The Fresh Loaf

News & Information for Amateur Bakers and Artisan Bread Enthusiasts

Micro Bakeries

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ElPanadero's picture
ElPanadero

Micro Bakeries

Anyone out there running a "Micro Bakery" from their home or using someone else's catering kitchen or using a small dedicated bakery area?

I'm interested to understand a few things including:

1.  How often do you bake per week, and roughly how many loaves?

2.  Who are your primary customers?

3.  What roughly were your initial setup costs?

4.  What is your realistic profit margin %?

I love bread baking, feel confident in making a variety of good breads and want to consider taking this a step further as a method of partial income now that I am retired from the 9-5 office career.

Micro Bakeries I have emailed seem to have little or no profit margins.  Some are doing it for "fun", others expending a lot of hours for very little return.   Is there a viable business to be had in Artisan Micro Baking or is this only viable for a full production bakery shifting large volumes of product?

Any views welcomed.

Many thanks

EP

bpezzell's picture
bpezzell

EP, I'm the guy you are talking about. I've been supporting my family for the past 5 years out of a 240 square foot shop in my back yard. That's about as 'micro' as a bakery can get. If you are serious, I'll talk with you.
It isn't easy, but if you love to bake, it is fun.

ajrosen's picture
ajrosen

I am a serious home baker and would love to know more how you have made the micro thing work to the point of profit. I work 6 half days at my office and love baking more than my day job

Allan R

bob13's picture
bob13

I do not want to discourage anyone who has a passion, but from a business point of view, the profit margins in a micro bakery only making bread just are not there.  Unlike a micro brewery or micro winery where customers are willing to pay twice or more of average store prices for "micro" quality, bread does not have that type of following.  A micro brewery is typically 30,000 gallons per year, how many loaves would be needed to equal that volume?  I just don't think a stand alone, bread only micro bakery is anything other than a "cottage industry" that will support ones hobby but never support a family over the long haul.  Unfortunately, volume or diversity (pastry, cakes, desserts) are required to make a go of it.  A good  business model is The Bread Alone Company.  Take a look at their web site to get an idea of what they need to do and they have a large metro area they support (NYC) as well as a strong local and internet following.  Sorry for the downer, but don't want to see you loose your shirt either.

Moya Gray's picture
Moya Gray

You could possibly do this as a retirement option to boost your income.  nonetheless it is more likely to be successful,if you add other items to your product line.

given the profit margins, you want to offer items for full premium value.  

You want to keep your costs as low as you can.  first I have solar panels for power.  I use my home oven with two pizza decks and a steaming pan, a cookie sheet as my loader, gloves, lame, 1 couche, big spray bottle and a four shelf baking stand.  I purchased a commercial level counter top mixer (KA) and a few cambros.

my market at the moment is a luxury or foodie market, but that is because I charge premium value.

 

best of luck

ElPanadero's picture
ElPanadero

all the feedback here. Just to clarify I WAS very much including the baking of sweet products like muffins, cakes, etc as well as bread in the venture, I know full well that bread alone can't support the business except in very exceptional circumstances.

So, for those of you that make both breads and sweets, what are your volumes, profits etc as per my OP?

bpezzell feel free to PM me

Joyofgluten's picture
Joyofgluten

Is there a viable business to be had in Artisan Micro Baking? I keep asking myself this as well.

i've been baking 10 loaves twice a week for the past few months now, 7 loaves are preordered, the rest feed the family. A few others have recently inquired about buying my bread, i'm not sure though if i want to add a second or third batch to my bake days.

Over the past couple of years, I've put together a pretty decent hobby bakery setup. By keeping a keen eye on the used equipment scene, i've picked up some very good deals. The oven i'm using now has a 70cmx70cm stone baking surface, holds 12 round 700g breads. A second smaller oven with 50x50cm stone hearth holds 6. A mid 60's diosina one armed bandit is serving me well in the mixer dept. These three items all operate on 3phase power. A few months back i had the good fortune to add a super flour mill to this combo. These four items are all in good working order and set me back, in total, less than the equiv. of 1500US dollars.  details of this set up are here   

My customers are neighbours, friends and friends of friends, i deliver the bread by bicycle early in the afternoon. It's a good social connection that helps to make up for the low profit involved. Everyone wears a big smile when fresh bread comes knocking.

I will probably end up boosting my production to 30 loaves per bake day, by getting my timing down so that the batches are ready to go one after the other, i could possibly make things efficient enough for it to be worthwhile as a side job.

Remaining an insider bread connection or going official is also the big question, every area/country has it's quirks about hygiene certification etc. in any case, it's importent to keep things clean and tidy and to keep that image up front. 

The rewards are many, it could be a splendid retirerment project, but more than likely wouldn't involve a substantial income for your efforts. It's wonderful to pull a good batch off and cut off a slice, but even more rewarding to know that the same loaves have taken their place on the cutting boards of others.

cheers

daniel

 

ElPanadero's picture
ElPanadero

Very interesting seeing your "setup".   The loaves shown on your blog look fantastic.  Really consistent shaping and crumbs.  It saddens me so much that such great creations from artisan bakers can not command a higher price for what they are and thus sustain a viable business.  Something is very very wrong with the world and supermarkets have so much to answer for !  There must be an answer to this.  Many thanks.

Moya Gray's picture
Moya Gray

Daniel your diet is very nice and I envy you your oven!  Breads are fantastic!

SpoonandSparrow's picture
SpoonandSparrow

Hi EP,

I bake "full-time" from my home kitchen for a couple local restaurants, supply desserts. I bake bread for individual customers. I cannot produce the amount of bread the restaurants need on a regular basis.

When I was baking only for farm markets and individual orders, it was not really that profitable. But it allowed me to meet great people and start baking for the restaurants. This a bit more secure income but it still would not support my family. It is supplemental. 

As far as volume, I bake anywhere from 2 - 4 cakes per day (or every other day depending on the season), and its at least six days a week. The bread baking varies. At one point we offered a Bread CSA, and it went well but it was a lot of work for one person baking. This coming summer I am going to try baking bread more regularly and selling it through yourfarmstand.com. I can control volume and keep it manageable.

I hope you found some of this helpful. good luck!

Marci

ElPanadero's picture
ElPanadero

Thanks for your input.  Interesting to hear how your work progressed.  So can I conclude that once you started supplying restaurants you were able to make some kind of profit?   Are we talking 10% or less?  Sorry if that's too personal.

SpoonandSparrow's picture
SpoonandSparrow

Hi,

Yes, once I started supplying restaurants the baking was/is more profitable. Couple things - there is not as much waste because I know what desserts are needed at the restaurants. With the markets, it was a guessing game and some days I just had too much left over (Breads, pies, desserts etc...) Also, one mistake I made was from the beginning I did not price as high as I should have. For the markets I priced with more consideration for what I thought people would pay, than for what I should have actually received to make a good profit. 

Supplying the restaurants has allowed me to slowly get my prices more in line and comparable to what other bakers are doing (there are several great local bakeries, and other home bakeries in my area). But I still have a couple loss leaders in the mix. Its hard to give an overall percentage for profit margin. At the end of the year, Its not very much, but its sustainable.

Marci

BobSponge's picture
BobSponge

Hi,

On the Bread Bakers Guild Events page there is a flyer for a workshop titled "Starting a Micro-Bakery"

http://www.bbga.org/files//FlyerMicroBakery.pdf

Even though I can't attend, its encourging that such a workshop exists. It indicates there may be a viable business model for such a bakery, although I'm not quitting my day job yet!  

 

 

 

ElPanadero's picture
ElPanadero

Thanks Bob

Taking a look at this now . . .

Ah !  It's in MInneapolis lol, a bit far from the UK.  Must be something similar here.

Mebake's picture
Mebake

Hi, ElPandero

Andy (ananda) is a TFL member who lives in northumberland - UK.  He bakes for farmer's markets and is a professional consultant for bread baking. Why don't you send him a private message , and he may help you out.

ElPanadero's picture
ElPanadero

Many thanks

dabrownman's picture
dabrownman

will make on Social Security when I turn  65 in 3 years, If I made 20% profit on a $5 loaf of bread,  I would only have to sell 12 loaves an hour, 8 hours a day, 5 days a week to equal my SS gross income.  That is only 96 loaves a day,480 loaves a week and  25,000 loaves a year.  I can't make it on my SS alone, even in retirement with no debt but maybe making twice as much would help?

Happy Micro baking

 

ElPanadero's picture
ElPanadero

20% is ambitious!  Nevertheless 480 loaves per week is not in the realms of "micro baking" imo.  That's the domain of a full production artisan bakery.  

Moya Gray's picture
Moya Gray

Last August I began selling at one farmers market.  When you sell at the farmers markets one important issue is to get your prices right the first time - easy to drop, difficult to raise. 

The artisan breads are premium and often luxury items, especially because of the long duration and hand-made aspects.  I don't have a bread that I sell for under $6.00 (sourdough) and most are $7.00.  My profit margins depend solely on reducing my costs and labor.  So my average margin is upwards of 46%.  On the whole, however, working alone I can only produce 40-50 loaves in my home oven ( I did do up to 100 but that was when I baked for 12 hours straight, not including clean up time) so this limited volume reduces my overall profit. 

Retirement is supposed to be fun! Ha!

dabrownman's picture
dabrownman

the 46% is net margin after taxes, interest and depreciation but nos salary for you.  Averaging $6.50 sales price a loaf gives you a profit for 50 loaves a week would be $149.50 a week or $7,475 a year.  A real bump in retirement  earnings.  The average SS payment is 1250 a month and this side job is worth $647 a month increasing the average SS take home by almost 52%  Assuming that you only spend 20 hours a week doing this then your take home pay before taxes is $7.48 about the same as minimum wage and way much more fun since you don't have to answer to anyone!

The bad part, like all business owners without employees is that this is a 52 week a year job and there is no vacation allowed:-) 

ElPanadero's picture
ElPanadero

$7 USD equates to £4 in uk money.   Unless you lived in a very affluent area I don't think people would be prepared to spend this much for a loaf of bread given the cheaper options at the supermarket.  Don't get me wrong, the 2 products are a world apart but the British psyche is unfortunately fairly well established and changing it takes a long time.  Take for instance it's Post Office.  Brits for years have had the luxury of a state funded postal service and thus have been able to stick a little stamp costing 30p on a letter and have someone cart that letter from one end of the country to another.  It's simply expected that they can do this.  However if you thought it through rationally, you can see that it's a nonsense.  Would YOU take a letter for me and deliver it 500 miles away for 30p?   Nope.   With the Post Office privatised all this will change, but it will take ages for the British population to adjust to that reality.  If they had to pay £2-£3 to send that letter they simply wouldn't bother.

If you can get $7 per loaf where you are then more power to your elbow.  I suspect however that for many artisans, even those with full production bakeries can't get away with £4 per loaf.  Mostly it's £2-£3 that I see.  Maybe I need to revisit that and check around?  It seems to me that volume is a primary concern for any wouldbe baker as it's the bulk scaling up of process that brings efficiency.  It's not economical for example to heat the oven up to make 5 loaves is it?  Make 50 and it's better, make 500 and it's much better.  Same goes for raw ingredients.  Large bulk buying of flour, salt, seeds etc saves money but I presume you need to be working through them swiftly to keep things as fresh as possible.  My local bakery buys 25kg sacks of flour by the palette and presumably gets a decent discount for that volume.  I couldn't buy the same quantity if just making 50 loaves per week.   Home or micro baking seems to be a difficult business as far as I can determine because the primary factor of volume is restricted.

Moya Gray's picture
Moya Gray

ElPanadero -

Purchasing in bulk is critical to profit margins....I live in Hawaii thus, everything must be shipped in by boat or air.  As very little is inexpensive in Hawaii I think the more affluent people are willing to spend for a good product. 

You are right about the affluent neighborhood.  I sell in just such an area and do ok and I've tried to sell in an area that is less affluent and less well traveled and prefer white bread and pastries, and haven't done well.  However, I'm not trying to sell to everyone - I want to sell to those people who appreciate good bread.  To those who are curious about my breads, I tell the story of the bread - how its made, how long it takes to make the bread, why I chose to make these breads, I tell them that they are vegan breads, that there are only three basic ingredients, etc. etc.  By the time the story is completed and after they've tasted the breads, they have become regular customers.  And that is what I want - the repeat customers.

In growing any business - but especially the artisan bread business - you must be willing to take losses until your customer base is large enough to produce volume.  In this business many if not most people are completely unaware of what bread could taste like.  They have grown accustomed to what I call "air bread."   So I educate each of my customers.  Some of them are unsure and hesitate so they take the most familiar bread - a baguette or a sourdough (I used to call it country bread, but that was too unusual for many).  Once they've done that they come back for more.

Micro baking is a difficult business if you can't get efficiencies.  But I believe there is a niche for micro baking and what that niche is is different for each and every baker.  The baker must develop his/her own market and business model.  There are a few 'tried & true' ways that you can go but ultimately the baker makes those decisions based on his or her customer base, capacity and resource.  For many I believe the micro-baking business is simply a step up to the next business level.

Tomorrow I'll be testing a new market and I'm hoping they will love my bread!

 

Moya Gray's picture
Moya Gray

Hi Allan

I have been fortunate because I have been able to use a MIWE steam injection 2 deck oven.  Using this oven reduces my time and ultimately reduces my cost.  But - and this is a big but - right now I'm not being charged to use this oven and if I were to return to baking in my home oven my power bill is nil because we have solar panels and produce more electricity that we use.

So, that being said, a micro artisan bread baker will likely need other lines to improve the over all profit margin.  I am limited by the farmers markets 'rules' on competition, but I have developed chutneys, preserves, etc. as well as a line of granola to fill in the profit.  I would love to do some other items just because I think they are fun and may sell well.  In comparing my sales at one market (60-80 pieces a week) to three local markets I can tell you that I am competitive.  Only the big box discounter is way ahead in sales numbers.

But ultimately, right now I look at the farmers markets as research & development labs.  I'm trying to decide whether to pursue this beyond the micro bakery stage, or whether I want to sell only a few items on a larger scale.

While I don't have a vigorous internet presence I am beginning to improve it - see my facebook page at Moya's Bake Shop and my website at www.artisanalbreadsandbliss.BlogSpot.com

What I think you need to think about is to whom will you sell your breads?  You can do it organically and sell to neighbors and friends, or you can jump into a farmers market to determine whether your breads are desired.  

Believe me, although I love every minute of making bread, this is physically demanding work.  I will have to hire help soon to tote those four 50-lb bags of flour I buy every 1.5 weeks!  And there goes my profit!