Specialty Bakeries

Encyclopedia of Emerging Industries

Industry snapshot
According to the Center for Economic Vitality at Western Washington University, there were about 6,000 retail bakeries in the United States in 2012, which together earned total annual revenues of approximately $3 billion. After suffering through the economic recession of the late 2000s, the industry started to recover as 2010 neared a close. However, some of the developments in the early years of the twenty-first century had affected how retail bakeries conducted business. Some of the major trends influencing the industry included the increase in demand for small, individually sized products; the growing market for organic and allergen-free foods; and the incorporation of ethnic flavors and recipes into the mainstream bakery. In addition, Americans were demanding evidence of environmentally friendly practices from bakeries and other product suppliers. This demand resulted in changes to everything from the way bakeries powered their ovens to the types of materials they used to package their products. The rise in Internet use and social networking in the early 2010s also was moving many retail bakeries to offer interactive websites, Facebook pages, and Twitter accounts. For example, according to Supermarket News, in January 2010 cupcake bakery Sprinkles in Los Angeles was tweeting a "secret" word every week, which customers could then use to cash in for a free cupcakes. The CupcakeStop, a mobile bakery in New York City, also relied heavily on Twitter and Facebook to generate business. Said owner Lev Ekster, "If I have an exciting new flavor that I want people to try, I'll tweet about it and get people excited. Twittering lets us manage inventory for the day, and show people what we're offering." In addition, research indicated that Americans were plugging in and logging on more often. Retail bakeries--as well as other businesses--that capitalized on this trend were riding the market wave of the future. A 2008 study by the Boston-based marketing company Cone Inc., for example, showed that more than half of social media users "prefer and feel better served by brands and companies that they can interact with online." In the first few years of the twenty-first century's second decade, retail bakeries continued to struggle to recover from the effects of a down economy. Some, however, claimed the industry was somewhat recession-proof. For example, when asked about the state of the industry in January 2013, Eric Deising opf Deising's Bakery, Restaurant & Catering Co. (Kingston, NY), said, "From the baking industry standpoint, I feel pretty good. ... We offer products that fit into any economy--good or bad," and Roland Krueger or Buehler's Fresh Foods (Wooster, Ohio), concurred. Said Krueger, "Over the course of the last couple years, we've seen people either shopping down or not indulging as much as before. But the one thing about bakery that's still true is it's an affordable indulgence. ... You're not buying an $18 T-bone steak from the meat department each week but you can treat yourself to a brownie, donut or pastry."

Organization and Structure

This classification covers stand-alone retail bakeries that sell baked goods on-site or through special order. These establishments sell baked goods such as bagels, donuts, cookies, cupcakes, and bread over-the-counter; offer made-to-order or off-the-shelf items such as wedding cakes and other special-occasion baked goods; or do both. They also may offer lunch and breakfast items, coffee/tea, and other related products. While some retail bakeries focus on a specific product, others offer a wide range of baked goods. This classification does not include bakeries that are contained within another retail store, such as a grocery store or discount store. A majority of the retail bakeries in the United States in the early 2010s were small, with more than 61 percent employing only one to four people, according to Dun & Bradstreet. The industry was served by several national trade associations, including Retail Bakers of America, the American Bakers Association, and the

American Society of Baking, as well as many regional and state organizations.

Background and Development

Bread has been a staple of the human diet for thousands of years. The history of baking as a profession, however, can be traced to early Roman times. According to the American Bakers Association, a bakers' guild was formed around 168 B.C. in Rome, which established baking as its own profession. These first bakers were the only free people who worked a trade; all other tradespeople at the time were slaves. Bakers continued to hold a privileged position throughout the spread of civilization until the Industrial Revolution, which brought about technology that enabled bread to be produced at a price that was affordable by more than just the wealthy. In addition, throughout history the importance of bread for the food supply was never underestimated by governing bodies. During World War I, for example, the U.S. government passed regulations on various aspects of the baking trade, such as price, ingredients, and even the shape of the bread. During World War II, when it was found that many of the male teenagers enlisting in the armed forces could not pass their physical examinations, the industry established enrichment standards for baked goods. The operations of the retail bakery of the 2000s bear little resemblance to those of centuries past when baked goods were kneaded by hand and baked in rough, clay-brick ovens. However, some aspects of the trade are still recognized as vital, including keeping recipes "secret." Other factors, such as using fresh ingredients and offering a large variety of options, were not major concerns until relatively recently in history. In 2007 retail bakeries, as well as all other industries in the United States, faced a recession that would bring a severe drop in housing prices and a record number of foreclosures, an increase in unemployment, and a near-collapse of the automotive and financial services industries. Although the bakery industry historically has been recession-resistant, according to Modern Baking, the economic recession of the late 2000s and the resulting "consumer frugality" took its toll on retail bakeries. With less extra cash, Americans cut down on trips to bakeries, an indulgence that some could no longer afford. Some, however, looked at the recession as a positive influence on the bakery business. As stated by Ronald Krueger, a bakery merchandiser in Ohio, in the September 2010 issue of Modern Baking, "We've seen a lot

of people looking for comfort foods--donuts, pound cakes and that kind of thing. They still find that bakery is an affordable treat." A June 2009 Modern Baking article had a similar premise: "Customers may not be able to afford a new car or a new TV, but they can afford a $2 cookie or $20 torte." Others noted the downturn in the economy as an opportunity. Todd Wagner of Wagner's European Bakery & Cafe in Olympia, Washington, told Modern Baking: "In a way it [the recession] has been beneficial. It woke us up. We are no longer complacent; we are not immune from downturns. We have changed our operations to adapt." One of the ways some retail bakeries sought to capitalize on the market for small and affordable treats was by adding individual cupcakes to their shelves. The cupcake is an off-shoot of the individual pound cake, or "Queen cake," baked in England in the eighteenth century. According to food historian Andrew Smith, the first actual cupcake recipe was found in an American cookbook published in 1826. There are two theories for the origin of the cupcake's name. One relates to the amount of ingredients in a typical recipe (one cup of sugar, two cups of flour, and so on) and the other has to do with the fact that the cakes were originally baked in small, individual cups. Muffin tins became popular for baking cupcakes around the turn of the twentieth century. In addition, bakers appreciated the reduced amount of time it took to bake cupcakes as compared to a regular-sized cake. Cupcakes became a popular item in U.S. bakeries in the late 1990s, boosted by an episode of the popular television series Sex and the City in which two of the characters visit over cupcakes at the Magnolia Bakery in New York City. By 2010 Magnolia had four locations in New York, one in Los Angeles, and one in Dubai. Los Angeles-based Sprinkles, however, which was founded in 2004, bills itself as the first cupcake-only bakery in the country. In 2010 the company had eight U.S. locations and plans for more. A plethora of cupcake bakeries popped up around the country in the 2000s--spurring what many called a "cupcake craze." Other evidence of the growing popularity of the cupcake included the premiere of the Food Network television show "Cupcake Wars," in which four bakers competed to make the most original and tasty mini-cake; the sales numbers for Martha Stewart's new cookbook released in June 2009, Martha Stewart's Cupcakes, which spent 11 weeks on The New York Times bestseller list; and the creation of several Web sites and blogs about cupcakes, including Cupcakes Take the Cake.com and Cupcake-Business.com. In March 2010 Cupcake-Business.com claimed that cupcakes represented a $6 billion industry, with some stores, such as Magnolia Bakery, baking an average of 5,000 cupcakes a day. By 2010 there were four basic types of cupcake bakeries, according to Elizabeth Olson of The New York Times: chains, such as Sprinkles; Web-based businesses that sold only online; bakeries that offered other items in addition to cupcakes; and the sole bakery. Some of these new bakeries took it a step further and created a specialty within the specialty: Examples included vegan-only cupcake bakeries and mobile cupcake bakeries (cupcake trucks). Some cupcake bakeries specialized in local or organic ingredients, whereas others stayed with the traditional ingredients and focused on creating the most unusual flavors or elaborate designs. Mintel Research predicted cupcake sales would increase 20 percent nationwide between 2010 and 2015, as compared to other baked goods, which were expected to show growth rates in the single digits. By 2010 many in the retail bakery industry were looking forward to economic recovery, as well as the return of more discretionary income for Americans. Some new developments, however, were changing the way bakeries did business, or at least what they offered on their shelves. One of these was the tendency of consumers to cut back on their portion sizes. As Steve Schulte, a bakery coordinator in Atlanta, told Modern Baking in September 2010: "Consumers are still eating bakery foods, but rather than have waste, they buy smaller portions. ... Before, somebody would come in and buy a cake, take it home and toss some. Now, they're buying the smaller cakes, but they may come back twice a week instead of just one time." This trend was one of the driving factors behind the cupcake craze. The desire for small but indulgent baked goods was also illustrated by the National Restaurant Association's Chefs Survey, in which bite-sized desserts were ranked number two among the top 10 eating trends of 2009. Another trend that continued unabated into the 2010s was the overall health and wellness focus. Americans

increasingly sought out healthier options, even in--or perhaps especially in--the bakery. For example, consumers looked for items that were baked with all-natural, organic, or locally grown ingredients, whole grains, and lower levels of fat, sugar, and sodium. The market for allergen-free and gluten-free baked goods was also growing. For example, a survey by Modern Baking showed that the percentage of in-store bakeries that experienced sales of organic and natural baked goods grew from 19 percent in 2006 to 38 percent in 2008, and that 20 percent of in-store bakeries sold gluten-free products, as compared to 3 percent in 2006. Overall sales of products containing natural ingredients and whole grains increased 45 percent between 2005 and 2008, according to Mintel. This trend continued and many retail bakeries capitalized on it by dedicating whole shelves--and often the entire store--to offering these new "-free" products.

Current industry conditions

By 2013 there were indeed more retail bakeries opening that carried only gluten-free products. More resources were also becoming available for people looking for these specialty products. For example, the Gluten Free Registry offered a searchable map of more than 32,000 food establishments, including bakeries, that sold gluten-free items. Despite the trend toward healthier products in the retail bakery industry, Americans' cravings for sweets stayed strong. As the world's largest sugar consumer, the United States maintained a robust demand for retail bakery items that were not especially healthy. For example, according to IBISWorld, 8,602 U.S. donut shops generated $12 billion in sales in 2012. The top four companies accounted for about 64 percent of industry revenues. Dunkin' Donuts was the top company, accounting for more than 57 percent of the market share. It experienced a 7.2 percent annual growth in revenues between 2007 and 2012, whereas the overall donut shop industry saw increases of about 2.5 percent during that time.

Industry leaders
Many of the leaders in this industry operated as both a bakery and/or caf or coffee shop. For example, Starbucks Corp. of Seattle, Washington, was the world's number-one specialty coffee retailer and also sold baked goods. With 17,000 shops in more than 40 countries, Starbucks had sales of almost $13.3 billion in 2012. Total employment numbered 149,000. Similarly, Panera Bread Company of Richmond Heights, Missouri, sold bagels, cookies, bread, and other bakery items in addition to offering a limited meal menu. In 2013 the firm had about 1,650 bakery/caf sites in 45 states and Canada operating under the banners of Panera Bread, Saint Louis Bread Co., and Paradise Bakery & Caf. About 800 of the stores were company owned, and the remainder were franchises. In 2013 Panera recorded sales of $2.1 billion. Einstein Noah Restaurant Group Inc. of Lakewood, Colorado, held the position as the United States' largest bagel bakery in 2013, operating under the banners of Einstein Bros. Bagels, Noah's New York Bagels, and Manhattan Bagel. With 770 locations in 40 states, Einstein Noah had sales of $427 million in 2013. About 440 stores were company owned and the rest were franchises. Other major retail bakeries also operated as wholesale bakeries. Krispy Kreme Donuts Inc. of Winston-Salem, North Carolina, for example, was a wholesaler that also had more than 695 donut stores in the United States and 20 other countries. With 4,000 employees in 2012, Krispy Kreme recorded annual sales of about $435.8 million. Other industry leaders included Dunkin' Brands Inc., of Canton, Massachusetts. With 6,400 stores in the United States and about 3,000 more in 30 countries, Dunkin' Donuts was the world's leading chain of doughnut shops. Including sales from Dunkin' Brands other chain, Baskin-Robbins, sales were $6.9 billion in 2009. Similarly, Mrs. Fields' Original Cookies of Salt Lake City, Utah, operated two franchises: Mrs. Fields' Cookies and TCBY Frozen Yogurt. Mrs. Fields was one of the largest premium snack-food stand franchisors

in the United States in 2013, with about 400 outlets in the United States and 100 more around the world. Another large franchiser in the retail bakery business was Cinnabon Inc. of Atlanta, Georgia, with 770 outlets in the United States and overseas. Former industry leader Hostess Brands Inc. of Irving, Texas, filed for bankruptcy in 2012 after being in business for more than 80 years. Previously, the company sold its products to convenience stores, grocery stores, and other retailers as well as through 700 bakery outlet stores around the country. In 2013 Hostess was sold to Metropoulos & Co. and Apollo Global Management, which had plans to reopen some of the bakeries that had been closed when the company went bankrupt.

Industry workforce
According to Dun & Bradstreet, 221,756 people were employed by the retail bakery industry in 2010. California employed the most workers in the industry with 28,669, followed by New York with 20,435; Texas with 15,069; Massachusetts with 14,660; Florida with 13,112; New Jersey with 11,623; and Pennsylvania with 10,546. U.S. Bureau of Labor Statistics figures showed that approximately 149,800 people were employed as bakers in the United States in 2010, including those employed by establishments other than retail bakeries. The average annual salary for a baker was $23,450, and demand for bakers was expected to increase 2 percent annually through 2020.

Industry research and technology

Like many industries in the United States, retail bakeries dealt with the implications of the green movement in the late 2000s and early 2010s. One of the results of this movement was the introduction of the Leadership in Energy and Environmental Design (LEED) building certification system. Established by the U.S. Green Building Council and verified by the Green Building Certification Institute (GBCI), the LEED certification is meant to encourage businesses to focus on energy and water savings, emissions reduction, better indoor air quality, and other environment-related factors when designing buildings. Different levels of certification are granted to buildings designed with sustainability in mind. Claire's on Cedros, a retail bakery and caf in Solana Beach, California, became one of only five restaurants with LEED platinum certification, the highest rank, in 2010. Aspects of Claire's that contributed to its LEED rank included a vegetated roof, a pervious-concrete parking lot (allows water to be absorbed rather than run off), solar panels for energy production, low-flow and sensor-activated water fixtures, and various other indoor and outdoor energy- and water-saving features. Research on ways to make buildings, as well as practices in the retail bakery and other industries, was ongoing into the early 2010s. While advances in technology were helping to create greener facilities and methods of production, they also were contributing to new methods of and materials for packaging bakery items. As a part of the green movement, many consumers looked for packaging that was environmentally friendly and did not involve excessive waste. In response, some bakeries created new options for packaging. For example, Pattycake Bakery in Columbus, Ohio, wraps its cookies in a plant-based material that is 100 percent biodegradable. Even the glue used to attach the labels is wheat-based and vegan and the labels are printed with soy-based ink. According to Modern Baking, the company spent almost a year developing the new packaging, which involved finding sources that would provide the necessary materials. Owner Jennie Scheinbach told the magazine, "Many regular adhesives, including all-natural ones, are made with animal products, which didn't fit with our vegan operation. And the other vegan glues we found were made with chemicals." Although Pattycake was an exception in terms of the extent to which its owners would go to be green, other bakeries were using more environmentally friendly packaging and bakeware as well, such as plain kraft paper bags and biodegradable paper molds for baking. Yummy Cupcakes of Santa Monica, California, eliminated

the waste of the paper liners with its Cupcake in a Jar, which consisted of layers of cupcake, icing, and toppings in a reusable mason jar. Other bakeries offered similar products, as the trend toward reusable and biodegradable materials continued.

Further Readings
"2013 Baking Industry Forecast: New Year, Same Refrain." Modern Baking, 10 January 2013. "About Us." American Society of Baking, 15 May 2013. Available from http://www.asbe.org. "About Us." Gluten Free Registry, 15 May 2013. Available from http://www.glutenfreeregristry.com. "Are Cake Pops the New Cupcakes?" Food Manufacture, November 2012. "Bakeries: Industry Snapshot." the Center for Economic Vitality at Western Washington University, June 2011. Available from http://www.pacificedc.org. "Bakery Cafes." Market Research Report. IBISWorld, 2013. Available from http://www.ibisworld.com. "Bakery Product Trends Emphasize Healthier Eating." Food Processing, 17 February 2013. "Baking Industry Overview." American Bakers Association, 15 May 2013. Available from http://www.americanbakers.org. "Donut Stores in the U.S." Market Research Report. IBISWorld, June 2012. Available from http://www.ibisworld.com. "Einstein Noah Restaurant Group Reports First Quarter 2013 Financial Results." Einstein Noah Restaurant Group, 2 May 2013. Available from http://www.einsteinnoah.com. "Flour Craft Bakery, Marin's First Gluten-Free Bakery, Opens Next Week." Inside Scoop SF, 5 March 2013. "Heating Up or Cooling Off? Trends and Developments in Global Bakery Industry." Euromonitor International, 25 October 2012. Available from http://blog.euromonitor.com. "Industry News." Retail Bakers of America, 15 May 2013. Available from http://www.retailbakersofamerica.org. "Making Cents of Social Media." Modern Baking, 2 May 2013. Occupational Outlook Handbook,, 2012-13 Edition. U.S. Bureau of Labor Statistics, 11 July 2012. Available from http://www.bls.gov. "Panera Bread Introduces New Platform to Express Brand Values, Purpose and Culture: 'Live Consciously.'" Panera Bread, 18 February 2013. Available from http://www.panera.com. Rekai, Mika. "Crumby Returns." ; Maclean's, 6 May 2013. "Retailers Stepping Up Green Push: Businesses Find Ecofriendly Initiatives Can Provide Boost to Bottom Line." Crain's New York Business, 22 April 2013. "Starbucks Announces Senior Leadership Moves to Fuel Global Growth Aspirations." Starbucks, 2 May 2013. Available from http://www.news.starbucks.com. Suter, Lesley Bargar. "New Bakeries: Floury Goodies Are on the Rise Again Thanks to the Latest Dedicated Crew of Boutique Oven Artisans." Los Angeles Magazine, February 2013. "Temecula: So Good Gluten-Free Bakery & Cafe Opens." The Press-Enterprise, 12 January 2013. "The Trendy 10: Bakery Game Changers." Modern Baking, 10 October 2012. "US: Hostess Brands to Open More Plants as Returns To Production." just-food.com, 29 April 2013. Van Landingham, Vanessa. "Sprinkles Cupcakes Eyes New Sites, Concepts." Nation's Restaurant News, 15 April 2013. Source Citation: "Specialty Bakeries." Encyclopedia of Emerging Industries. Ed. Lynn M. Pearce. Detroit: Gale, 2013. Business Insights: Essentials. Web. 26 July 2013. Document URL http://bi.galegroup.com/essentials/article/GALE%7CRN2501500572/d7ba2704ce856e0cb0e0d34e657e9cb1?u=cbs

Document Number: GALE|RN2501500572