DEFINITION OF BAKERY RINGS, BAKERIES AND BAKERY SHOPS

Since the publication of the information pack for the Master Bakers Climate Change Levy Discount Scheme there has been some slight confusion over how to fill in the Application Form, because of lack of clarity in the definition of a bakery ring. This information sheet is intended to explain these issues in more detail, to help applicants fill in their Application Forms.

Types of Craft Bakery Sites

Craft bakery companies can consist of one or more of the following types of sites:

1. A bakery, without retail premises. A bakery of this sort is often a "central" bakery serving a number of dedicated shops. Alternatively the bakery maybe a wholesale bakery, selling to businesses that are not owned by the same company.

2. A bakery, with a retail bakery shop attached at the same location. This will often be a very small craft baking company where all the bakery output is sold in the attached retail shop. Alternatively, the bakery may produce sufficient output to supply the attached shop and one or more remote retail premises (which may or may not be owned by the owner of the bakery).

3. Retail bakery shops, without any baking facilities.

4. Retail bakery shops, with bake-off facilities.

Eligibility

Within a Climate Change Levy Agreement it is necessary to identify individual sites that are eligible for a Levy discount and then to measure the energy consumption and the production of such sites, or of appropriate groups of sites.

In the food and drink industry, sites are eligible for a Levy discount if they carry out "processing" of vegetable or animal products. Operations that do not involve food processing (such as offices or retailing) will not be eligible for a Levy discount. However, the "90/10 rule" allows a small amount of ineligible energy use to receive a Levy discount, providing such uses represent less than 10% of the energy used at a site with eligible activities.

Most bakery sites in the craft bakery sector are likely to be fully eligible for a Levy discount as over 90% of energy usage at the site is usually related to the bakery process itself and will therefore be eligible.

Retail bakery shops with bake-off facilities will either be partially or fully eligible for a Levy discount. The food processing activities in such shops use a significant proportion of the total energy used. Eligible energy will include the bake-off ovens themselves together with all activities that support the baking process (e.g. oven area lighting, air-conditioning and extract ventilation, raw material refrigerated storage, cleaning of baking equipment etc.). Also eligible will be other "food processing" activities such as sandwich making. If these operations represent at least 90% of the energy used in the shop it will be fully eligible for the Levy discount. If the eligible activities only represent, say 75% of the total energy then the site is only partially eligible. However, the 90/10 rule still applies, so the eligible energy is 75% divided by 0.9, i.e. 83%

However, retail bakery shops without bake-off will not usually be eligible, because they use very little or no energy for the processing of food products.

Energy Saving Targets

The energy saving targets agreed with DEFRA by NAMB and SAMB are as follows:

• For bakeries: 9.0%

• For retail bakery shops: 4.5%.

A bakery with a retail bakery shop attached at the same location will have a 4.5% target if all the output is sold at the attached shop. In this situation there is no need to know how much of the energy is used in the bakery and how much is used in the shop, as they both have the same energy saving target of 4.5%.

However, if a bakery with a retail bakery shop attached makes products for both the attached shop and for other shops or other customers, the bakery will have a 9% target.

These targets need to be achieved over a 10 year period. There are milestone to meeting the targets set every 2 years. These are listed in Information Sheet 3.

The energy saving targets are set in units of energy used per unit of output.

Measuring Output

In order to measure output in a consistent way it has been necessary to introduce the concept of a "bakery ring" into the Master Bakers climate change levy agreement.

It is important understand why we have introduced the concept of a "bakery ring". For most industrial sectors production is measured in terms of output tonnage or raw materials tonnage. For the craft baking industry it is very difficult to collect such tonnage information and the NAMB/SAMB negotiating team proposed the concept of using "added value" as a suitable production parameter. Added value is the difference between the value of sales and the cost of raw materials. These parameters are readily available to most craft baking companies. DEFRA have agreed that added value is a suitable measure of output for the Master Bakers CCLA.

However, added value is not always known for individual bakeries or bakery shops within a company. For example if a central bakery supplies 10 shops then the majority of the sales occur at the shops and the majority of the raw material consumption takes place in the bakery. Added value is known for the "bakery ring" consisting of the central bakery and 10 shops, but it is not known for any of the 11 individual sites.

Hence, within a bakery ring it will be possible to measure both output (in terms of added value) and energy consumption. The energy saving target will therefore be established for a bakery ring rather than an individual site.

Filling in Your Application Form

The Application Form has been designed using the concept of a bakery ring. You will need to fill in one Application Form for each bakery ring that you own.

In most situations a bakery ring has one bakery and any number of shops (including zero shops). Alternatively, a bakery ring can consist of a group of shops with no central bakery. Occasionally a bakery ring could include more than one bakery.

The Application Form needs to be used in the widely varying circumstances that exist in the craft baking sector. The way in which you are expected to fill in the form is now explained for a series of examples that represent the majority of potential applicants.

Example 1. One Central Bakery with a number of dedicated shops.

This common example of a bakery ring is the one already quoted above. A central bakery serves are a number of dedicated shops. There could be as few as 1 or 2 shops or as many as 200. If you are applying for more than one bakery ring of this type you should fill in an individual Application Form for each such ring.

You will need to fill in all questions on the Application Form. You should note that:

• Questions 3.1 to 3.7 and Question 4.5 specifically relate to the central bakery
• Questions 3.8 and 4.6 specifically relate to eligible shops (i.e. shops with bake-off)
• Question 3.9 relates to ineligible shops (i.e. shops with little or no food processing)
• Question 4.3 relates to the whole bakery ring (i.e. the bakery and all the shops).

Example 2. One Wholesale Bakery

This is a bakery without any dedicated shops. If you are applying for more than one wholesale bakery you should fill in an individual Application Form for each such bakery.

For a wholesale bakery you do not need to fill in the questions that relate to shops i.e. Questions 3.8, 3.9 and 4.6. All other questions should be completed.

Example 3. A bakery, with a retail bakery shop attached at the same location, no external sales.

In this example we assume that all the output from the bakery is sold in the attached bakery.

You should fill the form in as for Example 1 except:

• For Question 3.8, show 1 shop with the same address as the bakery address.
• For Question 3.9 show no shops.
• If all the energy to both the bakery and shop is metered in a single supply, show this in Question 4.5 and put zeros in Question 4.6.
• If you have separate supplies to the bakery and the shop, fill in both Question 4.5 and 4.6.

Example 4. A bakery, with a retail bakery shop attached at the same location, and with external sales to shops owned by the applicant.

Effectively this is the same as Example 1. One of the sites listed in Question 3.8 can be the attached shop. The energy use at the attached shop should be included in Question 4.5 if there is no separate supply to the shop, otherwise it can be included in Question 4.6.

Example 5. A group of eligible retail shops without a central bakery.

In this example the shops are purchasing baked products from wholesale bakeries and/or carrying out baking on the premises. There is no limit to the number of shops that could be in a ring of this type.

• You will not need to fill in Questions 3.1 to 3.7. For Question 3.1 it would be helpful if you simply state: "No central bakery".
• Questions 3.8 and 3.9 should be filled in appropriately for each of the shops in the ring.
• Question 4.3 will be based on the costs of input materials and baked product purchased at all the shops in the ring.
• You will not need to answer Question 4.5.
• Fill in Question 4.6 for all eligible shops.

Example 6. One Central Bakery with a number of dedicated shops and some sales to other customers.

This is effectively the same as Example 1 plus some wholesale activity. Simply fill the form in as for example 1. When calculating the value of sales for Question 4.3 don’t forget to include the wholesale sales and the sales from the dedicated shops.

Example 7. Two or more central bakeries with a common set of dedicated shops.

This is the unusual situation where more than one bakery is associated with a particular group of shops. This could occur if a company owns two bakeries that specialise in particular products e.g. one bakery makes bread and the other makes flour confectionery. Product from both bakeries is supplied to a common group of shops.

In these circumstances you will need to slightly modify the Application Form as follows:

• For Question 1.2, show the number of shops in the ring and also add an entry that indicates the number of bakeries that serve the ring.
• Please photocopy Questions 3.1 to 3.7 and complete these for each central bakery.
• Complete Questions 3.8, 3.9 and 4.3 in the normal way.
• Please photocopy Question 4.5 and complete this for each central bakery.
• Complete Question 4.6 in the normal way.

PLEASE NOTE, do not use this procedure if you own 2 central bakeries that each serve individual groups of shops. This is Example 1 and you need to fill in 2 Application Forms. Example 7 only applies to the situation where there is a common set of shops.