Bakery Business Plan: How to start & run a Bakery

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The food industry in India is one of the largest markets in the world. According to IBEF, India is the world’s sixth-largest food and grocery market. However, bakeries form a large part of the Indian food market. Thus, these are quite profitable and in demand. Follow this guide to learn all about creating a business plan and setting up a bakery in India.

Setting up a bakery business has become easier than before. Through online classes, a third-party logistics chain, and a standard kitchen, you can start a bakery right from your home. Apart from the actual skill of baking, there are several business factors you must consider.

Growth of the Bakery Industry in India

The bakery industry is dominated by regional brands. All-India brands such as Parle and Britannia have a strong multi-state presence. This format of business has remained unchanged for decades. Bakeries are best operated regionally. According to the IMARC Group, the Indian bakery industry reached a market value of $9.6 billion in 2020. This market is expected to grow at a CAGR of 10.8% from 2021 to 2026.

Bakery products comprise bread, cakes, biscuits, pastries, flat-breads, etc. People prefer freshly baked goods over-processed goods. Thus, baked items fall under fast-moving consumer goods (FMCG). Due to the large and cheap availability of raw materials, India is the third-largest biscuit manufacturing country.

Lifestyle changes, awareness surrounding excess calories, sugars, and nutrition have driven people towards healthy baked goods. For example, baked potato chips, multigrain bread, whole wheat pizzas, etc. This has opened up a whole new market for the bakers of India.

What are the Types of Bakeries?

Before starting a bakery, it is important to identify what type of bakery you want to start. There are several service styles of bakeries. There are food truck bakeries, traditional bakeries, cake bakeries, café bakeries, pastry shops, and bread houses. However, all specialized bakeries fall under two broad categories:

  • Wholesale Bakeries: Wholesale bakeries are different from storefront bakeries. They are more focused on the industrial production of products. If you prefer working with a large number of orders and big corporate clients, a wholesale bakery would be a good choice. A wholesale bakery does not require an ideal location, a storefront, and offers a steady source of income. Think of wholesale bakeries as B2B businesses. However, the high maintenance costs are a downside.
  • Retail Bakeries: These are the most popular form of bakeries. They’re easier to manage and can be customized to a great extent. A retail bakery sells directly to the customer (B2C Business). They do not require a lot of staff to operate and can be set up at a comparatively low cost. They do require a great store location. However, you can get creative with your storefront to attract the most customers.

Based on your investment size, store location, and calibre you can decide which type of bakery suits you the best. Starting directly with a wholesale bakery may be challenging if you’re new to the industry. However, scaling up a small but profitable retail bakery is relatively easier.

Once you have decided on your category, you need to identify your service style. Will your bakery also be a café? Or is it a home bakery, or an exclusive cake bakery? This will help you decide upon the store size, number of staff, equipment, and investment.

Create Your Bakery Business Plan

Creating a business plan is extremely important before you start any business. It helps you define your objectives, goals, opportunities, and threats. It is like a blueprint of your business. Additionally, business plans are necessary for getting business loans from banks. Therefore, start making one using this standard business plan template.

Replace the sections that are not relevant to your business. Given below are some of the most important sections of your business plan. Focus on these parts to add a little more weightage to your business plan.

Training & Certifications

Your bakery business will only be as good as your baking skills. While you can hire a baker or cook, to carve a unique identity, you will eventually require baking skills. Therefore, it is advised that before you begin your business take a course in baking. There are several high-quality professional courses available. Once you’ve been certified as a baker, you can add your qualifications to your business plan.

A qualification helps with getting business loans faster. Additionally, it will give you an idea about the possible product range you can make. This will help you finalize a bakery-style. Becoming an expert baker is a life-long process. Thereby, continuously practicing and honing your skills along the way will significantly help your business blossom.

Conduct an Industry Analysis

Industry analysis and research is the next important step after you’ve become a baker. You need to conduct a thorough analysis of the regional bakery industry. As mentioned above, in most cities in India, regional bakeries are dominant. For example, understanding the demand of the product you want to sell vs. the supply can be helpful.

Industry analysis will give you a deep insight into your business’ position relative to the bakery industry. What are the external or internal factors that can influence the success rate of your business? You can use several famous models for effective industry analysis. Models such as Porter’s 5 Forces, SWOT Analysis, or PEST Analysis are great tools that will help you create a strong industry profile.

Competitor Analysis

Once you’ve studied the regional and national baking industry thoroughly, you can shift your focus to your competitors. Begin by narrowing down on your regional competitors. This will help you build your Unique Value Proposition, use the weakness of your competitors, identify product gaps, and learn from their marketing tactics.

You should perform a complete company overview of a competitor. Start with their funding, customers, product range, and then progress towards marketing and growth. Alternatively, use this competitor analysis template to assist you in the process.

Equipments Required for a Bakery

You will need high-quality and sturdy equipment for your bakery business. A good set of equipment will enable a smooth and speedy workflow and higher quality products. Getting the maximum efficiency out of your employees and business is important for both cost-saving and customer satisfaction. Therefore, here is a list of basic equipment needed in a bakery:

  • Oven
  • Deep Fridge
  • Gas Stove
  • Planetary Mixers
  • Utensils and packaging materials
  • Working Tables
  • Exhausts and Chimney
  • Cylinders
  • Storage Racks

Several other things are needed to run a kitchen such as raw materials, cutlery, and staff. However, these are some of the must-have equipment for any type of bakery.

What are the Legal Requirements for Starting a Bakery Business?

Every bakery business must comply with the legal requirements in India. To start a bakery business, you will need the following licenses:

  • FSSAI License: Since you’re selling food items, you must first get an FSSAI number if your gross annual turnover is below INR 12 lakhs. However, an FSSAI license is mandatory for most medium-sized bakeries that have a higher turnover. You can apply for an FSSAI license from the official website.
  • GST Registration: Every business must have a registered GST number. You can obtain this from a chartered accountant.
  • Local Municipal Corporation’s Health License: A local municipal health inspector must clear your bakery for operation and provide you with a health license.
  • Fire License: Your store must be equipped with appropriate fire safety measures such as fire exits and extinguishers. Once a local municipal inspector clears your store for fire safety, you will receive a fire license.

Some additional documents that are required while applying for a business loan include VAT registration, business registration certificate, trade license, and TIN number.

Financial Plan for Your Bakery

A financial plan is the backbone of every business. It can give anyone a quick insight into how profitable a business will be. You can get an idea of the costs involved for setup, operation, and the estimated profit margin. These numbers are important when applying for a loan.

Starting a bakery business is not the cheapest venture but can be done under INR 25 lakhs. To get a rough idea of the costs involved, here is a sample cost breakdown:

  • Store Rent: INR 50,000 – 2,00,000
  • Equipment Cost: INR 5,00,000 – 15,00,000
  • Licenses: INR 50,000
  • Employee Salaries: INR 2,00,000
  • POS Software: INR 15,000 – 30,000
  • Marketing: INR 2,00,000

Estimated Total Cost: INR 25 lakhs

This is a rough approximation. This can vary based on the location of your store, the size of your bakery, the number of employees, and your product range. However, a specialized bakery can be set up and run profitably for under 25 lakhs.

Pick a Great Location for Your Bakery

Choosing a strategic location for your retail bakery business is of prime importance. If your bakery has café style service, it cannot be located in a remote or industrial area. You need to be at the city centre, close to residential neighbourhoods, offices, and colleges. Some other factors you should keep in mind while picking a location are:

  • A busy and reputed market street
  • Ground floor access
  • Hygienic area with 24/7 water and electricity supply
  • Close to malls, colleges, or offices

Create a Customized Marketing Plan

Marketing is a crucial factor that can weigh down or shoot up your new bakery business. With the help of a professional marketing agency, plan a marketing campaign. Since it is a new business, you must advertise and market it. Only when people know about your business, can they try it out.

Having an online presence is equally important to physical advertisements. Create a beautiful website, blog, and social media handles. Posting engaging content to your target audience will help attract online visitors which can be converted into customers.

Therefore, develop marketing strategies around your product’s USP and execute them at the earliest. This will help your business stand out and get recognized.

Professional Bakery Courses

Getting trained and certified is extremely crucial for starting a great bakery. Therefore, here are some of the best places you can become a certified baker:

Conclusion

Baked goods are some of the most consumed products in the Indian market. Thus, starting a bakery business is a profitable and creative venture. The more creative and unique your bakery is, the better the chances of success. Using cloud kitchens, food ordering platforms, and home delivery services, you can easily scale up and run a successful bakery business.

This post is also available in: English Hindi Tamil

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