Commercial and Retail Bakeries

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 10,350 bakeries in the US produce bread, rolls, and other bakery products. Commercial bakeries sell primarily to businesses (retailers, restaurants, and food service companies). Retail bakeries sell primarily to consumers. Major revenue categories include bread, rolls, cakes, cookies, and crackers. Companies may also sell frozen bakery products or may specialize in a particular type of product, such as cupcakes.

Variable Costs Impact Margins

The cost of ingredients, such as flour, sugar, and dairy products, can vary and affect margins.

Dietary Trends Change Demand

Trends and fads that drive food preferences can impact demand for bakery products.

Industry size & Structure

The average commercial bakery employs 50 workers, and generates between $13-14 million annually, while the average retail bakery employs 10 workers and generates about $717,000 annually.

    • The bakery industry consists of about 10,350 firms that employ about 200,000 workers and generate about $36.5 billion annually.
    • Commercial bakeries account for 25% of firms and 88% of industry revenue.
    • The commercial bakery industry is concentrated - the top 50 firms account for 70% of industry revenue. The retail bakery industry is fragmented - the top 50 firms account for just 16% of industry revenue.
    • Large companies include Grupo Bimbo (Sara Lee, Arnold), Hostess Brands, and McKee Foods (Little Debbie).
    • Bread is a standard household staple, with penetration in almost all US households.
                                    Industry Forecast
                                    Commercial and Retail Bakeries Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Mar 20, 2024 - Cocoa Prices Soar
                                    • The price of cocoa, a key ingredient in many baked goods, has surged to record highs, The Wall Street Journal reports. In mid-March, May cocoa futures added $438 a metric ton to end at $7,405 in New York, nearly three times the price compared to a year ago and 38% above the previous record set in July 1977 during an earlier period of poor growing conditions in West Africa that shrank the global supply. Most of the world’s cocoa is grown in West Africa where unusually wet weather followed by hot, desert air led to a weak harvest and diminished stockpiles for the second consecutive year. Moreover, the supply shortage has been exacerbated by speculators stocking up on cocoa futures. The surge in cocoa prices has chocolatiers, confectioners, and big food companies raising prices, tweaking recipes, and shrinking products, WSJ reports.
                                    • Supermarket bakery sales are rising, driven by inflation and consumer demand for comfort items, bread in particular, according to the Food Industry Association’s latest Power of In-Store Bakery report. Over the 52 weeks that ended in early December, perimeter bakery items reached $18.3 billion, while center store bakery items recorded $25.1 billion in sales. Those sales figures are up considerably from pre-COVID numbers in 2019 of $13.9 billion and $18.6 billion, respectively. Dollar sales rose last year even though total unit sales were on par with 2022. “Top growing items came from both center store and perimeter aisle,” Whitney Atkins, VP of Marketing for the International Dairy Deli Bakery Association told Supermarket News adding, “Standouts like bakery center store bread have seen a rise of more than $1 billion over the last three years, and that’s a trend that doesn’t appear to be slowing down.”
                                    • The food industry is pushing back against the US government’s probe regarding the health effects of heavily processed (aka ultra-processed) food, The Wall Street Journal reports. The industry is concerned that the government’s bid to get Americans to eat a more healthy diet could threaten its profits. Opposition to ultra-processed foods – those foods most likely have many added ingredients such as sugar, salt, fat, and artificial colors or preservatives – is gaining steam, WSJ reports. Federal researchers are studying the health effects of processed foods and lawmakers are holding hearings highlighting their possible risks ahead of the next release of dietary guidelines, which tell Americans which types of foods to eat and how much. Some big food companies are seeking to forestall those recommendations in the coming guidelines and defending processing to regulators, arguing that it's made food safe, convenient, accessible, and affordable, according to WSJ.
                                    • The commercial baking industry is facing a workforce shortage that’s projected to lead to a deficit of as many as 53,500 jobs by 2030, according to the American Bakers Association (ABA). As in the broader manufacturing sector, commercial bakeries are struggling to hire and retain skilled workers while facing a wave of retirements as the workforce ages. According to the ABA report, demand for skilled workers in commercial baking will be concentrated in production, engineering and equipment maintenance, and shipping and distribution. By region, the 2030 projected commercial baking shortage is expected to be most severe in the Midwest (13,400 unfilled jobs), South (12,900 unfilled jobs), and West (short 10,300 jobs). Commenting on projected workforce deficits ABA CEO Eric Dell said, "The data speaks for itself and is a chasm that threatens the very foundation of our industry and requires immediate and collective action."
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