How to Aug, 06 2014

How to succeed in a bakery business

“Sweet is no more sinful.” Indian bakery industry is overflowing with a number of bakeries, serving high nutritious value breads, cakes, sweets and confectioneries to the customers.

By Rashi Mathur, TFW Bureau
Feature Writer
How to succeed in a bakery business

According to Research and Markets reports, the bakery industry is the third-highest revenue generator in the processed food sector. The market size for the industry in India is expected to reach Rs. 47 billion by 2015 with a growth of 50 to 60 per cent per annum. Read on to discover the way bakery industry is luring not only the consumers but even the investors.

Krispy Kreme is internationally known for their doughnuts and coffee. “It was established in July 13, 1937 when Vernon Rudolf, bought a secret yeast raised doughnut recipe from a French Chef in New Orleans. The brand still follows the same secret recipe to prepare enchanting doughnuts. The brand is known for its innovation and fresh delectable doughnuts coming off the doughnut making machine straight onto the trays for the consumers to relish,” says Purwa Sinha, Director, Krispy Kreme.

Down To Earth is a food brand under Morarka Foundation. It is an organic food brand meeting the needs of ever expanding health conscious consumer market. “Bakery for many is considered to be a less healthy food choice due to high level of fat and unhealthy ingredients. Morarka, has developed a unique range and baking processes to introduce organic and healthy products,” explains Amandeep Singh Kabli, Project Manager, Down To Earth bakery. They offer a wide range of bakery products ranging from multigrain bread or organic cookies. They have an assortment of nutritious items in menu. The various health benefits of organic food are well known and they appeal to the target audience.

Monginis offers varieties of chocolates, pastries and cookies. Monginis specialise in customised products which the client can order as per individual specifications and tastes, together with personalised messages. Its web portal  offers a convenient and safe option of sending gifts without the hassle of personal visits or payment hurdles. Monginis also deals in puffs, bread rolls, pizzas, burgers, sandwiches and snack packs.

Another leading doughnut player, Dunkin’ Donuts is an international coffee and baked goods chain which has recently made its presence in India. Spread worldwide across more than ten thousand locations, the brand is known for its doughnuts, coffee, beverages and sandwiches. Jubilant Food Works Limited has exclusive rights for developing and operating Dunkin’ Donuts restaurants for India.

“With the changing lifestyle people are becoming health conscious, greater exposure to Western culture and need for "quick bites" especially in the urban pockets have scripted success for this industry in India. The industry as a whole has a tremendous potential,” says Yasir Ahmed Hamraz, Founder and Director, Bakesmiths & Company.

Kabli of Down To Earth Bakery expressing his views about bakery industry says: “The bakery industry in India is performing very strongly due to increasing disposable income levels of consumers, rapid urbanisation, need for convenience and lack of time in urban households. This has helped drive demand for breads, cakes and pastries.With the increasing demand and rising sales, the entrepreneurs engaged in this venture are on an expansion spree and are hopping on to franchise model to achieve it."

Partner for profits

The franchise route was chosen by Down To Earth Bakery because it is the best way to promote the brand and its expansion. It upholds the brand integrity. Promotion and development of entrepreneurs is guaranteed. Not only the franchisor, but even the franchisee is equally benefitted. Franchising is a good way to obtain expansion capital since the franchisees pay in order to buy outlets in the brand name of the company. They can grow the number of locations without using much of their own capital or funding from banks and investors. Franchising can generate high financial returns for relatively lesser risk.

“If one has a good business model then new outlets can be opened with ease by the franchisor and high royalties can be earned from sales at those outlets. On comparing the returns from franchisee run and own outlet the former outweigh latter by huge margin,” explains Kabli of Down To Earth Bakery.

Currently, Down to Earth Bakery has 15 outlets through their company owned bakery unit. Out of 15 outlets, six are franchise outlets. “We are offering pan-India franchise under various models mainly in category A and B 1 cities,” informs Kabli. Bakesmiths have two outlets presently, out of which one is company owned and one is franchisee run.

Sweet Prospects

For Down to Earth Bakery, the industry is going to register strong growth driven by modern retail outlets, bakeries, cafes and fast food outlets. Also, rising number of women joining the work force together with time-pressed urban-dwelling consumers seeking convenience will drive sales of baked goods. For Bakesmiths & Company the increased spending capacity has allowed people to spend on recreational food more often, leading to the surge in demand and consumption. Health benefits of baked products have also been well received.

Related: How to close a biz deal over a cup of coffee

Bakery industry in India today occupies an important place in the industrial map of the country. Improved standard of living, rapid growth, westernisation, increasing spending power, changing eating habits of people and increased transition from the unorganised sector to organised sector have given a great impetus to bakery products.

Recipe to grow

Franchisors provide relevant training and timely support to the franchisees in areas of marketing, handling human resources and raw material, operations and selection of location for opening outlets. They are instructed on retail management and spreading across along with other franchisees.

Down To Earth bakery franchisees’ are given training to provide them with the tools to successfully own and operate their business. Major areas of training include baking skills and production management, imparting product knowledge, bakery team training and customer service, marketing and promotions, purchasing and inventory control, effective management practices and bakery staff development. Their training programme is conducted in a bakery environment at designated bakery locations. Training is competency based and designed to be completed within a period of 40 days.

The sour route to sweet success

The concept of organised bakeries in India was introduced by the British. Hamraz of Bakesmiths & Company brings to light the various challenges faced by the bakery industry in India. “The bakery and confectionery industry in India is highly fragmented, largely unorganised and extremely diverse in terms of product assortment and target market.”

“Although foreign players like Bread Talk, Cinnabon and Au Bon Pain have entered the market through joint ventures on huge financial reserves, the Indian brands are absolutely unfazed and up to the challenge. The lines are just being drawn as far as the confectionery and bakery retail is concerned,” adds Hamraz of Bakesmiths.

Sinha of Krispy Kreme says, “The biggest challenge is supply chain and providing value to the discerning Indian consumer. For supply chain we work with our partners to improve the infrastructure and also look at locating stores close to each other so we can control supplies and costs when restricted to a smaller geographical region.  Regarding value for the customer, we are constantly looking at new products that we can offer from which our customers derive more value.”

Franchise Facts

Brands

Area

Investment

Breakeven

RoI

Bakesmiths

350-1600 sq ft

Retail model : Rs 15 lakh
Production & Retail : Rs 75 lakh

1.4 years

33-34%

Down To Earth Bakery

1500-2500 sq ft

Rs 20-50 lakh

-

25%

Related: How are debutant franchisors gaining ground globally?

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