Specialty Bakeries

Encyclopedia of Emerging Industries

Industry snapshot

According to the Center for Economic Vitality at Western Washington University, there were about 6,000retail bakeries in the United States in 2012, which together earned total annual revenues of approximately $3billion. After suffering through the economic recession of the late 2000s, the industry started to recover as2010 neared a close. However, some of the developments in the early years of the twenty-first century hadaffected how retail bakeries conducted business. Some of the major trends influencing the industry includedthe increase in demand for small, individually sized products; the growing market for organic andallergen-free foods; and the incorporation of ethnic flavors and recipes into the mainstream bakery. Inaddition, Americans were demanding evidence of environmentally friendly practices from bakeries and otherproduct suppliers. This demand resulted in changes to everything from the way bakeries powered their ovensto 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 tooffer interactive websites, Facebook pages, and Twitter accounts. For example, according to Supermarket

, in January 2010 cupcake bakery Sprinkles in Los Angeles was tweeting a "secret" word every week,Newswhich customers could then use to cash in for a free cupcakes. The CupcakeStop, a mobile bakery in NewYork City, also relied heavily on Twitter and Facebook to generate business. Said owner Lev Ekster, "If Ihave an exciting new flavor that I want people to try, I'll tweet about it and get people excited. Twittering letsus 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. Retailbakeries--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 ofsocial 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 torecover from the effects of a down economy. Some, however, claimed the industry was somewhatrecession-proof. For example, when asked about the state of the industry in January 2013, Eric Deising opfDeising's Bakery, Restaurant & Catering Co. (Kingston, NY), said, "From the baking industry standpoint, Ifeel pretty good. ... We offer products that fit into any economy--good or bad," and Roland Krueger orBuehler'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 bakerythat's still true is it's an affordable indulgence. ... You're not buying an $18 T-bone steak from the meatdepartment 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; ordo both. They also may offer lunch and breakfast items, coffee/tea, and other related products. While someretail bakeries focus on a specific product, others offer a wide range of baked goods. This classification doesnot 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 percentemploying only one to four people, according to Dun & Bradstreet. The industry was served by severalnational 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' guildwas formed around 168 B.C. in Rome, which established baking as its own profession. These first bakerswere the only free people who worked a trade; all other tradespeople at the time were slaves. Bakerscontinued 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 morethan just the wealthy.

In addition, throughout history the importance of bread for the food supply was never underestimated bygoverning bodies. During World War I, for example, the U.S. government passed regulations on variousaspects 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 physicalexaminations, 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 bakedgoods were kneaded by hand and baked in rough, clay-brick ovens. However, some aspects of the trade arestill recognized as vital, including keeping recipes "secret." Other factors, such as using fresh ingredients andoffering 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 bringa severe drop in housing prices and a record number of foreclosures, an increase in unemployment, and anear-collapse of the automotive and financial services industries. Although the bakery industry historicallyhas been recession-resistant, according to , the economic recession of the late 2000s and theModern Bakingresulting "consumer frugality" took its toll on retail bakeries. With less extra cash, Americans cut down ontrips 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 RonaldKrueger, a bakery merchandiser in Ohio, in the September 2010 issue of , "We've seen a lotModern Baking

of people looking for comfort foods--donuts, pound cakes and that kind of thing. They still find that bakery isan affordable treat." A June 2009 article had a similar premise: "Customers may not be ableModern Bakingto afford a new car or a new TV, but they can afford a $2 cookie or $20 torte." Others noted the downturn inthe economy as an opportunity. Todd Wagner of Wagner's European Bakery & Cafe in Olympia,Washington, told : "In a way it [the recession] has been beneficial. It woke us up. We are noModern Bakinglonger 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 byadding 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, thefirst actual cupcake recipe was found in an American cookbook published in 1826. There are two theories forthe origin of the cupcake's name. One relates to the amount of ingredients in a typical recipe (one cup ofsugar, two cups of flour, and so on) and the other has to do with the fact that the cakes were originally bakedin small, individual cups. Muffin tins became popular for baking cupcakes around the turn of the twentiethcentury. In addition, bakers appreciated the reduced amount of time it took to bake cupcakes as compared toa regular-sized cake.

Cupcakes became a popular item in U.S. bakeries in the late 1990s, boosted by an episode of the populartelevision series in which two of the characters visit over cupcakes at the Magnolia BakerySex and the Cityin New York City. By 2010 Magnolia had four locations in New York, one in Los Angeles, and one inDubai. Los Angeles-based Sprinkles, however, which was founded in 2004, bills itself as the firstcupcake-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 FoodNetwork television show "Cupcake Wars," in which four bakers competed to make the most original andtasty mini-cake; the sales numbers for Martha Stewart's new cookbook released in June 2009, Martha

, which spent 11 weeks on bestseller list; and the creation of severalStewart's Cupcakes The New York TimesWeb sites and blogs about cupcakes, including Cupcakes Take the Cake.com and Cupcake-Business.com. InMarch 2010 Cupcake-Business.com claimed that cupcakes represented a $6 billion industry, with somestores, 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: chains, such as Sprinkles; Web-based businesses that sold only online; bakeries that offered otherTimes

items in addition to cupcakes; and the sole bakery. Some of these new bakeries took it a step further andcreated a specialty within the specialty: Examples included vegan-only cupcake bakeries and mobile cupcakebakeries (cupcake trucks). Some cupcake bakeries specialized in local or organic ingredients, whereas othersstayed 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, ascompared 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 returnof more discretionary income for Americans. Some new developments, however, were changing the waybakeries did business, or at least what they offered on their shelves. One of these was the tendency ofconsumers to cut back on their portion sizes. As Steve Schulte, a bakery coordinator in Atlanta, told Modern

in September 2010: "Consumers are still eating bakery foods, but rather than have waste, they buyBakingsmaller 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 trendwas one of the driving factors behind the cupcake craze. The desire for small but indulgent baked goods wasalso illustrated by the National Restaurant Association's Chefs Survey, in which bite-sized desserts wereranked 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, wholegrains, and lower levels of fat, sugar, and sodium. The market for allergen-free and gluten-free baked goodswas also growing. For example, a survey by showed that the percentage of in-store bakeriesModern Bakingthat experienced sales of organic and natural baked goods grew from 19 percent in 2006 to 38 percent in2008, 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 2005and 2008, according to Mintel. This trend continued and many retail bakeries capitalized on it by dedicatingwhole 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. Moreresources were also becoming available for people looking for these specialty products. For example, theGluten 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 sweetsstayed strong. As the world's largest sugar consumer, the United States maintained a robust demand for retailbakery items that were not especially healthy. For example, according to IBISWorld, 8,602 U.S. donut shopsgenerated $12 billion in sales in 2012. The top four companies accounted for about 64 percent of industryrevenues. Dunkin' Donuts was the top company, accounting for more than 57 percent of the market share. Itexperienced a 7.2 percent annual growth in revenues between 2007 and 2012, whereas the overall donut shopindustry 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 café or coffee shop. For example,Starbucks Corp. of Seattle, Washington, was the world's number-one specialty coffee retailer and also soldbaked goods. With 17,000 shops in more than 40 countries, Starbucks had sales of almost $13.3 billion in2012. Total employment numbered 149,000.

Similarly, Panera Bread Company of Richmond Heights, Missouri, sold bagels, cookies, bread, and otherbakery items in addition to offering a limited meal menu. In 2013 the firm had about 1,650 bakery/cafésites in 45 states and Canada operating under the banners of Panera Bread, Saint Louis Bread Co., andParadise Bakery & Café. About 800 of the stores were company owned, and the remainder werefranchises. In 2013 Panera recorded sales of $2.1 billion.

Einstein Noah Restaurant Group Inc. of Lakewood, Colorado, held the position as the United States' largestbagel bakery in 2013, operating under the banners of Einstein Bros. Bagels, Noah's New York Bagels, andManhattan Bagel. With 770 locations in 40 states, Einstein Noah had sales of $427 million in 2013. About440 stores were company owned and the rest were franchises.

Other major retail bakeries also operated as wholesale bakeries. Krispy Kreme Donuts Inc. ofWinston-Salem, North Carolina, for example, was a wholesaler that also had more than 695 donut stores inthe United States and 20 other countries. With 4,000 employees in 2012, Krispy Kreme recorded annual salesof about $435.8 million.

Other industry leaders included Dunkin' Brands Inc., of Canton, Massachusetts. With 6,400 stores in theUnited States and about 3,000 more in 30 countries, Dunkin' Donuts was the world's leading chain ofdoughnut shops. Including sales from Dunkin' Brands other chain, Baskin-Robbins, sales were $6.9 billion in2009. 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 outletsin the United States and overseas.

Former industry leader Hostess Brands Inc. of Irving, Texas, filed for bankruptcy in 2012 after being inbusiness for more than 80 years. Previously, the company sold its products to convenience stores, grocerystores, and other retailers as well as through 700 bakery outlet stores around the country. In 2013 Hostess wassold to Metropoulos & Co. and Apollo Global Management, which had plans to reopen some of the bakeriesthat 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; andPennsylvania with 10,546.

U.S. Bureau of Labor Statistics figures showed that approximately 149,800 people were employed as bakersin the United States in 2010, including those employed by establishments other than retail bakeries. Theaverage annual salary for a baker was $23,450, and demand for bakers was expected to increase 2 percentannually through 2020.

Industry research and technology

Like many industries in the United States, retail bakeries dealt with the implications of the green movementin the late 2000s and early 2010s. One of the results of this movement was the introduction of the Leadershipin Energy and Environmental Design (LEED) building certification system. Established by the U.S. GreenBuilding Council and verified by the Green Building Certification Institute (GBCI), the LEED certification ismeant to encourage businesses to focus on energy and water savings, emissions reduction, better indoor airquality, and other environment-related factors when designing buildings. Different levels of certification aregranted to buildings designed with sustainability in mind.

Claire's on Cedros, a retail bakery and café in Solana Beach, California, became one of only fiverestaurants with LEED platinum certification, the highest rank, in 2010. Aspects of Claire's that contributedto its LEED rank included a vegetated roof, a pervious-concrete parking lot (allows water to be absorbedrather than run off), solar panels for energy production, low-flow and sensor-activated water fixtures, andvarious other indoor and outdoor energy- and water-saving features. Research on ways to make buildings, aswell 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 alsowere contributing to new methods of and materials for packaging bakery items. As a part of the greenmovement, many consumers looked for packaging that was environmentally friendly and did not involveexcessive waste. In response, some bakeries created new options for packaging. For example, PattycakeBakery 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-basedink. According to , the company spent almost a year developing the new packaging, whichModern Bakinginvolved finding sources that would provide the necessary materials. Owner Jennie Scheinbach told themagazine, "Many regular adhesives, including all-natural ones, are made with animal products, which didn'tfit 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, otherbakeries were using more environmentally friendly packaging and bakeware as well, such as plain kraft paperbags 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, andtoppings in a reusable mason jar. Other bakeries offered similar products, as the trend toward reusable andbiodegradable materials continued.

Further Readings

"2013 Baking Industry Forecast: New Year, Same Refrain." 10 January 2013.Modern Baking,"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?" November 2012.Food Manufacture,"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 fromhttp://www.ibisworld.com."Bakery Product Trends Emphasize Healthier Eating." 17 February 2013.Food Processing,"Baking Industry Overview." American Bakers Association, 15 May 2013. Available fromhttp://www.americanbakers.org."Donut Stores in the U.S." Market Research Report. IBISWorld, June 2012. Available fromhttp://www.ibisworld.com."Einstein Noah Restaurant Group Reports First Quarter 2013 Financial Results." Einstein NoahRestaurant Group, 2 May 2013. Available from http://www.einsteinnoah.com."Flour Craft Bakery, Marin's First Gluten-Free Bakery, Opens Next Week." 5 MarchInside Scoop SF,2013."Heating Up or Cooling Off? Trends and Developments in Global Bakery Industry." EuromonitorInternational, 25 October 2012. Available from http://blog.euromonitor.com."Industry News." Retail Bakers of America, 15 May 2013. Available fromhttp://www.retailbakersofamerica.org."Making Cents of Social Media." 2 May 2013.Modern Baking,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: 'LiveConsciously.'" Panera Bread, 18 February 2013. Available from http://www.panera.com.Rekai, Mika. "Crumby Returns." ; 6 May 2013.Maclean's,"Retailers Stepping Up Green Push: Businesses Find Ecofriendly Initiatives Can Provide Boost toBottom Line." 22 April 2013.Crain's New York Business,"Starbucks Announces Senior Leadership Moves to Fuel Global Growth Aspirations." Starbucks, 2May 2013. Available from http://www.news.starbucks.com.Suter, Lesley Bargar. "New Bakeries: Floury Goodies Are on the Rise Again Thanks to the LatestDedicated Crew of Boutique Oven Artisans." February 2013.Los Angeles Magazine,"Temecula: So Good Gluten-Free Bakery & Cafe Opens." 12 January 2013.The Press-Enterprise,"The Trendy 10: Bakery Game Changers." 10 October 2012.Modern Baking,"US: Hostess Brands to Open More Plants as Returns To Production." 29 April 2013.just-food.com,Van Landingham, Vanessa. "Sprinkles Cupcakes Eyes New Sites, Concepts." Nation's Restaurant

15 April 2013.News,

Source Citation:

"Specialty Bakeries." . Ed. Lynn M. Pearce. Detroit: Gale, 2013. Encyclopedia of Emerging Industries. Web. 26 July 2013.Business Insights: Essentials

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