Sales are up for this artisanal biscuit maker, but inflation is taking a huge bite

Callie’s Hot Little Biscuit, a specialty food company based in Charleston, South Carolina, serves up handmade biscuits and other goods in its bakeries and on its website. But while its stores are thriving, inflation and other pandemic-related woes are causing problems in hiring, sourcing ingredients and managing rising costs. 

“Our business is actually doing really well, sales are up in all of our stores and in our wholesale and e-commerce,” said founder and owner Carrie Morey, who also catalogs her business’ ups and downs in the PBS show “How She Rolls.” “However, inflation has just reared its ugly head, and it is making it very difficult to become profitable. And so at the end of the day, sales being up are great, but if you’re not making money, it creates a whole new set of problems.”

Started in 2005 as a mail order-only operation, Callie’s has seen its share of challenges since the beginning of the pandemic. Morey has closed two stores this year, one in Charlotte and one in Atlanta, due to staffing issues and rising rent.

For today’s Economic Pulse, “Marketplace Morning Report” host David Brancaccio spoke to Morey about how high inflation, ongoing supply chain issues and other problems are making business operations more difficult at Callie’s.

The following is an edited transcript of their conversation.

David Brancaccio: Some of your restaurants made it, some did not?

Carrie Morey: Yes. It’s been an interesting couple of years, for sure. We’ve had two close, and two are thriving. So you know, you have to be grateful for your blessings.

Brancaccio: And people should realize that Callie’s Hot Little Biscuit, I mean, you do have national distribution for the biscuits. So maybe not the restaurants, but the biscuits?

Morey: We do. We have about 2,000 grocery stores across the country, mostly focused on the East Coast and Midwest, that carry our fully baked and frozen biscuits in the freezer aisle along with our pimento cheese and biscuit mixes. So there’s never been a better time to be diversified.

Brancaccio: Yeah, just shows you, right? You know, there was a time there, especially in 2020 into 2021, where people were less likely to go out to a retail location or a restaurant, and you ended up taking the brunt of that. But you had this other outlet.

Morey: Right, we did. And we were, you know, it’s so funny, because over the years speaking to different potential investors and other people in the business sector, the one thing that, the theme that every person told me was: “You’re too diversified. You need to hone in on one area and really try to drive sales.” And while I understood that concept, like I said, I’ve never been more grateful to have been diversified. And you know, it just really, it saved us, honestly.

Brancaccio: So here we are, in 2022, there is a shortage of people to hire, I keep reporting. We have inflation. This is something you must be experiencing at the sharp end.

Morey: We are. We are battling it, and we always say there’s a new problem every day. And that was actually the statement before pandemic. So it’s just become, the problems are more intense. And we —our business — is actually doing really well. Sales are up in all of our stores and in our wholesale and e-commerce. However, inflation has just reared its ugly head, and it is making it very difficult to become profitable. And so at the end of the day, sales being up are great, but if you’re not making money, it creates a whole new set of problems. So, you know, we’re just dealing with it and taking it day by day. And to your point with employees, things are exactly the same. You know, two steps forward, one step back. We think that, you know, we can hire new people, and we get them, and then somebody falls off. So it has been incredibly frustrating. And two of our locations are still with limited hours due to our employee shortage, as well as our catering division and our food truck.

Brancaccio: This seems like such a basic question, but if you significantly increase what you pay, you will find the employees. But the challenge, right, for any business is: How much can you actually charge for a biscuit on the customer end?

Morey: I think that’s a great point. And I think that people that aren’t living in the world of “I need employees” say, “Oh, you should just pay more,” and we have. We evaluate that more than once a year. We did make increases over a year ago and we are paying — you would be shocked at what our employees are taking home. And it just goes to show you that it’s not always about money. It’s about building the right culture and making sure that your retention is working and, most importantly, having the right people on board. Regardless of all of that, if there’s not a volume of candidates that are actually actively interviewing — we get tons of resumes. The problem is either they don’t show up for the interview, or we never hear from them again after the initial phone interview. So there’s still a lot of that going on. And I am a believer that it doesn’t necessarily have to do with just paying more.

Brancaccio: Now, back to the nitty gritty of inflation as it flows through your business. I mean, is like flour and salt and baking powder getting more expensive? You seeing that?

Morey: It is, over 30% and rising. It is continuing to rise. Butter is rising, as we all know. Cream cheese, which is a huge ingredient for us, and [is] not only rising in costs, but also we’re having problems getting it. Dealing with a current flour situation right now where we cannot access it fast enough. So you have orders that we are now responsible for and will have to delay because we are waiting on flour. So supply chain issues are still there and passing along major price increases, which means that we need to pass along price increases. But then when we do that, there’s a concern, and we’ve already seen it on a small level, of people saying, “Ah I don’t know if we’re going to be able to keep you,” because of these high-cost changes.

Brancaccio: I mean, there it is. That’s the conundrum right there, like, “Oh, just pass it along to your customers.” But it’s, it may be that they cannot bear it on their end.

Morey: That’s right. And you know, we are a handmade, artisan business. And I think I can say that until the cows come home, but until you actually come to our bakery and see what we’re talking about — there’s not a machine in the bakery that makes the biscuits except for the oven to bake them. And so, you know, labor is high, ingredients are high, everything is at an all-time high, which is certainly not in our favor, and we just keep hoping for these markets to come down. And, you know, everybody’s looking for a break.

Brancaccio: Yeah, I’ve always seen that these biscuits are made by hand, but didn’t really believe by hand. So you make 8 quadrillion biscuits? I mean, not yourself, but your team makes 8 quadrillion biscuits by hand?

Morey: Yes, we do. And we mix the dough by hand. We roll the dough, we stamp each biscuit, we place it on the tray, we brush them with butter. There’s literally not a machine for making the biscuits, except the oven. And then the sealer that we use to seal the biscuits before they go in the freezer. So yeah, the quality, there’s a difference, and it’s worth it. But at some point you have to start evaluating, “Oh, my gosh, am I crazy to continue doing this? Should we look at other ways?” And those conversations are starting to surface, although I’m not quite ready to make any big changes just yet.