Brad's Breads ready to expand in Orange City

Brad Gabel
Brad’s Breads
Orange City, IA
In 2015 I took a 45+ year old family recipe bread and started baking for family/friends and selling at the local Farmer's Market. Over these past few years I have continued to expand my recipes and developed a passion for bread baking. My dream/goal is a small European-style Bakery in Orange City.
Brad’s Breads is a retail bakery located in Orange City, serving primarily the Sioux County market. The plan is to attain and maintain interest of its customers with its unique breads. It will build a strong position in the city and county by offering high-quality, competitively-priced premium breads.

Brad’s Breads is a small, family-owned bread baking company, founded in 2015 by Brad Gabel. Gabel has a degree in Business Administration and Finance from the University of Southern California, and worked for several years in corporate finance and accounting. Brad recently began devoting his full efforts to Brad’s Breads.

While Brad’s Breads began in 2015, the love of baking distinctive artisan bread for neighbors and friends is a family tradition that started over 40 years ago in the Central Valley of California. Brad’s Uncle Bill Bewley developed the original recipe for what would become the trademark offering of Brad’s Breads. Just like with Uncle Bill, each of Brad’s small-batch loaves is made with the care, consistency and quality that you only get from an artisan baker. The controlled baking environment, uniform ingredients weighed to a tenth of an ounce, and a single baker with a passion for creating quality breads come together to give customers an experience unmatched by other local bakeries.

Brad’s Breads is also committed to giving back to the community. Since their first loaf, Brad’s Breads has held to a simple belief: Sharing quality, hand-made bread can be a bridge that brings people together - families, friends, neighbors, and even strangers. Uncle Bill not only passed down the recipe, but also a love of connecting with neighbors and the community. His homemade breads weren’t for sale. He gave away each loaf to extended family, members of his church, and those in need in the area. That community-centric model is core to Brad’s Breads today.

Brad has been baking and selling bread to family, friends, and a small contingent of loyal customers in Sioux County, Iowa. Brad is also intentional about being present with our community. Brad’s is currently distributed directly, by hand, to customers, and at the Orange City Farmer’s Market throughout the summer. Brad’s is now seeking to scale up production and sales to prepare for a potential retail bakery within the next 1-2 years. This plan will outline how Brad’s intends to introduce new products, expand its distribution, and enter new markets.

(Industry Analysis form Chron) According to the American Bakers’ Association, bakery products make up 2.1 percent of the gross domestic product of the United States. That's a lot of people eating bread.

TOTAL MARKET SIZE: The baking industry generates more than $30 billion in revenue each year. The industry includes 6,000 retail bakeries and nearly 3,000 commercial bakeries. While the market of small bakery retailers is highly fragmented, three producers (Grupo Bimbo, Flowers Foods and Campbell Soup Co.) account for 55 percent of total commercial bakery revenue.

Retail bakeries generate around $3 billion in revenues, while commercial bakeries sell $31 billion in products. However, profits may negatively impacted because of the fluctuating costs of wheat and sugar. Bakeries are not always able to pass on these increased costs to consumers. Sixty-five percent of all bakeries have less than 10 employees; 44 percent have one to four employees, and most small retailers only have one facility.

MARKET SEGMENTS: The products that make up the bakery market are as follows: § Bread: 32 percent § Rolls: 19 percent § Cakes: 15 percent § Retail bakery products: 10 percent § Soft cakes: 8 percent § Pies: 2 percent.

BARRIERS TO ENTRY: Opening a small, retail bakery requires less equity and capital investment than a commercial operation. Additionally, competition is not as stiff as you are rarely directly competing against national brands. New and smaller bakeries need to establish themselves with specialty products, such as whole-grain breads, and develop a loyal following of local customers. Scaling can require large investments in equipment, production and/or retail space, and manpower.

THREATS: Bread can have a bad health reputation. As consumers become more health conscious, they may demand more gluten-free, low-carbohydrate, whole grain, organic and paleo diet products. A certain segment of buyers may also substitute baked goods with nuts, yogurt, or fruit bars – abandoning bread altogether. Government oversight will continue to weigh heavily on the industry. Small bakers, like Brad’s, need to be aware of EPA and FDA regulations as they begin to grow beyond a home kitchen into a retail environment.

OUTLOOK: The market for baked goods is expected to grow around 1 percent annually in the coming decade. Consumption specifics are primarily affected by changes in family make-up, disposable income, consumer preferences, and economic conditions. Large commercial bakeries will continue to dominate the market, due to the high visibility in the marketplace and because many consumers are price-conscious and see bread as commodity product.

THE TARGET MARKET SUMMARY: Over the past 10 years, Orange City (population 6,200) has become younger, and more heavily influenced by those who have moved into the community for employment or educational opportunities. As such, there is a greater emphasis on fresh, organic, and artisan food options. Downtown Orange City has experienced a renaissance with a new coffee shop and Farmer’s Market to support this demographic. While there is an existing bakery, it focuses more on baked sweet goods (donuts, rolls, and cakes). Additionally, there is a larger bakery located in Sioux Center (10 miles away, population 7,500), but it’s business is also predominantly from baked sweet goods and more traditional white bread and buns which are staple offerings in many area grocery stores, and closely associated with the bakery. Beyond this, there are small bakeshops in Hull (Le Meilleur - 15 miles away, population 2,200) and Sioux Center (Olivia’s – authentic Mexican) that offer non-traditional breads. Le Meilleur offers a broader variety of artisan offerings, but they bake on a somewhat random schedule and often with a very limited selection.

DEMOGRAPHICS: The target market for Brad’s products are progressive consumers between the ages of 25 and 65—consumers who have probably spent at least some time living outside of Sioux County, prefer to eat organic foods, believe in a healthy lifestyle, and are willing to pay a slight premium for fresh or organic ingredients. This consumer demographic is well-educated; they may be single or married and raising families. Household incomes generally near or above the median Orange City income ($69,000) to justify paying a small premium for a dietary staple.

NEEDS/DESIRES: With multiple existing location options for purchasing bread, the consumer still wants shopping convenience. Despite their comfortable incomes, these consumers consistently seek value in their purchases, but are willing to pay for higher-quality products. Regardless of their age, they most likely lead more-active-than-average lifestyles. They also value giving back to the community through volunteering, philanthropy, or church-related activities. Finally, they, or a family member, may have baked bread for themselves at one time.

The competitive analysis is limited in scope to only those competitors that offer bread and/or baked goods within Sioux County and within a 15-mile radius.

While competing with Casey’s and miscellaneous grocery outlets (Fareway, Don’s, Hy Vee, and Walmart) for bread sales is a longer-term goal, Brad’s breads should pay special attention to Le Meilleur. It’s positioning as a baker of unique artisan breads may offer the greatest competition – especially if they decide to expand into or form partnerships in Orange City.

PRODUCT STRATEGY: As of September 1, 2018, Brad’s Breads offers two distinct offerings of handmade bread: The original Bewley, and the English Muffin. Each are produced, baked, and packaged by a single baker in a certified home bakery in Orange City, Iowa; and each is produced with a tightly controlled and consistent formula and baking process to ensure consistency. Over the next year, Brad’s plans to expand the product line by adding two additional bread varieties. Each of these breads in the Brad’s line will aim to be distinct from what is mass produced and offered in the regional market by large bakeries, chain stores, and grocery outlets. This strategy will keep the concept focused, build brand affinity, allow for greater production efficiencies, and prevent the brand from becoming diluted with too many variations.

DISTRIBUTION STRATEGY: Currently, Brad’s is marketed at a hyper-local level, through word-of-mouth, an email list of past purchasers, and onsite at a weekly Farmer’s Market in Orange City from May-September. The bread is currently distributed by the owner via the Farmer’s Market, scheduled pick-up at Brad’s home, or delivered by special arrangement. Additionally, Brad’s occasionally provides “welcome loaves” to new members of his church and select members of the community. So far, Brad’s Breads has not been distributed through any second-party retail outlet. Brad’s currently conducts little to no research on trends or consumer preferences in the marketplace. Over the next six months, Brad’s seeks to explore reseller distribution in retail specialty shops throughout the Orange City area (Town Square or others). Ideally, Brad’s also wants to find a centralized location to distribute products during October-April when the Farmer’s Market is not in session.

PROMOTIONAL STRATEGY: Brad’s Breads currently communicates with consumers about its products and baking schedule via two primary avenues - email marketing and face-to-face at the Farmer’s Market. These methods are supplemented with social media postings. In alignment with its Distribution Strategy, Brad’s will increase its social media presence in non-summer months; seek to form new promotional partnerships with local retailers; and begin to use the newly designed website as a main portal for information and possible promotions/contests.

Nontraditional marketing methods that require little cash and a lot of creativity also lend themselves perfectly to Brad’s start-up, home-based model. Much of the promotional efforts will be conducted via social media, primarily on Facebook.
During the next year, the company will consider the following marketing efforts:
• Location Bomb: Location-specific promotions that upsell non-competing products (plates, butter dish, silverware, napkins, coffee, etc.). These can be placed in locations such as Holland House, Town Square, Dwellings, or Hands Around the World.
• Direct mail, including a Holiday “bread slice” mailer that talks about breaking bread with family members and offers discount for multiple-loaf purchases
• “Stories of Grandma’s Bread” or other social media awareness campaign (Facebook)
• Website-based Referral Program that will build credits towards free loaves; or a “Buy 5, Donate 1” campaign. Anyone who purchases 5 loaves, can choose a local charity to receive a loaf

PRICING STRATEGY: Brad’s products are priced as a premium bread product. Brad’s can justify the pricing through its production process, unique and distinctive offerings, and its use of premium ingredients. Although bread is generally viewed as a staple product, Brad’s is not positioning their products as a replacement for everyday white or wheat sandwich bread. Brad’s products will sell for $4.00 - $6.00 per loaf. Competitive offerings will sell at retail for $1.00 - $2.50 for simple sandwich bread, and $3.00 - $4.00 for premium whole wheat or oat bread options. Distribution in settings with other healthy or premium quality offerings, or aimed at consumers seeking local and/or healthy options will minimize the premium pricing.

The market environment for Brad’s represents exciting opportunities. It also contains some challenges that can be overcome. A SWOT analysis of the company to highlight Brad’s strengths, weaknesses, opportunities, and threats follows:

The SWOT analysis presents a thumbnail sketch of the company’s position in the marketplace. In just three months, Brad’s has seen strong incremental growth, nearly doubling weekly production. Its passionate founder, a growing number of brand-loyal customers, and an increase of dedicated baking days place the company in a good position to grow. However, as Brad’s considers expansion of its product line and increase in production, they will need to be vigilant of customer demands, quality slippages, and distribution obstacles. As the company finalizes plans for new products, new website sales, and potential retail expansion, they will also have to guard against competitors who attempt to duplicate products.
Bread baking is my passion and people who taste my products can tell. Startup costs to expand my business operations through the purchase of a commercial baking oven, a crepe maker, refrigeration & prep equipment would run around $10,000. I would like to have a physical presence in Orange City in time for the Tulip Festival in May 2019. That could be a Crepe Stand in the Straatmarkt or a permanent location for a European-style Bakery/Café on/near the parade route.

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