Niche Bakeries

Topics: Variable cost, Marginal cost, Total cost Pages: 7 (2271 words) Published: January 21, 2013
Niche bakeries are becoming more popular though the last few years. These types of bakeries specialize in a certain type of baked goods and showcase them for their customers as well as having other types of more common baked goods available. This is the type of business that I would create. My niche bakery would specialize in individual cupcakes and pies as well as baking larger cakes and pies to order. Local customers will consist of area residents, business owners and students that can easily walk over to the bakeries location while on lunch break or after school and work to purchase what they want, and with the Internet available, I can expand my consumer base and ship my goods all over the United States. Customers can place their orders online, and I will be able to ship the product to their door. The area in which I reside does not have a type of bakery like this. We currently have a Wal-Mart and a Kroger’s Grocery if we want to purchase baked goods. While they are both good and they are also cheap considering their product, my bakery would offer a fresh home baked quality of product that could offer them some competition. I would say in this area, my niche bakery would be a monopoly market as that it would be the only one in this location. I would be able to set the prices for my product but would still need to keep in mind that if the price is too high, my potential customers will go back to purchasing their goods from the grocery chain bakeries. Looking at a broader area as with the Internet, I could say that I am in a monopolistic competition. Each niche bakery that sells baked goods such as this have relatively the same pricing, no one business sets the price for the other businesses. It is still a smaller industry but there are others in which I must compete for business. So advertising and a well made website will figure prominently in showcasing the goods I am selling in the best possible light.

Elasticity of demand in a bakery is very important to know. If the price of ingredients goes up, the bakery owner must adjust for this increase. The higher the price elasticity of the product the less volume of the product that will be output, if for instance the demand for the product was highly elastic, then it wouldn’t make sense to increase the price of the product. The company would lose business because of this.

Below in figures 1A and 1B is data that has been taken from the Bureau of Economic analysis from three different industries that are related to the niche bakery business. Between the years of 2007 to 2011, there shows a decrease in the earlier years but an increase within the year of 2011of growth in the food service and food and beverage industries. The retail industry has show a sharp increase and decrease in these years. Taking into consideration the growth in each of the food industries though, I can make the assumption that this is a business that could flourish and grow with the right type of marketing, promotion, and sales products. In looking at this type of business for my area, I have talked to some of the local residents and have found that they were amenable to a new specialty bakery in the area. This impromptu survey showed that the residents in the area expressed an interest in purchasing baked goods that were of homemade quality rather than mass produced market products. Figure 1A

Percent Changes in Chain-Type Quantity Indexes for Gross Output by Industry Release Date: November 13, 2012
Line| Industry| 2007| 2008| 2009| 2010| 2011|
80| Food services and drinking places| 1.1| -2.7| -4.6| 1.9| 4.4| 26| Food and beverage and tobacco products| 0.6| -1.5| 0.7| -0.7| 0.9| 35| Retail trade| 0.8| -5.6| -7.2| 10.8| 1.4|

Figure 1B
Chart of Percent Changes in Chain-Type Quantity Indexes for Gross Output by Industry

Increasing Revenue
In order to increase revenue in this business, there are several things that would be necessary. Below...

References: Bureau of Economic Analysis. (2012). Retrieved from
Gaines, M. (2012). Guide to the Bakery Business. Retrieved from
Isidro, I. (2009). Starting a Bakery: Success in the Niche Food Business. Retrieved from
Kimmons, R. (2012). Pricing Vs. Nonpricing Strategies. Retrieved from
moffatt, M. (2012). Marginal Revenue and Marginal Cost Practice Question. Retrieved fro
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