What is Confectionary Business? Explained with Examples A 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. Proven Confectionery Business Models in the African Markets B2B: Confectionery Distributor/Wholesale Confectionery In B2B wholesale confectionery or a distributorship, one business entity (a distributor) serves as the connecting linkage in the supply chain between confectionery manufacturers/bakers and confectionery retailers. The underlying fundamental is the same as it is in the case of any other distributorship-based business model. There is a manufacturer/producer that supplies goods to retailers via distributors. For instance, bakeries and sweets and snack shops that do not have their own factories buy from manufacturers and get their products delivered through distributors in bulk or wholesale quantities. B2B confectionery is a proven business model in many urban market regions in Africa. These are the regions with favourable demographics, and an increasing number of bakeries and pastry shops. In the B2B confectionery model, the manufacturers could also be large transnational or domestic confectionery brands. Confectionery Food Outlet Confectionery food outlets and regular confectionary stores are two different concepts. Confectionery food outlets also have sitting and eating facilities. Customers can also simply buy and checkout with their purchases. Because of the infrastructural needs, investments are higher in setting up confectionery food outlets. They also carry higher maintenance costs. There is a greater amount of stress on layout planning. Customer service and experience are important considerations in confectionery food outlets. This model is ideal for markets where consumer behaviour on the macro level supports outside eating habits. Idyllic locations for setting up confectionery food outlets are market areas close to educational institutes and places popular among the local people for evening outings. Retail Shop: Confectionery Shop Confectionary retaining is one of the most up-front business models in the confectionery industry. In contrast to confectionary food outlets and confectionery B2B models, investment necessities are lesser in setting up and maintaining a confectionary retail shop. Confectionery retailing has proved to be an efficacious business model owing to many reasons. It mixes up well with the buying behaviour for routine grocery products. These everyday confectioneries become easily available to customers when stores are within proximity to residential areas or alongside popular roads. This also makes the location a key element for success in confectionery retailing. Confectionery Manufacturing Confectionery manufacturing or production is a proven food-based business model. Businesses engaged in the manufacturing or production of confectionery products need not necessarily be engaged in the distribution function. Confectionery production businesses can also be initiated on smaller scales. Products like bread, cakes, candies, and pastries usually do not encompass compound technological or industrial processing. With the requisite skills and expertise, a small-scale baking kitchen or manufacturing unit could be initiated with minimal space and investment. However, staying confined to production/manufacturing gives rise to some challenges in future. Some of these challenges are brand recognition, marketing, scalability, and expansion. Confectionery Product The confectionery product business model is a relatively novel concept in the industry. In this model, a business entity sources one or more products from a manufacturer and launches them in the market as a private label brand. Imagine that a confectionery retailer wants to extend its product mix by adding customisable cakes for birthdays and other similar occasions. But say the existing capabilities do not allow the retailer to execute this strategy at effective levels. So, instead of developing its internal capabilities and setting up new systems, the retailer collaborates with a local confectionery unit. These confectionery units generally are individual home-based chefs or micro businesses. The retailer procures the finished products from them and sells them under its own brand name. Many local bakeries use this model for extending their product mix and catering to a larger customer base. Variety Running a confectionery business or bakery requires maintaining wide-ranging merchandises. For example, customers also assume to find pizza bases in the store from where they buy bread. If patties and burgers are sold, customers also expect to find coffee, tea, or any other suitable beverage. The same applies to manufacturers and distributors also. Distributors prefer to source maximum inventory from one manufacturer to optimise their logistics and holding costs. Retailers also seek that the entire gamut of their daily inventory requirements arrives in a fewer number of trips. This is possible only when the source entities offer varied and extensive inventory coverage. Inventory Management Confectionery products have a very short life cycle. If we consider products like bread, burgers, patties, pastries, or cakes, businesses cannot store them for too long. Once out of the kitchen and if not sold within a reasonable time, such products go to the bin. Such wastages are even higher in harsh climatic conditions despite storing measures. No confectionery businesses can take the risk of side-lining QA and QC standards. Another important facet of inventory management in the confectionery industry is ensuring the proper working condition of the assets like microwaves, refrigerators, storage units, lights, vending machines, and other such assets. As confectionery products are sold both in terms of units and quantities, it makes inventory calculations more challenging. The problem translates into difficulties in measuring stock, making demand forecasts, determining ROLs and ROQs, 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 industry, especially if we consider sweet-based confectioneries, products like chocolates, pastries, and cakes enjoy a special symbolic and emotional status among all of us. Whether it is birthdays, marriages, wedding anniversaries, or any other such event, these food items have always held a special place. Big brands like Cadbury adeptly make use of this behavioural trait. And there is no reason why any local or domestic confectionery business cannot do the same. Local businesses have the advantage of easy access to the deep pockets of local markets. This also gives them the advantage of delivering freshly-made products to the doorsteps of customers. Retail Chain Expansion Many prosperous confectionary brands, bakeries, and similar businesses, especially at the local levels, often seem lacking when it comes to exhibiting a strong intent for growth and expansion. Although this phenomenon is changing, there are still a large number of bakeries and confectionery units that can do much better on this front. Many of these businesses enjoy immense brand recognition in their respective markets. They may not realise it convincingly enough. Another cause for slowness in retail chain expansion is the lack of professional execution in the planning and implementation of scaling projects. If these two challenges are appropriately addressed, even a small or medium-scale bakery or confectionery business can become a brand of regional and national repute. Customer Experience (CX) Barring a few new businesses, most of the bakers and confectioners operating in the traditional formats are not doing enough on the scale of implementing contemporary CX strategies. Present-day entrepreneurs and the ensuing generation of business owners very well realise the significance and dynamics of delivering superior customer experience. The problem is more profound in those enterprises that are reluctant to change their perception of customer orientation and implement modern CX strategies into their businesses. Poor customer experience can make even successful businesses lose their dominant market positions. The confectionery business has drastically changed in the last 10 years owing to changes in demographics, urbanisation, globalisation, localisation, technology, business modelling, etc. Today’s customers are not willing to accept anything less than what eCommerce delivers in terms of services. Also, when one player starts providing a better customer experience, the other players cannot afford to remain lacking. And making minor changes here falls short to overcome major leaps in CX. Also, confectionery businesses should not confuse designer appearances as the only facet of customer experience. B2C & B2B ECommerce Is your bakery or confectionery business not on any online platform yet? If it is not, you might be missing out on many opportunities that also extend to your offline business activities. Today, the majority of local confectionary and bakery businesses in almost every urban market get their online stores listed on the popular food aggregator or food delivery service applications. If your online store is not on one of those platforms or you are not having your own website or app, then you are denying your brand the opportunity to reach out to your potential online customers. B2C selling via eCommerce is not a closed secret. If you are not applying it, you might be letting your brand slowly slip into oblivion. The same fundamentals apply to B2B eCommerce also. In B2B, by not taking the eCommerce route you not only lose on getting more business and clients but also on finding and working with more potential value chain partners. Omnichannel Sales Is your channel and distribution strategy flexible enough to cater to a wider customer base with a better shopping experience? Traditionally, brick-and-mortar did great. It is evolving at impressive levels after the short spell of a shadow cast by eCommerce. But some of the changes cannot be undone. ECommerce is one of them. There is hardly any business left which eCommerce has not left its mark on. Confectionary business is no exception. Take the example of digital payment in physical stores or the option of online ordering and physical pick-up. This mix of brick-and-mortar and eCommerce is the beginning of omnichannel. One of the most important goals of omnichannel is to provide a seamless experience to customers in their search-to-service journey. As confectionery business consultants, we can go on endlessly as to why becoming an omnichannel brand applies to almost every confectionery business. In omnichannel, you essentially bring the best of both worlds – online and offline channels to benefit both the business and customers. D2C Brands Today, many noticeable MNC confectionery brands are making inroads into direct selling to their customers via their own websites and apps. This trend is a deviation from the traditional B2B distribution strategy used by MNCs. B2B still remains the primary distribution strategy for these brands but now they are trying to realise the benefits of reaching directly to their markets and customers. The same strategy is equally suitable for local and regional confectionery industrialists. Done right, D2C gives higher margins, allows better control over quality standards, and provides direct access to business data for research and analytics. How YRC can help We are a retail and eCommerce consultancy brand specialising in business solutions for startups and business expansion. With more than 10 years of experience, today we are a brand with a growing global footprint. In confectionery business consulting, we assist startups and businesses develop, polish and execute their business ideas and projects with planned and proven tactics and solutions. A glimpse of our services and solutions relevant to confectionary startups and businesses are highlighted next. Enter Retail Starting a brick-and-mortar retail confectionary store has both conceivable and tacit challenges. As an experienced team in developing and delivering retail and eCommerce consulting services, we always stress that without the vision and knowledge of the road ahead jumping into the execution of plans leaves businesses more exposed to challenges and the ensuing consequences. For example, if you start your business without a well-conceived layout plan, you may find yourself unable to make layout changes that you didn’t see coming earlier. Store layout planning needs attention to several factors and it goes beyond space optimization. For example, customer experience is one of them. After setting up the furniture and fixtures, you may have very little to no scope to make changes to implement CX strategies. In setting up retail stores, we offer a wide-ranging package of solutions starting from the development of business models and business plans to operations and layout planning. Start ECommerce In confectionery eCommerce, we offer high-end solutions in the areas of market research, business model development, formulation of business strategies, operations planning and SOP development, digital marketing, and writing business plans. These six areas cover nearly everything that is required to give eCommerce startups solid wings to take off with. In formulating the solutions, the exclusive specifications and business priorities of each client are duly taken into account. One may ask, can we not do these things on our own? Yes, probably you can. But we provide a jumpstart with our proven solutions with needed customisations. This enables our clients to quickly launch their business. Market Research & Strategy Market research is a systematic, objective and in-depth analysis of a market to assess its feasibility for a selected business idea or project. And in the contemporary business and digital environment, market research is not possible without expert knowledge and skill sets. In market research services, our objective is to derive actionable insights for the development of better business models and business plans. A good understanding of confectionery markets lets businesses not only build better plans and strategies but provide a platform for creating workarounds to increase competitiveness and orient better with the markets. SOPs for Retail & ECommerce SOP is one of the best tools for mapping and defining business processes and operations. SOPs help businesses improve the accuracy and efficiency of their operations. In a confectionery business, operations include purchase and procurement, quality control, inventory management, manufacturing/production, order processing and fulfilment, HR and administrative activities, financial operations, etc. SOP development is one of our flagship competencies. We also provide assistance in SOP implementation. Our SOP solutions are designed and implemented following proven principles and planned. The design and delivery of services are carried out by a team of SOP experts for retail & eCommerce. Business Plan - Financial and Commercial Planning A vital requirement of any business plan is precise and dependable analysis and depiction of the financial and commercial assessments. This is an unavoidable requirement for all organisations. Here, common areas of financial and commercial assessment include projected revenue, costing – CAPEX and OPEX requirements, estimated profit and loss statements, ROI and break-even analyses, CAC, etc. Purchase decisions and inventory calculations are tricky areas in the confectionery business. Stock measurement is challenging for most retail confectioners since the products that they sell are measured in terms of units and also in wholesome quantities. We address these and all other relevant concerns while doing business plan financial and commercial planning. Estimates for different financial and commercial components are developed for different time scales. These projections also serve as a roadmap for future courses of action. Franchising If you are convinced that your confectionary business now has considerable brand recognition in the market and you want to convert it into business growth and expansion, we can help take forward your business expansion goals via franchising. We also help set up franchisee business for those who are interested in taking up a franchisee business opportunity from any reputed franchisor company. Our franchising services cover: Expansion Strategy Franchise Evaluation Business Plan Operations Planning – Franchise SOPs, Franchise Operations Manuals Agreements Marketing Audit FAQsWhat is a confectionery business? Confectionery and bakery business is a type of business that deals in ready-to-eat or ready-to-use baked/confectionery 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. How to start a confectionery business in Nigeria and other African countries? The standard process of starting a confectionary shop or business has the following fundamental elements. Assessment of any existing expertise or presence in the value chain Business Idea Validation Market Research – Competition, Pricing, Consumer Behaviour Business Model Development, USP Definition, Value Chain Mapping Business Strategies IT Platforms and Infrastructure Operations Planning, SOP Design Business Plan Audit and Control How to run a successful confectionery business? Running or managing a confectionery business in an excellent manner has many facets or requirements. Pointed below are some of the most essential ones: Quality Assurance, Quality Control and Quality Improvement Planned inventory management, purchase planning Proper packing, storage, handling and transportation of food products Maintenance of hygiene, cleanliness, and safety standards Taking customer feedback and reviews, CRM Timely payment to suppliers and vendors Digital marketing as applicable How to draft a confectionery business plan? A confectionery business plan is a summarised representation of the business vision, goals, objectives, and strategies. A vital component of any business plan is accurate and reliable analysis and representation of the financial and commercial estimates. 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 are significant areas of work in the confectionery business.