and a lot of investment which may not be worthwhile.”   

Balancing cost increases with customer relationships remains a tightrope act for any company in the sector.   

“We have passed some of the costs to our customers, but we have also absorbed some of the tariffs-related costs. It is a balancing act,” McDonald said.   

Fish also stressed the operational difficulties posed by uncertainty in the market. “The two hardest things to manage are uncertainty and the unknown duration of uncertainty. These create inefficiencies resulting in delayed or sometimes accelerated purchasing patterns. The industry is spending increasing amounts of time speculating, and that hurts efficiency.”   

Fish expressed confidence in Bay State Milling’s differentiated capabilities. “We invest in being different and special. We have privileged access to varietals of grains and seeds, and we are able to convert them into high value ingredients that no one else delivers,” he said, highlighting investments in specialty knowledge and conversion technologies as a competitive edge.  

Procurement Strategy & Supply Chain Innovation Key

Looking ahead, McDonald expressed optimism about procurement’s strategic role within the industry: “Procurement as a role in these evolving times has gone to the forefront of companies’ strategic planning. We are much closer now to seeing the impact of our decisions in the market rather than just seeing them in financial statements.”     

Fish also sees opportunities in both supply chain innovation and health-focused ingredients. “It’s about growing value for the company, developing the IP supply chain, and driving equity back to the farmgate. That has big value. Metabolic health is an increasingly important issue in the US and there’s a need to deliver better ingredients to help address this problem, and that’s where we step in,” he said.