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Starting A Bakery During the Pandemic

Last two years have been challenging in many ways. COVID-19 pandemic, which has forced several lockdowns and restrictions on people, have affected almost all businesses.

It has also encouraged consumers to put their health higher on the priority list making them realize the necessity for healthy food and eating habits. According to a research by Mintel almost three out of four Indians have put healthy eating at a higher priority than before the outbreak. The ongoing pandemic has led to rising demand for bakery products not only due to their health quotient but also due to their variety and functionality. This has driven more enterprising entrepreneurs to enter the bakery industry. Ashok Malkani takes a look at the various branches of the industry, the requirements for starting a bakery, and steps that the entrepreneurs need to examine before entering the industry.

 

 

The ongoing Corona virus pandemic, which has been prevailing for about 2 years, has also affected the Indian bakery market which has experienced a slowdown. Statistic estimates that the India Bakery Products Market total worldwide revenue stood at approximately $ 3.94 trillion in 2019. In 2014, the India Bakery Products Market generated revenues of $ 5.4 trillion at a record high.

However, due to the pandemic, since 2019, there has been a shift in the preference of bakery products by the health conscious consumers. This has led to a rise in demand for healthy and functional bakery items like those which consist of multigrains, nuts and other healthy ingredients. According to a research by Mintel, almost three out of four Indians have cited healthy eating as a higher priority, compared to before the outbreak.

Bakery products’ demand has also increased due to the rising influence of western culture. The increasing penetration of international bakery cafe chains in India like Barista, Cafe Coffee Day, and Monginis, etc has led to an increase of bakery products in the country. Add to this the trend of indigenization and home bakers and one can gauge the reasons for the rapid rise in demand for bakery products. One could also say that the shift forwards consumption of bakery products could also be attributed to the rising hectic working schedules and the present widespread work-from-home trend.

As one of the largest segments in the food processing sector in India, the bakery industry offers huge opportunities for growth. There is no doubt that several obstacles have caused losses in some bakeries but there has definitely been a boom in entrepreneurial endeavors in the bakery industry. And the enterprising entrepreneurs who are keen to enter the bakery industry would be boosted by  the Informa Markets’ forecast which has forecast a positive market value that is likely to exceed $ 12 billion by 2024 expanding at a CARG (Compound Annual Growth Rate) of 9.3% during 2019 to 2024. 

The Research and Markets Report, “Bakery Products Market 2021”, also projects a favourable image. This has been mainly due to the rising trend of “Natural nutrition”, “healthy living” and “organic products” which has significantly raised the consumers’ demand for whole wheat, light, natural and additive-free bakery products. In recent years, the growth in sales of packaged, whole wheat, whole meal, gluten-free and natural products is an important indication of the reasons for growth in the bakery industry. 

According to a report by the IMARC Group, “Indian Bakery Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2020-2025”, the Indian bakery market which was worth $ 7.22 billion in 2018 is projected to reach a value of $ 13.3 billion by 2025, expanding at a CAGR of 9.1% during the period. The organic bakery products, due to their high nutrient value and affordability, have now become an item of huge consumption which has also shown a strong demand growth for bakery products in India.

For a new entrepreneur it may be mentioned that while India is the second largest producer of biscuits in the world it is the largest consumer. Bread and biscuits form the major portion of the baked foods in India accounting for over four-fifths of total bakery products in the country.

Cakes are also popular. According to Mordor Intelligence, the Indian cake market is projected to grow with a CAGR of 12.5% during the forecast period, 2020 – 2025.

 

The convenience, accessibility, and nutrition profile associated with them are the major factors of their sustenance in the modern market.

However, to start bakery business – and make it a success during the pandemic – it is necessary to be aware of all the intricacies involved in starting a bakery.

Types of Bakery

Initially, one has to decide on the type of bakery one wants to start. One also does not have to produce every bakery item. A start can be made with just baking breads or any other item. There are also several types of bakeries. To help a new entrepreneur, some of them are mentioned below:

Bakery stores: These require about as much space as a standard grocery shop. These bakeries are found in almost all localities in cities, towns, etc. These can be started by anyone with a small team and basic baking knowledge. They either have their own small factory for producing the items that they sell or give orders to other factories for their requirements.  

Specialty bakeries: They are often run by experienced bakers and dominate specific product areas. These establishments make everything from bread and bagels to cookies and cakes by hand every day. However, they do not offer a range of products all under one roof. They accept orders in advance from their regular clients.

Bakery Café: Bakery cafes are more expensive to set up as they involve renting a commercial space in a busy area. For a coffee shop one has to decide on the model. Namely: franchisee or stand alone coffee shop. Choosing a proper location is a crucial step in starting a new coffee shop business. It may be mentioned that Café culture is, at present, booming in India.

Online bakery: With the world evolving at a rapid pace, online business is a trend that takes the business to its height. One can start an online bakery business from an Instagram page and move to different platforms. Online bakeries are ones where orders are placed on apps and the bakery delivers it directly to home. They are cost effective as one doesn’t have to spend much money renting commercial spaces or employ a lot of staff.

Home bakeries: These bakeries require very little investment. During this period of the pandemic, an entrepreneur who is hesitant to take chances can start the business from home. These bakeries need relatively little capital, and the few things that they offer for purchase are prepared at home. 

Wholesale bakeries: Every budding baker wants to start a wholesale bakery because of the growth in the demand for oven-baked delicacies. One is aware that this business is unlikely to go out of trend, as baked products like cakes, cookies, biscuits, bread et al., have become an essential part of our lives.

Study of the Industry Scenario

After deciding the type of bakery that you would like to start and the sort of products that you would like to make, it is necessary to undertake a thorough study of all elements that go into making your project a success. One must undertake an industry analysis before starting a bakery. This will help one to identify competition in your area, analyse the target audience for your bakery and help you choose the right location for your bakery.

Whatever baking niche you choose you have to keep your eye on providing quality goods with exceptional customer service.

You also have to know the competition in the area where you intend on setting up your business and differentiate yourself from other bakeries.

Before venturing into any field you must have a business plan summary. It is also essential for you to conduct a market analysis (studying your customers and your competitors), a SWOT analysis (which enlightens you about the strengths, opportunities and threats involved in the business), besides having an operation and marketing plan

Cost of Starting a Bakery

The cost of starting a bakery would involve the price of land, manpower that you plan to engage machinery, etc.

Land is the main monetarily high factor. To start the business one has to purchase land or rent the place. The area should be sufficient to ensure the machines fit in perfectly. If you are planning on retail bakery business then you must have sufficient space to enable you to carry out all the activities without any constraints. If you are making items by yourself and selling them from your bakery then you should have separate space for both. 

If you are planning on renting the place, it is believed that it can vary from Rs 15,000-40,000 per month, depending on the size and location of the bakery. The rent for a bakery café can vary from Rs 70,000-1,50,000 per month.

Cost of manpower is expected to be between Rs 1,30,00 to 1,45,000 per month. 

The total cost, according to POSist , is estimated to be about Rs 14,92,000 (remaining left for other operational expenses)

Registrations

It must be remembered that the first step to start any business is to get it registered with legal authorities. One has to get the licenses and permits for the business, including bakeries. The total cost of licensing and permits is estimated to be about Rs. 30,000. The licenses required are:

GST registration: GST (Goods and Service Tax) is an indirect taxation system. Every business which has an annual turnover of more than Rs. 20 Lakhs per annum (or Rs. 10 Lakhs per annum in special states) must have GST Registration

FSSAI registration: Every food business operator (FBO), irrespective of how much the establishment earns has to get it registered with the Food Safety and Standards Authority of India (FSSAI), which oversees the hygiene and quality of all the food items in India.

Health License: This is issued by the Municipal Health Inspector. It’s confirmation that your company follows all of the Health Department’s health-related regulations.

 Eating House License: It is necessary for the food industry. It has to be acquired from the Commissioner of Police, the City or State Police, or both.

Fire License: To get this license you have to install fire extinguishers in the property and follow safety guidelines. The Fire Department will issue you a Fire NOC, for a fee, after everything is in place.

Trademark Registration: Bakery business is highly competitive. If you don’t want your business competitors to misuse your branding you could get the trademark registered.  

 MSME registration: This is a government scheme for micro, small and medium bakeries. Under this scheme you can avail of collateral-free loans instantaneously 

Managing Employee Health

One of the great assets and time saver in the bakery is the equipment. However, it is important to use it properly, in order to avoid break down. Proper maintenance is necessary. For this, you should ensure that it is always clean. Everyday use can cause flour, sugar, and other ingredients to build up on/and in the machine. You should, therefore, clean it thoroughly at the end of each day. You should also get routine maintenance done at regular intervals.

The baking equipment required would be:

  • >> Commercial food processors or choppers of different capacities with a variety of mixing accessories
  • >> A turn over machine to handle the dough
  • >> Small equipment like spatulas, dough rolling mats, rolling pins, icing grates, pastry knives, icing tips and flour sifters.
  • >> Dough sheeter to roll out dough
  • >> Dough proofer to make the dough rising process simple
  • >> Slicers to prepare loaves and bagels
  • >> Ovens
  • >> Different types of pans
  • >> Fryer
  • >> A turnover machine for crimping, folding, trimming, and sealing dough
  • >> Baking trays
  • >> Working table
  • >> Cake décor accessories and supplies for custom cakes
  • >> Air-tight storage boxes to store raw materials

Besides this you would also need other equipment like:

  • >> Storage equipment comprising of shelves (in the kitchen as well as display areas
  • >> Refrigerator and freezer to store perishable items
  • >> Food bags for customers who make large purchases
  • >> Good quality packaging, which is also environment-friendly
  • >> Business accounting software for better management of systems. 

>> A filing system to keep your documents organized.

  • >> Weighing scale 
  • >> Card readers for electronic payment.
  • >> Aprons, Hairnets and gloves for you and your staff to maintain hygiene
  • >> Display cases for presentation. This item can be skipped for online bakery. But in this case you would require a responsive website to display your items

Conclusion

The demand for bakery products is increasing and it provides ample opportunities for an enterprising entrepreneur. The value of this industry which was $ 7.22 billion in 2018 was expected to touch $ 12 billion by 2024.

The Bakery industry, which is one of the largest segments in the food processing sector in India, offers huge opportunities for growth, innovation and job generation. The growth in the industry could be attributed to the changing consumer taste and lifestyle habits. Today, customers are seeking baked goods which are gluten-free, lower on calories and sugars, with alternative ingredients like multigrain and whole-wheat. Besides healthier options, the millennials, in particular, are seeking new flavours and experiences. 

But the industry also poses some challenges for an entrepreneur. One of them is the government regulations.   Besides this, the rising prices of ingredients, particularly of flour (maida) and wheat, as also oil, fat, and eggs, poses a dilemma.

However, irrespective of the problems and challenges research studies by several bodies project that the market value of the industry would rise over the years. This is definitely an incentive for new entrepreneurs to venture in to the field!

 

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