The super bakery trend is a worldwide phenomenon. All over the world we see bakeries extending their activities and product portfolio in order to compete with supermarkets and foodservice outlets. The super bakery trend is quite big in Brazil and has some unique local characteristics to it. We spoke to Joao Guilherme Ribeiro, marketing manager at Puratos Brazil, about the success story of the super bakeries in his country.
In search of competitive edge
In Brazil in the late nineties, the big supermarkets and some new players started acquiring smaller local stores and consequently grew bigger and bigger. To be able to compete with the traditional bakery segment, they started to introduce in-store bakeries where they produced bread, patisserie and pastries on site.
Traditional bakeries faced a major challenge in trying to remain relevant and to find a competitive edge. So many bakers began to diversify their offerings. They decided to enter into other market segments of the retail and foodservice industry and started serving simple meals like burgers and pizza. Some even started selling a small selection of packed convenience products such as coffee beans or butter and became minimarkets.
Bakery concepts have diversified a lot in the past 15 years. Some of these super bakeries have grown to become huge players. There are super bakeries that can earn 2 to 5 million Euros in revenue a month and some operate 24 hours a day, 7 days a week. Besides bread, they sell an offering of heavy rotation grocery products, but also serve hot meals, offer delivery service and take away, have their own (wine) bar with special happy hours, deploy catering activities and more.
As a result, the bakeries have grown in complexity and size. And this isn’t limited to how many square meters of sales area there is. Areas for customers to dine in and counters for take away have added to the floor plan. The diversification of activities also requires new skills and expertise. Some bakers have learned how to cook but, generally speaking, they hire skilled professionals from restaurants and professional cooks who know how to make burgers and pizza.
A new business reality
In this shifting market, the bakery category has remained one of the keystones in the business. Many owners are still very passionate about this product category but nevertheless lose their focus as they have so much to attend to. Today, for instance, we see that many owners are no longer very familiar with bakery practices in terms of production. Very few of them know what it takes to be a good baker.
The new business reality is that today’s owner is mainly responsible for the financial side of the business: controlling purchasing, stocks, cash flow. They have become entrepreneurs and are still very passionate about bread, but they are no longer bakers. The people running the bakery and patisserie segment are the ones who are managing the product portfolio.
Booming in Brazil, but why?
It is hard to find an explanation for the booming success of super bakeries in Brazil compared to other parts in the world. Joao mentions two possible factors. "First of all, the traditional Brazilian bakery store has always been a big shop. They would have had an extensive portfolio and maybe offer some side activities, although they would focus primarily on bakery products. I think they simply saw an opportunity to make money. The out of home consumption has grown on average 15-20% per year for the last 20 years. So as an entrepreneur, you see this trend and you do the math. They just took advantage of a growing market segment.”
“A second factor to the success is that - compared to Europe or the US - we have a different lunch routine in Brazil. We are used to eating a warm meal for lunch, with rice or potatoes, meat, vegetables, everything. This is different to other countries where they eat a lighter lunch such as a small snack, a quick sandwich, a cold salad or a soup. In Brazil, bakery products are not standard lunch items, so the need to look for other business opportunities was more necessary.”
Even the smallest bakeries diversify. Any small traditional baker who sells only bread and pastry products will have disappeared by now. Even the smallest bakeries have transformed their business. Albeit to a smaller degree, they also present different products and additional services to their customers. Sometimes they will only serve simple snacks, such as pastries and burgers, but they will find their own way to differentiate.
The current generation of super bakery entrepreneurs is very quick in picking up new activities as long as they believe there is profit to be made. They are very pragmatic in their business approach. For example, many bakers are exploiting all kinds of catering activities. Providing brunches in hotels, product offerings for meetings, cakes for celebrations. Their reasoning: we have the portfolio, we have the operation, we have the production area and we have the people ready to do it. So it seems like an excellent opportunity to expend their business without any additional investment.
Qualified labour as main challenge
The constant growth of this market segment has lead to the fact that we don’t have as many bakers in the market as we should have. The main challenge today is labour. Supermarkets are facing this quite fiercely already and soon it will become a real problem for the super bakery sector as well. Good skilled staff will be crucial to super bakeries, as it is one of the few aspects that help them differentiate from supermarkets. The staff and their approach is largely the reason why people are prepared to except higher price levels.
What makes it complicated is that in Brazil the turnover of staff is very high. Compared to other parts of the world, people show little loyalty to their employer. This means that many of them are open to switch jobs when presented a better financial offer.
Industry as driving force for innovation
What has changed is that the super bakeries have been abandoning their once 100% artisanal recipes. Usually the new trends are brought to the market by the industry. Even though the owners do travel around and see new things in Europe or the US, usually the new trends and product information is introduced by the industry.
At Puratos we normally have a business relation with both the owner and the baker. That has not changed over the years. What has changed is their demand for support. We are giving a lot of training and advisory sessions, helping them educate their not very skilled staff. The universe of bakeries in Brazil is immense, about 60.000 to 70.000, and still about 95% of the bakeries are operating independently. Therefore from a marketing approach, we are not able to address them individually. That's why we develop wider programs where we do our training and talk about technologies and introduce new products to them.