Confectionery Business Consulting

What is Confectionery Business? Explained with Examples

Confectionery stores or confectionery businesses or bakeries are those businesses which are involved in the production, distribution, and retailing of baked or sweetened products like sweets, bread, patties, cakes, sandwiches, pastries, pizza, burgers, and other such food items. These products are also sold in packaged forms and are available via both retail and eCommerce.

The value chain of these products goes beyond retail selling. It also covers the procurement of raw materials like flour and sugar, baking and production processing, packaging, wholesale distribution, marketing, and retailing. Businesses involved in one or more of these functions in this value chain are considered as confectionery businesses.

Broadly, confectionery is divided into two groupings: bakers’ confections and sugar confections. The bakers’ confections include patties, cakes, pastries, and baked products like bread, pizza bases, buns, etc. Sugar confectionery includes products like nuts, chocolates, sweets, candies, chewing gums, and other similar sugar-based or sweetened products.

The confectionery business offers promising business opportunities. And we are not talking about giants like Nestle or Cadbury that sell packaged products like chocolates and candies. The emphasis here is on local brands and businesses like pastry and sweet shops, bakeries, bread-baking kitchens, home-based bakers, etc. We, as customers, encounter these brands and businesses in our routine on an almost everyday basis and especially, 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

Maintaining an extensive range of merchandise is important for bakery or confectionery businesses, especially those in the retailing format. The extensiveness of the product mix is a powerful strategy to not just pull more customers with different requirements but also increase the performance of the other products. For example, if a store sells bread, customers also expect to find other bread-based items there. If a store sells patties and burgers, customers also expect to find beverages there.

Manufacturers prefer to get maximum raw materials from fewer suppliers. Distributors prefer to get maximum merchandise from fewer manufacturers. Retailers prefer to get maximum inventory from fewer distributors. This helps businesses plan better, stay organised, and optimise transportation and holding costs. This ideal picture is something hard to get painted in real-world business circumstances.

Confectionery and bakery have a very short life span. Products like bread, burgers, patties, cakes, and pastries cannot be stored for too long. This span can get further reduced depending on the ingredients used in these products. And if these products do not get sold, they go to the bin. Such wastages are common in the confectionery business. Businesses also have to maintain QA and QC standards.

The upkeep of assets is another crucial requirement that affects the inventory management of confectionery businesses. These assets include microwaves, storage units and refrigerators, display lights, vending machines, and other such infrastructural necessities.

As confectionaries are sold both in terms of units and quantities, it makes inventory calculations more challenging. This translates into other challenges in stock measurement, making demand projections, and determining ROQs and ROLs.

The supply chains in the candy, bakery, or confectionery industry often operate in unorganised conditions. There may be exceptions to this in sophisticated and advanced markets. But such exceptions are rare. Especially in the local supply chains, it is common for confectionery businesses to deal with operational inconsistencies emanating from one another.

The disturbances mainly come from businesses that are not professionally managed. Poorly-defined processes are reflected in their operations. Without proper SOPs, they are unable to maintain their assets and infrastructure. Not implementing SLAs makes things worse.

As customers, we rarely see local or domestic brands coming up with offerings that compete with those sold by brands like Nestle or Cadbury. That is often the case with packaged confectionery products like chocolates, cakes, or even nuts and sweets. Distributors and retailers walk on tightropes when it comes to options. The competition from well-established brands is way too strong to alter consumer behaviour.

Such demand patterns carry a halo effect not just in the supply chains but also in the industry. Local manufacturers are aware of the market risks involved in venturing into product segments dominated by big brands for decades.

Untapped Potentials

Sweet-based confectionery products like chocolates, cakes, and pastries carry special emotional and symbolic appeal. The choice of these products, for occasions like birthdays, wedding anniversaries or any occasion that would be marked by joy and celebration, is a result of this appeal. Communicating emotions with sweets is something mankind has known for a long time. Brands like Cadbury have mastered these arts in the chocolate confectionery business. And there is no reason why any other brand with the same or similar product offerings cannot take advantage of this strong behavioural trait. Local brands enjoy quick and easy access to their physical markets. This also provides them with the time advantage to deliver freshly baked products.

Many companies are hampered by a lack of conviction in the pursuit of growth and expansion. These companies/enterprises are often satisfied with their business volumes and market coverage. Although modern-day confectionery businesses show an increased appetite for growth and expansion, the intensity of efforts is not enough in many cases.

A lack of professional guidance and direction in planning and implementing business expansion projects may also be one of the reasons why retail chains are slow to expand. When these two challenges are addressed in the right ways, even an MSME confectionery business can become a regional and national brand.

When it comes to improving customer experience and their shopping journeys, most confectionery businesses are still not doing enough. New-age entrepreneurs and business owners realise the value of delivering superior shopping journeys and customer experience but developing and implementing strong and effective CX remains the most commonly encountered challenge. And not accentuating enough on customer experience puts businesses on an unfavourable side from customers’ perspective. Today, the confectionery business works in a different way that is not the same as it was a decade or even five years back. Modern-day customers say no to brands that do not provide them with a good overall shopping experience. CX is also necessary to attract and retain customers in the face of prevailing competition. Small changes in the product mix fail to overcome major differences in CX strategies among competitors.

ECommerce has affected confectionery businesses in both B2C and B2B formats.

The repercussions of eCommerce on B2C confectioners are quite straightforward and at the same time, eCommerce has also become necessary. However, eCommerce in B2C confectionery is different from other product-based eCommerce businesses. Packing and delivery of confectionery items like cakes and pastries need special care and standards. Because these items have shorter life spans, the need for accuracy in operations is even higher.

In B2B confectionery, things are a bit different. Here, the impact is more profound on the value chains and business models. The application of eCommerce and the tools and technologies that come with it helps businesses reach out to and work with more suitable value chain partners.

Two vital business areas where both B2B and B2C confectioners can reap the most out of eCommerce applications are digital outreach and online ordering.

Omnichannel is more than eCommerce or online selling. Omnichannel more than anything else is about the seamlessness of experience delivered to customers across different touchpoints in the customer journey. The case for going omnichannel arises in the confectionery business is not much different than what it is for any other business. If you sell via both online and offline channels, you need to make the best of both channels to facilitate both business and customer experience and their shopping journeys. As confectionary business consultants, we always maintain that whatever your sales and distribution channels, make sure it is easier for customers to benefit from the presence of all the channels.

In recent years, many big MNC brands with confectionery products in their product mix are establishing D2C channels to sell directly to their customers. This marks a glaring deviation from their age-old, trusted B2B models of distribution. B2B still remains their primary distribution strategy. But they have realised the benefits and importance of reaching out directly to their customers and markets. The D2C strategy is also suitable for small and medium-scale confectionery manufacturers. If the planning and implementation are right, businesses can work with higher margins, implement strict quality control measures, and generate business data for analytics.

How YRC can help

We are a retail and eCommerce consultancy brand specialising in developing business solutions for startups and existing brands. With growing global footprints, our services and solutions are designed to meet international standards. In confectionery business consulting, we help our clients define, map, and execute their business ideas and projects with planned, proven, and customised solutions. Highlighted below are our services useful to confectionary startups and businesses.

Starting a brick-and-mortar confectionery store comes with many predictable and concealed challenges. As providers of retail and eCommerce consulting services, we always emphasise that without planning and jumping into implementation part leaves a business more exposed and vulnerable to those challenges and the resulting consequences.

Take layout planning for instance. Starting off with a casually planned layout eventually makes business owners realise that they are stuck with the existing store layout. Store layouts need a reflection of several elements that go beyond the best space utilisation. For that matter, customer experience is an important element in layout planning. After the fitting of furniture and fixtures, business owners have very little room left to incorporate or make changes in their CX strategies.

In setting up brick-and-mortar confectionery stores, we offer an extensive range of business solutions starting from validation of business ideas and business model development to process and operations planning and incorporating internal audit systems.

Some of the key solutions we offer in helping build confectionery eCommerce startups are market research, business model development, formulation of business strategies, operations planning, digital marketing, and business plans. These six areas cover almost everything required to start a confectionery eCommerce startup on a robust foundation of strategies, planning, and executional roadmap. The specifications and requirements of each client are duly taken into account.

Can entrepreneurs do these things on their own? Yes, they can. But we provide the jumpstart platform with our planned and proven solutions. And starting as early as possible helps startups make the most out of the scanned market opportunities.

Market research is a scrutiny and analysis of a targeted market to gauge its suitability for a specific business idea. Today, market research is a recognised profession that calls for specialised knowledge and expertise. In market research services, we deliver meaningful and actionable insights and information to aid in the process of business model development, business planning, and the formulation of business strategies. With a solid understanding of the markets, it is easier for confectionery business owners to be innovative for enhanced competitiveness with a firm footing on the market realities.

SOP is one of the best tools for mapping and defining business processes and operations. Developing and implementing SOPs greatly help organisations achieve enhanced effectiveness and efficiency in all areas of operations. These operations include inventory management, production, purchase and procurement, quality control, order processing & order fulfilment, recruitment, financial and commercial activities, etc.

SOP development & implementation is one of our core competencies. The service design & delivery is carried out by SOP experts for retail & eCommerce following predefined principles and processes in planning and implementing the SOP solutions.

Accurate and reliable analysis and depiction of the financial and commercial assessments is a vital component of any business plan. This is a universal requirement and no organisation can avoid it.

The key areas of assessment include sales and revenue projections, CAPEX and OPEX requirements, profit & loss projections, ROI and break-even analysis, and CAC. Purchase and inventory calculations hold special significance for confectionery businesses. Confectionery products are sold in units as well as in wholesome quantities. This makes stock measurement a tricky area of work for confectionery businesses.

We address all these and other concerns in developing business plans financial and commercial planning solutions. We develop an extensive array of estimates encompassing different financial and commercial components. These projections also serve as a roadmap for decision-making in the ensuing course of business.

If assessments tell that a confectionary brand or store now holds a distinct market position and recognition, it is time to consider using it for business growth and expansion. We help our clients take such endeavours forward via the franchising route.

If you are a confectionery brand or an aspiring entrepreneur interested in taking up a suitable business opportunity as a franchisor or franchisee, YRC can help you set up your franchise business. Our franchising solutions include:

Expansion Strategy

Franchise Evaluation

Business Plan

Operations Planning – Franchise SOPs, Franchise Operations Manuals





What is a confectionery business?

A confectionery business is a form of business that offers ready-to-use or ready-to-eat baked/confectionery food items like patties, sweets, pastries, bread, sandwiches, cakes, burgers, pizzas, and other similar confectionery shop items.

Confectionary products are classified into two broad categories: bakers’ confections and sugar confections. Bakers’ confections include patties, cakes, pastries, and baked products like bread and pizza bases. Sugar confections cover sweets, candies, chocolates, gums, nuts, and other such sweet-based products.

How to start a confectionery business?

If you want to start a confectionery business, you must focus on the fundamental elements listed below. The flow or sequence of activities can vary.

  •  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

Is confectionery business profitable?

There is no pre-destined answer to this question. If the assessments and planning are right, a business has a higher chance of being profitable. To find out whether a confectionery business idea will float or sink, we suggest examining and elaborating on the following elements:

  •  Check if there is any existing expertise or presence in the value chain
  •  Conduct Market Research – Demand, Competition, Pricing, Consumer Behaviour, etc.
  •  Business Model Development, USP Definition, Value Chain Mapping
  •  Functional Strategies
  •  Business Plan (Financial and Commercial aspects)
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