The perfect recipe for a bakery business expansion strategy

Deeply rooted in European culture, the bakery sector generates more than £6 billion annually. Even though bakery items are still one of the most important alimentary element in the UK, the market is becoming increasingly more volatile due to changes in production and consumption patterns that are forcing industry players to either adapt or lose out.

The competition has grown exponentially with the emergence of industrial production and the selling of bread or pastries in supermarkets. Likewise, consumer demand has not only grown but also diversified in conjunction with recent trends such as gluten and dairy free, plant-based products, thin bread etc.. To avoid being overcome by the competition and keep up with consumer preferences, bakery brands need to understand how all of these contributing factors influence consumer demand and incorporate those learnings into a successful bakery business expansion strategy. This is where the concept of “consumer insights” come into play.

Location Intelligence data in the bakery industry

Knowing who the target customers are, what motivates them and what their shopping behaviour is like is an essential component to developing an accurate business expansion strategy. But where can these types of companies obtain this kind of information? Some avant-garde expansion management and franchise professionals are turning to location intelligence data to answer these once-puzzling questions. This form of business intelligence is sourced from geolocated data that provides deeply contextual information about a potential area being evaluated for expansion.

For the bakery sector, the benefits of integrating location intelligence data into an expansion strategy are numerous. This key information can be used to improve the product mix in a variety of ways. For example, location intelligence can help these brands know which consumers prefer a certain kind of pastry in a particular area. This insight, in turn, can be capitalised on to increase sales of that item from the product portfolio in that specific zone. Location Intelligence data can also be analysed to determine how the potential customer would most-likely purchase the product—in-store, online, pick-up, home delivery, etc.. If the customer usually orders their bakery products online and has them delivered to their residence, maybe opening a physical store in the area is not the best option. Location intelligence can help you decide.

Determine what success means for your business and repeat it

Another way that Location Intelligence can serve the bakery sector is through helping these professionals understand which of their stores are the most successful and why. This innovative technology allows brands to pinpoint the level of influence their store has on a specific group of people that frequent an area and provides them with sociodemographic data about them. Let’s put this into perspective:

Imagine a neighborhood pastry franchise shop is located in a middle-class neighborhood on a residential street where the average income is between £47,000-£60,000 and the people living in the area are homeowners with families. The bakery franchise’s internal data reveals that this particular shop is the most successful performing store in the entire chain (sales are especially high during the weekends). The franchise managers working for this chain attribute this to the fact that people in the area have a higher disposable income and enjoy having pastries with their families while at the establishment.

When trying to convince other potential franchisees to invest in the chain and open up their own pastry shop, franchise managers must be able to thoroughly convince them that their store will be successful—location intelligence tools will do just that. This type of big data can not only take points-of-sales data and visually map out the best-performing establishments, it can also pinpoint new locations that meet the same “location” criteria that make other franchisees’ establishments so profitable. With this information, franchise managers are able to replicate those success factors and provide a list of new target locations where potential franchisees could open up their own pastry shop and obtain similar results (maybe even better depending on the data).

Avoid cannibalisation between different bakeries within the same franchise or chain

Finding new locations that meet the same success criteria of other stores within a bakery franchise or chain is not enough to ensure they’re profitable. If the new potential location is too close to other establishments pertaining to the brand, instead of generating new revenue, they could be taking away faithful clientele from another store in the same chain. This type of cannibalization between two bakeries is neither beneficial for the brand (in the case of chains) nor the franchise(e). All establishments within the network should work in unison, as all are part of the “same team”.

Location Intelligence data works to solve this phenomenon by providing these industry professionals with data on the true area of influence each one of the points-of-sale locations has. It’s crucial to understand up to which point a consumer is willing to walk (or drive) to a particular bakery in order to purchase products. Once the influence radius of these catchment areas is established, new locations can be selected without risking potential cannibalisation by having two bakeries that are too close together. Granier is the perfect example of how this data can be used to prevent cannibalisation between different establishments. This bakery franchise applies Location Intelligence insights into their business expansion strategy to maximise the sales of all the shops in their network by maintaining at least a 400 meter distance (area of influence) between each.

Location Intelligence, a smart tool for bakery business expansion

The bakery industry is one of the oldest in the world and the competition is fierce. With so many different brands vying for consumers’ attention, identifying the various market conditions and sociodemographic factors that could potentially influence customers’ behaviour is a smart way to drive a lucrative expansion plan where everyone wins.

The craftsmanship, knowledge, and heritage of this industry are elements that should continue to be preserved and admired. However, a traditional strategy in this hypercompetitive market is now obsolete. The adoption of new business models that are capable of incorporating new technologies and big data insights to bridge the gap between traditional and digital are what will determine the bakeries of the future and those of the past.