Niche markets are thriving in the world of sweets. Specialty bakeries are popping up and prospering thanks to their unique and creative concepts, and the evolving demand of the industry. Modern customers and dessert lovers are seeking interesting treats with personality and are also on the lookout for local and better-for-you options at the same time. Focusing on a specialty leaves room for customization and personalization, two features cherished by the Millennial Generation, which are among the first to rush through the doors of niche shops. From custom cupcakes and cakes to revamped doughnuts and éclairs, bakers and entrepreneurs are succeeding thanks to their specialized skills, creativity and unique business models.
Bakery Industry Snapshot
According to the research market company IBISWorld, the Bakery Industry – including products such as bread, cakes, pastries, pies, bagels, and other complementary products – is in the growth stage of its life cycle. With an annual growth of 7.2% between 2009 and 2014, the sector reached a revenue of $8 billion last year. The industry has outperformed the foodservice segment over the past decade and grown for the last five years, despite the recession. This evolution is explained by changing consumer preferences that put more emphasis on convenience, as well as high-quality, affordable and healthy cuisine. Responding to this trend, operators have created menus and opened specialty concept bakeries to tap into this profitable niche market. Product development has been key to this industry’s growth. Consumer perception of freshness and quality of the products created in bakeries is driving sales. And the future is promising: IBISWorld indicates that through 2019, the industry is projected to continue to grow at an annual rate of 5.9 percent.
Existing Specialty Concepts
Found in most cities nowadays, cupcake bakeries started to multiply in the mid-to-late 2000s. Among portable, single-serve desserts, cupcakes stand out for their glamorous and endless flavor combinations. “If you look back at the modern arrival of the cupcake, it happened to coincide with and was the motivator for the niche [of the] specialty bakery that evidently was ripe to come,” says Kara Nielsen of the Center for Culinary Development in San Francisco, in the article “Psychology of Cupcakes.” Cupcakes appeal to modern consumers who value creativity, authenticity, visual appeal, personalization and locally sourced goods. However, consultants of the Food Industry have been warning for over a year that cupcakes are in decline, so make sure you have a solid business plan before jumping into the cupcake craze.
Doughnut shops are everywhere. In addition to Krispy Kreme and Dunkin’ Donuts chains, chefs and operators are giving the sweets more personality to make them more unique and attractive. Portland, Oregon’s Voodoo Doughnut, as an example, is one very special store. Its doughnuts have names like Maple Blazer Blunt and Voodoo Doll. The chain opened their first location in 2003 and is now expanding to Japan and Taiwan to open 12 to 20 stores over the next three years, as well as opening a fifth location nationally in 2015. Voodoo Doughnuts generates additional revenue with branded merchandise and voodoo-themed weddings. Like Voodoo, Doughnut Vault in Chicago has become so popular that it is now also a tourist destination. The success also lies on the store’s business model, which is similar to Dominique Ansels’ Cronuts™. Vault’s customers wait outside the store for its 8:30 a.m. opening and usually the shop sells out of doughnuts in less than four hours. Once the inventory is gone, the shop closes for the day.
The trend of custom cakes has grown over the past few years. Fashionable cakes, extravagant sugar decorations and fancy confections have become the norm. Whether for weddings, children’s birthdays, showers or other events, specialty cakes have become a main component of celebrations. The interest for the latest cake trends and innovative designs continues to grow. No longer just for weddings, custom cakes have become an easy and fruitful business to get into.
If you thought the traditional French éclair couldn’t get any better, think again. Pastry chef Christophe Adam of L’Éclair de Génie in Paris’s Marais district has modernized the classic éclair. He dresses his éclairs in rainbow colors, finishes them off with edible powdered silver, and chooses fun flavors like yuzu, salted caramel, caramel popcorn, and orange pistachio. Chef Adam is giving the éclair a new life. Parisians and tourists from all over the world stand in line to buy éclairs at 5 euros a piece. Chef Adam opened another store in Paris, plans an opening in Japan, and is contemplating the idea of bringing his éclairs to New York City.
Another unique concept is catering baked goods to pets. Sweet Paws Bakery is one of the many specialty bakeries for dogs. Located in Gainesville, FL, it offers 15 different kinds of freshly baked treats ranging in flavors such as cheese, garlic, and peanut butter. Sold between $1.30 and $3.38 per piece, the concept taps into the fruitful pet industry that reached $19.5 billion this year in the U.S.
Trends & Opportunities
Gluten-free, light, organic, vegan and any other dietary solutions make for great opportunities for specialty concept stores to respond to consumers with dietary restrictions. Chefs are trying to increase choices for diabetic customers by offering pastry items that do not include glucose or butter. Specialty diet restrictions really challenge chefs to adjust flavors with perfumes, fruits, and spices.
As for actual desserts, choux pastries, including éclairs and profiteroles, to name a few, are becoming fashionable again. With their chewy texture and buttery flavor, these classic French staples are not as hard to make as they sound and offer a broad range of creativity, from shapes to colors and flavors. Technical baking with pastry items is growing too: mirror glazes, tempered chocolates and edible gold, for instance, are a focus in cake making. Using modern flavors with retro staples is also gaining traction and reinventing the classics continues to be a mainstay in desserts. Following the general trend in desserts, bakeries are also moving more and more towards a rustic feel by using authentic and local ingredients.
By capitalizing on trends based on consumer tastes, specialty bakeries can increase their margins and stay in business while fighting the competition. Even bigger companies can find ways to cater to people’s desire for handcrafted artisanal products and thus build a recognizable niche.
Being audacious and creative seems to be the norm for a successful specialty concept bakery. Selling niche products can make your business even more successful by diversifying your offerings and setting yourself apart from the competition. By focusing on what you know and do best, you can spend more time being creative and focusing on the special needs of your consumers.