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 10,800 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, cocoa, and dairy products, can vary and affect margins.
Dietary Trends Affect Demand
Trends and fads that drive food preferences can impact demand for bakery products.
Industry size & Structure
The average commercial bakery employs 43 workers and generates between $14 million annually, while the average retail bakery employs 11 workers and generates about $665,000 annually.
- The bakery industry comprises about 10,800 firms that employ about 337,000 workers and generate about $40.7 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 (Drake’s Cakes, Little Debbie).
- Bread is a standard household staple, with per capita consumption in the US of nearly 44 pounds annually.
Industry Forecast
Commercial and Retail Bakeries Industry Growth
Recent Developments
Jul 20, 2024 - New High For Producer Prices
- Producer prices for commercial and retail bakeries rose about 2.7% in May compared to a year ago after rising 9.4% in the previous annual comparison, according to the latest US Bureau of Labor Statistics data. Industry producer prices continue to climb as input costs, including ingredients and labor, rise. Employment by commercial and retail bakeries grew 3.3% in May, while average industry wages rose by 3.7% over the same period to $22.00 per hour, BLS data show. Sales for the US commercial and retail bakeries industry are forecast to grow at a 2.13% compounded annual rate from 2024 to 2028, slower than the growth of the overall economy, according to the Interindustry Economic Research Fund, Inc.
- Farmers’ markets can be a valuable asset for retail bakeries looking to grow, according to a recent Retail Bakers of America blog post. Renting space at a local farmers’ market allows local bakeries to raise their profile in the community, reach new potential customers who might not otherwise visit their brick-and-mortar location, and expand their market. Farmers’ markets attract a diverse group of consumers, including food enthusiasts and local residents eager to support small businesses. Moreover, like bakeries, farmers’ markets open early in the morning, ideal for selling bakery items like fresh bread, pastries, and coffee. Also, they offer bakers an opportunity to connect with local producers, including dairy and fruit farmers, honey producers, and others, per the RBA blog, which suggests that sponsoring a farmers’ market can be a smart move to enhance a bakery’s visibility.
- Unit sales of perimeter bakery items are outperforming center-store unit sales, with bread playing a major role, Supermarket News reported in June. Perimeter bread (baked fresh in the store) had the highest unit sales growth during the first quarter, up 6.6% year over year (YoY), primarily due to store brands, according to consumer analytics firm Circana. (However, center-store bakery outperformed perimeter bakery in February in dollar sales, up 0.9% YoY versus a 0.1% decline). Noah Smith, a grocery merchandiser at PCC Community Markets, told SN that bread continues to be a top-five performer in the bakery section, with artisan and sliced bread leading the way. Sub-categories that saw strong unit center-store bakery sales included croissants (up 10.1% YoY), muffins (4.3%), and doughnuts (3%), while perimeter bakery’s strong performers included specialty desserts (units up 6.4% YoY), bread (4.3%), and muffins (2.2%).
- Labor and other input costs are driving how bakeries intend to invest this year, according to Baking & Snack’s 2024 Capital Spending Study. Bakers are focused on reducing reliance on labor and improving efficiencies to lower costs. “When asked what their biggest challenges were for the next 12 to 18 months, 73% of bakers said attracting and retaining a quality workforce,” said Kerwin Brown, president of Bakery Equipment Manufacturers and Allieds, which sponsored the study. The next top three concerns were labor costs, increased raw material costs, and inflationary pressures, all of which impact profitability. More than half of respondents (58%) reported that their companies would increase capital spending due to a lack of labor, followed by 52%, who said rising raw material costs would drive capital spending. Investments in facility expansions and new buildings are down compared to 2023, with most companies intending to use capital spending dollars on systems improvements (84%).
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