Bakery Business Opportunities
The baking business has some of the highest profit margins in the food industry but there is almost always existing competition in one way or the other. Success in this business depends on having a plan. Here are a few ideas:
A sustainable business involves being able to sell a certain amount of a product at a certain price. This goal can be achieved in various ways: You can sell a lot of cheap products or less, more expensive products or somewhere in-between. One of the most important things to consider is location: are you close to schools, offices, an affluent area or a poor area. Another thing to consider when thinking location is the proximity to potential business, are you close to fresh markets or catering companies that you can partner with, etc.
Selling a lot of cheap products | Location: close to schools, offices
Items to sell: donuts, muffins
So we’ve covered mass-produced, low margin items, and premium high margin items. But in-between the two there is also an opportunity, this is usually in the birthday cake or other celebration cake market. To use cakes as an example this business is positioned between the sub supermarket (from PnP & Shoprite/Checkers) cakes and the R700+ cakes from Tessa’s & Velvet Cupcake. This business does not necessarily compete on quality but rather on customization: personalized “photo” birthday cakes or cupcakes.
Sell fewer products for higher margins
This involves selling a premium product. This is something that you can do in a more affluent area or a fresh market. The best examples of this would be in Cape Town where we have places like Tessa’s and Charly’s bakery as well as The Velvet Cupcake Co. There are also cheaper places (by Cape Town standards), in the premium segment that fall into this bracket but not in the high end, places like Limnos and a few others. To give you an idea of the price point, The Velvet Cupcake Co. is able to survive by selling only cupcakes and other cakes in a mall with one of the highest rental costs in Africa (Canal Walk).
There are other opportunities in this segment as well, like gluten-free bread and vegan cakes (gluten-free, dairy-free and egg-free).
Any of the businesses mentioned above you need to get into a position where you can supply wholesale as soon as possible and sell to people who will resell your products. On the low end, you can sell to resellers on the high, ideally, you must try to get your products into a retail outlet.