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Bakery cafe category expected to grow over next 5 years

October 9, 2013

The Bakery Cafe industry is heating up as consumers warm to the idea of moderately priced, high-quality menu offerings, accrding to a new report from IBISWorld. The report predicted that in the next five years, economic fundamentals such as consumer spending and disposable income are anticipated to perform strongly, creating a favorable operating environment for bakery cafes.

"The industry has undergone heavy consolidation over the past five years as major chains such as Panera Bread, Einstein Bros. Bagels and Tim Hortons have expanded rapidly," said IBISWorld Industry Analyst Andy Brennan. "The franchise model most of the major players operate under has accommodated the rapid growth in establishments as operators require less capital and take on lower risk while growing market share. A number of small, independent bakery cafes which have traditionally serviced local markets have been pushed out of the industry, unable to compete with the geographic reach and marketing spend of the major chains. However, many savvy independents have made profitable businesses with niche, high-end offerings such as cupcakes or macaroons."

As operators add more stores in 2013, and consumer awareness of this relatively new segment increases within the food sector, industry revenue is expected to jump 7.2 percent this year to $7.1 billion, according to the report. The Bakery Cafe industry is expected to continue on a growth trajectory over the next five years as many of the same trends that have influenced the industry continue. Economic fundamentals such as consumer spending and disposable income are anticipated to perform strongly over the outlook period, creating a favorable operating environment for the category.

"To avoid price-based competition and protect profit margins, operators are expected to target markets with greater potential for growth, such as the breakfast crowd," said Brennan. "The breakfast market has traditionally been less competitive, and bakery cafes are expected to bolster sales by offering a greater range of breakfast sandwiches, bagels and coffee."

The Bakery Cafe category exhibits a medium level of market share concentration. As the largest industry operators continue to expand their market presence, smaller operators are expected to be forced out of the market place. The emergence of fast casual dining poses a threat to small local bakery cafes. IBISWorld expects that they will continue to fend off large operations to maintain their markets, according to the report.

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