The demand for bakeries is growing. Almost 50% of bakeries that took part in the Bakery Market Report 2024 grew their estates over the past year, and GAIL’s is opening 35 new stores in 2024. 🤯
But despite these growing opportunities for bakeries, there are still challenges to face. Costs are high, margins are low, and consumers are much more selective about where they buy from.
We don’t know about you, but we’re getting a little tired of sitting around and crying about it. At this point, you’re ready to take real action, right?. What you really want to know is how to overcome the odds and thrive in such a challenging market.
Well, we’ve got the solution: technology. And more specifically, Nory’s AI-powered operating system. With our software, you can access valuable, real-time insights to improve your bottom line.
But don’t just take our word for it — keep reading to see for yourself! By the end of this article, you’ll see how Nory can:
- Improve your production planning
- Control your labour costs
- Identify underperforming locations
- Minimise food waste
- Ensure your bakery is as efficient and profitable as possible
What are the key challenges bakeries face right now?
Before we get into the thick of it, let’s walk through some of the main challenges that bakeries are facing in the UK.
Tight profit margins
Inflation has been causing prices to rise for the last few years, with the cost of labour and raw materials getting higher for bakeries. The minimum wage increase came into effect this year, and the cost of some raw ingredients like (almonds and cocoa) are still getting more expensive.
With these costs going up, profit margins become tighter.
You’re spending more money on raw materials, but there’s only so much you can hike your prices before scaring customers away. In fact, 83% of hospitality operators are worried that increasing prices will alienate customers.
Higher input costs
In addition to the cost of labour and raw materials, prime costs have also been rising for bakeries. The Chief Executive of Scottish Bakers, Alasdair Smith, highlighted the average increases across these major input costs in 2022:
- Electricity – 214%
- Gas – 207%
- General insurance – 83%
- Ingredients – 41%
- Motor fuel – 44%
With these input costs rising across the board, it’s becoming harder for bakeries to keep profits healthy.
Food waste
It’s no secret that the hospitality industry typically has a high waste level. The Waste and Resources Action Programme (WRAP) estimates that 800,000 million tonnes of food waste came from hospitality businesses in 2021.
But for bakeries, managing waste is a particularly tricky task.
With the need for raw and fresh ingredients to create short-shelf-life items, it’s easy for bakeries to overproduce. And the results? Throwing food away because it’s spoiled before they have a chance to sell it.
Fragmented tech stack
It’s not uncommon for bakeries to have technology in place to manage different parts of the business — from scheduling software to supplier management systems.
But using a disjointed tech stack can seriously impact profitability. How? By missing opportunities to cut costs in real-time.
With no instant access to consolidated data, it’s much harder to pinpoint where you’re losing money and how to boost profits. It also means you’re spending way too much time moving between systems and manually analysing data — time that could be better spent elsewhere.
All of these hurdles make it hard for bakeries to make fast and informed decisions that improve the bottom line.
You can find out more about these challenges in this article: Common challenges UK bakeries face, and how to overcome them.
How can Nory solve these problems?
Now, let’s take a look at how Nory can help bakeries overcome these challenges.
Improve production planning at the central bakery
Nory is an AI-powered operating system. This means that we analyse historical sales and performance data (alongside external factors like the weather and seasonal events) to create accurate forecasts.
These forecasts can really help you improve your production planning.
You can predict exactly how many raw materials and ingredients you need in your central bakery to meet demand in individual bakery locations. As a result, you minimise overspending, increase profitability, and reduce food waste across the business.
Here’s how it works:
- We create hourly forecasts at the store level, providing suggestions to your team on the ground (and at the central bakery level) on what they should order to meet demand.
- Central bakeries order the right amount of ingredients, driving down costs and preventing more food from going to waste
- Teams at the central bakery are now aligning their production planning with store demand.
Using Nory also means your customers won’t experience as many stockouts.
You always have the right amount of ingredients to prepare enough baked goods for all your bakery locations. It improves the customer experience, and ensures that you’re producing enough baked goods to make as much revenue as possible.
Control labour costs
What’s one of the best ways to combat the rise in the minimum wage (and generally cut back on labour costs)? Optimising labour deployment in your central bakery and individual bakery locations.
This means ensuring you schedule the right number of staff to meet demand, without overscheduling during quiet times. And as we all know, overscheduling during a quiet shift can really make a dent in your profits.
The good news is, we can help with this.
Our system uses AI-powered forecasts to predict demand accurately. Then, we create optimal schedules to ensure you have enough staff to meet customer demand, but avoid overscheduling and spending unnecessary money on staff wages.
Nory success story 🥳 See how Masa uses Nory to accurately forecasts sales within a 3% margin, controlling labour costs to within 1% of what they’d planned.
“Constantly being able to see what your sales are, what your cost of labour is — and trusting that is really valuable.”
Shane Gleeson, owner and founder at Masa
Identify where and why locations are underperforming in real-time
When operating a central bakery, it’s hard to identify how each location is performing and where you can make improvements. But this visibility is crucial to the success of your bakery.
If you don’t know where you’re losing money, you won’t know how to improve it.
Enter the ideal solution: Nory!
With Nory, you have full visibility of each bakery location. You can identify where waste occurs, how much profit each location generates, how productive they are, how much they spend on labour, and so on.
Let’s say that you notice one of your bakery locations is producing a lot of food waste. Nory will show you why that is (perhaps you’re sending them too many baked goods or the bakery isn’t storing them correctly), allowing you to make changes.
And having all this information in one location? It makes it a whole lot easier to understand the financial health of your bakery.
You can see which locations are making the most profit, which items are the most profitable, and where you’re losing revenue. As a result, you can make quick and informed decisions to capitalise on top-sellers and fix any issues that prevent profits.
Not to mention, you can visualise your site-level EBITDA to visualise your financial performance without taking your capital structure into account.
Nory success story 🥳 Find out how one of the biggest bakery brands in the UK uses Nory to centralise food costs and track inventory usage in real-time and across different locations, pinpointing ways to increase profitability from the central bakery.
With these insights, the bakery has been able to reduce food waste in a short space of time. In just one week, they decreased waste from 6.7% to 5.4% at an on-site level!
“Nory shows us that every store uses ingredients differently. For example, we can spot when specific stores use higher-priced ingredients. We can then find ways to reduce costs and increase our overall GP.”
Manage supply chains and costs in real-time
Keeping track of supply chains is one of the most effective ways to bring costs down. If you don’t know what you’re paying for raw materials and ingredients, how can you minimise the prices?
With Nory, you know your exact bill of materials and the cost of each item. You can stay on top of supply chains and monitor prices at the central bakery level, making sure that your supply chain is as profitable as possible.
Plus, you can manage the volatility of the wholesale market by picking up price changes in real-time. This means you can instantly react to price changes, either by negotiating with your existing suppliers or sourcing new ones.
Nory success story 🥳 Find out how Rocksalt uses Nory’s integrated supplier management features to accurately track prices and supplier costs, allowing them to make instant changes to optimise spending.
“Because all the ordering and invoices are updated daily, we can catch a price increase from a supplier pretty much instantly. As soon as we spot it, we can react to it immediately.”
Stephen Burns, Group Operations Manager at Rocksalt
Use Nory to elevate your bakery operation
Bakeries are facing a lot of challenges in the industry right now, but it’s not a total disaster. There are things you can do to mitigate potential losses and keep your profits above water — like implementing the right technology to track and monitor your performance in real-time.
If you haven’t already gathered, that’s exactly what Nory can do. 😎
FAQs about bakery profit margins
How profitable is a bakery business?
A typical bakery has profit margins of around 5-15%. However, profitability depends on several different factors. These include:
- Location of your bakeries
- Number of staff
- Price of baked goods
- Volume of customers
- Operational efficiency
- Cost of ingredients
What bakery item makes the most money?
Generally speaking, bread is the cheapest item to make. This means it can make some good profit margins for your bakery (providing you have the demand). But really, the most profitable bakery items depends on how much you spend on ingredients, how much you sell, and the price you sell it for.
You might have lots of loaves of bread for sale, which is great because it’s cheap to make. But if customers don’t buy them? You’re not maximising your revenue.
You need to know what your customers are looking for and how much demand there is to pinpoint the most profitable items in your bakery. This is where technology like Nory can help! You can easily spot your most profitable items alongside customer demand, allowing you to produce the right amount of baked goods to generate the most profit.
How can technology improve bakery profit margins?
We’re so glad you asked! Technology plays a pivotal role in boosting profit margins for a bakery — especially if you use an AI-powered system like Nory. Here’s how:
- Improve production plans
- Optimise labour schedules
- Track supplier costs in real-time
- Monitor and reduce food waste
- Identify underperforming locations
- Enhance operational efficiency
Scroll back up to see how Nory can do all of these things and ultimately, help boost bakery profit margins!
