Whether you are a creator, manager, or buyer of a bakery business, your objectives are the same: to optimize the profitability of your bakery.

Good news: there are many levers you can activate to achieve this goal; the trick is to master how they work!

To help you in this process, we offer you concrete advice in this article to boost the profitability of your bakery.

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Control the main cost items

Keep your bakery's payroll under control.

By payroll, we mean all costs directly linked to personnel costs.

The payroll generally constitutes more than 30% of the cost price of a bakery product. Therefore, you must be particularly vigilant when analyzing this cost item because it is the first factor likely to weaken the profitability of your bakery.

Controlling this expense item supposes setting up a precise work organization; each staff member must be essential. Above all, it is necessary to ensure that the benefits generated by the staff exceed their costs.

The starting point for, if not reducing, at least controlling this cost item is to compare the salary costs with the income collected on each day of the week. And this will allow you to identify possible inconsistencies in work schedules: too many staff on quiet days, not enough during peak hours, and adjustments accordingly.

A simple and efficient way to perform this analysis is to calculate the hourly cost charged (that is to say, taking into account employer contributions) of each employee and multiply it by the working hours on each day of the week. You will then only have to compare this figure with the number of daily receipts.

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Control the purchases and use of raw materials

By raw materials, understand manufacturing ingredients. These can be processed or natural products. Know that the products already ready are often, contrary to popular belief, less profitable than those resulting from traditional manufacture.

In baking, raw materials generally constitute around 25% of the cost price of a product.

Managing the expenses related to raw materials is perhaps one of the most straightforward tasks. Here you can rely on the following levers:

  • Optimize the recipes of your products to control their material cost (we will come back to this point a little later in this article)
  • Optimize the quantities produced to limit wastage due to unsold products. To do this, do not hesitate to establish, for example, different production quotas for each day of the week.
  • Buy in larger quantities, without ever compromising on the quality, of course! Here storage capacities play a significant role.
  • Finally, play on the competition between the different suppliers to lower the prices.

Keep an eye on your overheads.

General costs correspond to the administrative, commercial, and salary costs of your company.

Generally, It is estimated that overheads constitute 15 to 20% of the cost price of a bakery product.

Controlling these cost items is therefore very important to optimize the profitability of your bakery.

Here, the best way is often to list and analyze all the expenses to identify those that seem redundant or reduced by using the competition.

For example, you can consider changing your energy supplier to reduce the bill or renegotiate your accountant's fees.

Ensure the profitability of your bakery products

Controlling the main expenditure items is one thing, but you still have to make sure that your products are sold for more than it costs to manufacture for your bakery to be profitable.

Calculate the cost of products

The first step in calculating the profitability of your products is to assess their cost price by allocating them a share of all the company's costs.

The calculation of the cost price, particularly the choice of the keys of distribution of the general expenses, is a bit complex and exceeds the framework of this article. We will, therefore, not go into details here.

Let's take an elementary example of the cost of a baguette. To do this, we used a calculation already carried out by INBP :

  • Raw materials: € 0.15
  • Staff costs: € 0.39
  • General expenses (maintenance, rents, advertising, accounting, etc.): € 0.21
  • Taxes and levies: € 0.02

In this example, the cost of a baguette is, therefore, € 0.77. For this bakery to be profitable, it must consequently sell its baguettes at a price higher than its cost price.

After the cost price, let's take a look at the margin.

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Calculate the margin on the cost price

To calculate the margin on the cost price, it suffices to subtract from the sales price excluding taxes (PVHT) the cost of the product. 

You are, in fact, the one who will set the margin you want to make from the sale of your product, depending on what your customers are willing to pay and the prices charged by your competitors.

Let's take the example of our baguette, the cost price of which amounts to 0.77 €. For example, if you want to earn, for example, € 1 per baguette, all you have to do is set the price of the product at € 1.74 excluding tax or € 1.84 including tax.

To ensure the profitability of your bakery, it is essential to regularly calculate the cost price of the products offered for sale to check that their selling price is higher than their cost.

Optimize the product mix

Are your costs under control and the price of your products higher than their cost price? You are on the good road—the last step to improve your bakery's profitability: optimizing the product mix.

Here you must first start by analyzing the composition of your sales:

  • What are the best-selling products (in quantity)?
  • Who and who contributes the most to turnover?
  • Which are the most profitable?
  • Which ones are selling well but not very beneficial?

This analysis will allow you to identify the products that have the most potential for optimization.

Then it is about trying to increase the profitability of each product by asking yourself the following questions:

  • Can you improve the sale price?
  • Can you reduce the cost price by modifying the recipe?
  • Conversely, is it possible to enrich the recipe (by adding an ingredient, for example) to then sell a product with higher added value?
  • Can you use the product as a lead product or certain group products to create offers to increase the average basket (for example, offer a baguette for 4 pastries purchased on Sunday)?

That's it for this time. We hope that this article has given you concrete ideas to improve the profitability of your bakery.

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