Are you keen to take a deep dive into the dreamy world of pastries and open up your own bakery? First, you need to know your market.
To help you in this process, we've put together the guide below to tell you everything you need to know about how to do market research for a bakery.
The benefits of carrying out market research for a bakery
With the demand for bread as great as ever - the bakery market is flourishing, so it may be tempting for an entrepreneur to jump head-first into opening a bakery without carrying out market research.
This, however, would be a big mistake.
Market research is an essential step for every entrepreneur, no matter what his or her business is. It enables you to confirm that there is indeed commercial potential in the area you wish to open your bakery.
From the foot-fall of passers-by in the area to the type of snacks and baked goods you should display on offer, market research allows you to understand how those living within the area around you operate, and what their preferences are.
The type of baked goods you decide to sell will also depend on what competitors already present in the area are offering, something you won't be able to guess without doing a market research for your bakery.
Market research allows you to identify whether there's an itch for a service or product within your area that hasn't yet been scratched, and then determine how to market this new service or product to attract and retain customers.
Bakeries rely particularly on close relationships with customers, so prioritise your quality of customer service and think also about offering promotions such as loyalty cards.
All these elements will be essential to the success of your bakery, but it's important not to forget about current trends in the bakery industry, too.
Checking out trends in the bakery industry
Consumer eating habits change regularly, so it's wise to keep an eye on the latest trends hitting the bakery market (remember cronuts?) to ensure that your offer meets new expectations that customers have.
What do consumers expect from a bakery?
Bakeries regularly have to switch up their offer to meet changing consumer demands.
With people's lives getting busier and their shorter work breaks soliciting 'food-to-go' lunches, over 650 million British pounds was spent by UK consumers on sandwiches, rolls, and baguettes in 2019 alone - resulting in more bakeries offering sandwiches to keep up with demand.
What's more, the new "click and collect" trend allows bakers to make sales that are no longer in-store but through deliveries by apps such as Uber Eats and Deliveroo.
Therefore, the tradition of waking up early each morning to visit the bakery is gradually wavering. Thanks to modern technology, bread is now available at any time and can come straight to people's doors - so bakeries have to keep up by offering more variety and better quality loaves of bread than the other ones listed on these apps.
The rules and regulations in the market research for a bakery
Doing market research for a bakery also provides an opportunity to familiarise yourself with the rules and regulations related to operating a bakery.
One of the best things about opening a bakery in the UK is that you don't need any special qualifications. If you'd like to try your hand at baking, there are numerous training courses on artisan baking that you can take - but they are all optional.
There are, however, several regulatory requirements you'll need to satisfy when it comes to food safety. Before opening your bakery, you'll have to register the premises with your local authority's environmental health service at least 28 days before you start trading. Find out more about the other steps to follow in our guide on how to open a bakery.
It's important to note that this process doesn't cost any money. It simply involves allowing a local official to visit your premises to check out the space you'll be using to prepare food and ensure it's safe and hygienic. To register for a visit from your local authority, check out the UK Government website.
It's also mandatory for new business owners to draft a plan based on the Hazard Analysis and Critical Control Point (HACCP) Principles. This plan will ensure your food is safe from biological, chemical, and physical hazards, as well as allowing you to identify potential hazards.
You'll also be required to comply with any rules established by the Food Standards Agency - a government body providing guidelines on hygiene standards, sampling, labelling, and traceability.
You will also have to respect the rules concerning the safety of the employees. Bakeries can be a risky environment for employees, as being in and amongst fridges causes respiratory illnesses. It's up to you to ensure that your employees are comfortable and feel safe when working.
The best sources of information on the bakery industry
When carrying out market research for your bakery, you can rely on the following sources of information to help you conduct your market research on the bakery industry within the UK and US:
- Statistical institutes such as the Office for National Statistics (UK), Eurostat (EU), or the Census Bureau (US)
- Research institutes and specialized consulting firms
- The economic and specialized press
- The UK Health and Safety Executive and the FDA website's, in particular for all matters concerning health and safety regulations
You also can’t forget the main players in the bakery game: the bakery owners themselves. Take some time out to grab a coffee with a bakery owner in your local area - as they could provide you with some valuable insider information about the sector.
Analysing the demand for bakeries in your area
Once you have studied the trends in the general bakery market, you can start analyzing the demand in the area in which you'd like to set up your bakery.
Begin by studying how many people live in the city, as well as their age demographic and whom amongst them is most likely to visit your bakery.
You'll then be able to develop an offer adapted to the demand, whether it be targeted towards busy professionals in the area or older residents - as not everyone will want the same one product from a bakery.
Don't forget about the hotels, restaurants, and supermarkets that may also approach you for supplies, whether this is regularly or occasionally.
If you haven't yet chosen your premises, try to discover which locations are the most suitable given the customer profile you wish to target. A location near a train station or a busy shopping street will require a different approach than a location in a more residential area. Consider every aspect when carrying out your market research for a bakery.
Checking out your direct and indirect competitors
The bakery sector is a very developed one, with many European cities having bakeries on almost every street corner - so it's perfectly normal to have strong competition close by.
To ensure your business doesn't suffer as a result of this competition, however, it's wise to ask yourself the right questions in your bakery's market research.
First, take a look at the baked goods offered by your competitors and the prices they've set. It's vital to find something that differentiates your bakery from theirs here - why should a customer go to you for baked bread instead of them?
Next, look at the type and size of each of your competitors: how many bakeries and sandwich shops are close by? How many are independently owned and how many are franchises? How many employees do they have? What is their turnover?
Then use this data to draw the appropriate conclusions: does the local market seem saturated or is it large enough to accommodate your business?
We also advise you to look at the various marketing strategies used by your competitors: do they have loyalty cards? Or maybe they have a huge following on Instagram? Assess these options to see what actions might work for you.
Deciding what products to sell with your bakery's market research
Once you've gone through these steps, you should have enough information to make an informed choice about what products to sell in your bakery.
The strategic positioning of your bakery needs to be clear and take the following points into account:
- A clearly identified target market: residents, travellers, professionals, etc.
- A range of products that meet the expectations of your target market
- A unique selling proposition from your competitors
- A marketing strategy to attract and retain customers
By putting all this in place, all there is to do now is validate that your business is financially sound.
Creating a business plan after your market research for your bakery
Once all of the above steps have been completed, it's time to draft up the business plan for your bakery.
The business plan is made up of two major components:
- A financial forecast that aims to highlight the expected profitability of the business and the initial financing requirement.
- A written part that presents, in detail, your project, the team, your business strategy, and your medium-term objectives.
The business plan is the document with which you will try to secure financing from your bank or potential investors, so you need to make it impeccable.
If you are not used to writing business plans, a good solution would be to use online business plan software.
There are several advantages to using specialized software:
- You are guided through the writing process by detailed instructions and examples for each part of the plan.
- You can be inspired by already written business plan templates
- You can easily make your financial forecast by letting the software take care of the financial aspects for you.
- You get a professional document, formatted and ready to be sent to your bank.
If you are interested in this type of solution, you can try our software for free by signing up here.
We hope that this article has helped you better understand how to carry out a bakery market study.
If you’d like more advice on any of the points mentioned above or any other element related to the creation or takeover of a bakery, please don’t hesitate to get in touch.
Also on The Business Plan Shop
- Business plan template for a bakery
- How to enhance the profitability of your bakery
- How to secure funding for a bakery
- How to takeover a bakery
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