What is Confectionery Business? Explained with Examples

Confectionery business is a type of business that deals in ready-to-eat or ready-to-use baked/confectionery items or food products like patties, pastries, sweets, cakes, bread, sandwiches, burgers, hotdogs, pizza, and other such confectionery shop items. Confectionary is classified into two broad groups: bakers’ confections and sugar confections. Bakers’ confectionery includes patties, pastries, cakes, and baked products like bread, pizza bases, etc. Sugar confectionery covers sweets, candies, nuts, chocolates, chewing gums, and other such sweetened products.

Here we are not emphasising giants like Nestle or Cadbury but local, everyday businesses like bakeries, pastry shops, home-based bakers, bread-baking kitchens, etc. which we, as customers, come across in our routine lives and sometimes also during events and occasions.

Successful Business Models in Confectionery Business

B2B: Confectionery Distributor/Wholesale Confectionery

In B2B confectionery distributorship, one business entity (a distributor) serves as a supply chain bridge between confectionery manufacturers and confectionery retailers. The underlying concept is the same as that of any other distributorship business model. There is a manufacturer and there are retailers, and then there is a distributor who plays the bridge between the two. For example, a local manufacturing brand may have no presence in the retail market but products of that brand are easily available in retail local bakeries and confectionery shops. There are distributors who carry the goods from this manufacturer and deliver it to retail outlets in relatively bulk or wholesale quantities.

This is a promising model in market regions where bakeries and pastry shops are mushrooming in congruence with favourable demographic factors. The concerned manufacturers in this model could also be MNC and domestic giants who deal in related confectionary items or confectionary products like chocolates, candies, mouth fresheners, etc.

Confectionery Food Outlet

A confectionary food outlet is different from a regular confectionary store. In a food outlet, customers can also eat. A food outlet requires more investment because seating/eating arrangements have to be made. A more comprehensive layout planning is required in it. The emphasis in food outlets is also on the element of service and experience. This model is highly suitable in areas where consumer behaviour and demand patterns substantiate outside eating habits. Ideal confectionery markets include areas close to educational institutions or ones popular for evening outings.

Retail Shop: Confectionery Shop

Retaining is one of the most straightforward business models in the confectionery industry. In comparison to confectionary food outlets or distribution warehouses, investments are relatively lesser in setting up and maintaining a confectionary retail shop.

If you are not eating outside, you want the food to be accessible more quickly and easily. The majority of demand for bakers’ and sugar confectionary products are routine and household by nature. And you would also not want to reach close to home and find the required product not available in the local store and then again go back to a bigger marketplace for the same. That is why proximity to residential areas and reliable availability of products is a make-or-break factor in the confectionery retail shop business.

Confectionery Manufacturing

Confectionery manufacturing is yet another proven food-based business model. Strictly speaking, it comprises businesses engaged in the manufacturing of confectionery products. These businesses may or not be engaged in the distribution network. A confectionery manufacturing business could also be started on a small scale. Manufacturing confectionary products like bread, cakes, pastries, and candies do not involve any heavy technological or industrial base. If the required skills and expertise is available, a small baking kitchen could be started with a small space and minimal investments. However, some potential challenges remaining confined to manufacturing are brand recognition, visibility, marketing, scalability, and expansion via integration in the value chain.

Confectionery Product

The confectionery product business model is a relatively new concept. Here, a business entity sources the product from a manufacturer and launches it in the market as a private label. Imagine that you are already a confectionery manufacturer. Now you want to get into the tea/coffee powder segment. But you do not have the expertise and infrastructure to make it happen. So, instead of building your own set-up, you collaborate with a manufacturer who deals in these products. If you already enjoy a good brand reputation in the confectionery market, it should not be difficult for you to push this new offering into the market. Many prominent local bakeries pick up this model for extending their offerings.

Challenges in the Confectionery Business Line

Variety

When you run a bakery or confectionery business, especially in the retailing format, you have to maintain an extensive range of merchandise. For example, if you sell bread, customers would also expect to find pizza bases in your store. If you sell patties and burgers, customers would also expect to find tea and coffee. To a great extent, the same applies to manufacturers and distributors as well. If you are a manufacturer, distributors will prefer to buy maximum merchandise from one SPOC to optimise their transportation and holding costs subject to their strategic business requirements. Think of it assuming yourself to be a distributor. If you are a retailer, you would want the entire daily inventory to reach your store in a limited number of arrivals which is possible only if your distributors have the best possible coverage of your inventory requirements.

Inventory Management

Bakery products have a very short life span. If we consider products like bread, patties, burgers, pastries, and cakes, confectioners cannot hold them for too long. A product that is made and not sold within its usage lifetime goes to the bin. Such wastage of products is higher on low-sales days. Confectionery businesses cannot take the risk of ignoring QA and QC standards.

Another important aspect of inventory management in the confectionery business is ensuring the upkeep of assets like microwaves, refrigerators, display lights, storage units, vending machines, and other such infrastructural requirements.

Confectionaries are sold in terms of both units and quantities. This makes the calculations more difficult. The problem then compounds into difficulties in stock measurement, demand forecasting, determining ROQs and ROLs, etc.

Unorganised Supply Chain

Supply chains in the candy and confectionery industry are often found in unorganised states. At local levels, it is common for businesses to experience inconsistencies in their supply chains. Many businesses and entities in the supply chain are not professionally managed. They do not have strong SOPs in place which gets reflected in their operations. The assets used by them are of poor quality. The absence of SLAs makes things worse. If your business is part of such a supply chain, you are bound to encounter chronic difficulties in fulfilling customer/client demand and delivering a good experience to them.

Competition from International Brands

As a customer, how many local brands have you seen that came up with chocolate products to compete against the likes of Nestle or Cadbury? The chances are thin to none. That is the case with packaged confectionery products like cakes, chocolates, or even nuts and sweets. Retailers and distributors have very little scope of trying anything out of the box here. They know what customers seek. And this demand spirals up in the supply chain. Local manufacturers too know the market risks of venturing into this segment.

Untapped Potentials

Gifting Experience

In the confectionery business, especially in the sweet-based product category, products like chocolates, cakes, and pastries enjoy a special emotional and symbolic status among all. Whether it is birthdays, wedding anniversaries, or any other event that brings people closer, sweets have always been the most popular medium to symbolically convey emotions. Brands like Cadbury have mastered this tactic. And there is no reason why your business cannot do the same. You have the tremendous benefit of local market penetration. This also gives you the advantage of offering and delivering freshly baked products to the doorstep of your customers.

Retail Chain Expansion

Many successful confectionary brands, bakeries, and such businesses, especially at the local or regional levels, do not seem to exhibit the intent for growth and expansion. Although this trend is changing, the intensity of efforts still at its best is lacklustre. Such brands and businesses can tap into the immense brand recognition they enjoy in their respective markets. They simply do not realise it very strongly yet. Another reason for the slow adoption of retail chain expansion is the lack of professional direction in the planning and implementation of such projects. If these two challenges are addressed, even a small or medium-scale business can become a regional and national brand.

Customer Experience

Barring a few confectionary startups, most traditional bakers and confectioners are still not doing enough on the front of improving customer experience. New-age entrepreneurs and the next generation of business owners very well understand the dynamics of marketing and the significance of delivering superior customer experience. The problem is for those enterprises that are reluctant to rope in the element of CX into their businesses. Not focusing on customer experience immediately puts such businesses on the back foot. You can no longer think on the same lines that worked 10 or 20 years back. Today’s customers simply would not embrace it. Also, when your competitors are providing a better experience to your customers, you cannot afford to stay behind. Minor differences in product quality will fall short to overcome major differences in CX strategies. And confectionery businesses should not confuse designer interiors and exteriors as the only aspect of customer experience.

B2C & B2B ECommerce

Is your confectionary business not online yet? If it is not, you might be missing out on increasing your sales. If you open any food aggregator or food delivery service app, you would see the presence of many local confectionary and bakery businesses. If you are not in one of those apps or not having your own website or app, are you not then denying your business the opportunity to reach out to your potential online customers and fulfil more orders? B2C selling via eCommerce is not a secret sauce. If you are not doing it, you might be keeping your business a secret from your customers. That means your customers cannot find your business online or order from your online selling channel and they will go and order from one of your competitors. The same logic applies to B2B eCommerce. But in B2B the stakes are even higher. You not only lose on getting more clients but also on working with more potential value chain associates.

Omnichannel Sales

Are you still selling via brick-and-mortar? Or do you think selling only via online selling will do the magic? ECommerce has touched every type of business. Confectionary business is one of them. But omnichannel is a step ahead of eCommerce. In omnichannel, you provide a seamless experience to your customers in their search-to-service journey. Today, buyers comprise people who extensively use the internet and smartphones for buying stuff. You should provide this feature and its flexibilities to your clients and customers. As confectionary business consultants, we can write you essays on why this applies to your business. But omnichannel is not just selling online. What you do in omnichannel is combine the offline and online selling channels. For example, you can fulfil home deliveries for online orders directly from your bakery kitchen while keeping the option of conditional exchange open at your stores.

D2C Brands

In the present day, many prominent MNC brands that have confectionary products in their product portfolio are making attempts to sell directly to their customers via their websites and apps. This trend marks a stark deviation from their traditional B2B mode of distribution. Although B2B remains their primary distribution strategy, they realise the benefits of reaching directly to their customers. The same strategy is equally apt for local and regional confectionery manufacturers. Done right, they can enjoy higher margins, implement better quality control, and generate or gain direct access to business data for analytics.

How YRC can help

We are a 10-year-old retail and eCommerce consultancy brand specialising in business solutions for start and scale with growing global footprints. In confectionery business consulting, we help startups and businesses refine and execute their business ideas and plans with planned and proven strategies and solutions. Highlighted below are our services relevant to confectionary startups and businesses.

Enter Retail

Starting a physical retail store has many foreseeable and hidden challenges. As retail and eCommerce consulting services providers, we always emphasise that without knowing the road ahead and jumping into the act leaves a business more exposed to those challenges and the consequences resulting from those challenges. Think of layout planning as an instance. You can start off with a casual layout plan but you will eventually realise that it is not serving your business priorities. Store layouts need consideration of several factors beyond the best utilisation of available space. Customer experience is one of them. After the installation of furniture and fixtures, you may have very little scope to make room to incorporate CX strategies. In setting up retail stores, we offer a comprehensive package of business solutions starting from business idea validation and business model development to operations planning and audit mechanisms.

Start ECommerce

The six broad areas where we help our clients in starting their eCommerce businesses are market research, business model, business strategies, operations planning, digital marketing, and business plan. These six areas nearly cover almost everything needed to start an eCommerce business on a solid foundation. The unique specifications and business requirements of each client are duly taken into consideration. Can you not do these things on your own? You can. But you will provide you with a jumpstart with our planned and proven solutions. Starting early helps you make the most out of the market opportunities.

Market Research & Strategy

Market research is an examination and analysis of a market to evaluate its suitability for a chosen business idea. Today, market research is a full-blown profession calling for specialised knowledge and expertise. In market research services, we carve out meaningful and actionable insights and information for improved business modelling and planning and formulation of business strategies. With a foundation understanding of the markets, it is easier for businesses to create workarounds for enhanced competitiveness and market reorientation.

SOPs for Retail & ECommerce

SOP is the language of mapping, planning, and defining processes and operations. Developing and implementing SOPs help organisations achieve executional accuracy and efficiency in all areas of operations including purchase and procurement, inventory management, quality control, production, order processing, order fulfilment, recruitment, financial operations, etc.

SOP development & implementation is one of our flagship capabilities. We follow a robust set of principles and processes in developing and implementing SOP solutions. The service design & delivery is executed by a team of SOP experts for retail & eCommerce.

Business Plan – Financial and Commercial Planning

A vital component of any business plan is accurate and reliable analysis and representation of the financial and commercial estimates. This is a universal requirement and no enterprise can dodge it. In addition to the routine areas of assessment areas like revenue, costing – CAPEX and OPEX, P/L, ROI, break-even, CAC, purchase and inventory calculations is a significant area of work in the confectionery business. Stock measurement is a tricky area of work for retail confectioners owing to products being sold in units and also in wholesome quantities. We address all these concerns in our business plan financial and commercial planning solutions. We develop estimates for different time periods for different financial and commercial components. These estimates also serve as a roadmap for future decision-making in the course of business.

Franchising

If you assess that your confectionary brand or store now enjoys considerable recognition in the market and you want to convert it into business growth and expansion, we can help you take this goal forward via franchising. Or if you are interested in taking up a business opportunity as a franchisee, we can help you set up your franchisee business. Our franchising solutions cover:

• Expansion Strategy
• Franchise Evaluation
• Business Plan
• Operations Planning – Franchise SOPs, Franchise Operations Manuals
• Agreements
• Marketing
• Audit