How Profitable is Bakery Business in Nigeria? This is a bakery business feasibility study for those who will want to venture into this business.
The bakery industry is a huge market across the world. Food is life after all and in a country with over 140 million people, food is a great expression of our life and culture.
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How profitable is Bakery business is an exciting topic to explore when you count the amount of bread Nigerians consume daily. Some people say that having a Bakery business is equal to printing money in your house.
That claim is an exaggeration, therefore this article will give you bare facts and leave you to judge whether it is a profitable business or not.
You will learn how to start your own Bakery business, discover why selling on credit and return of unsold stock by wholesalers could cost you the business, and why being able to give the market the exact flavors and varieties at fair prices, would make your bread a consumer’s delight.
Come along as we explore the nitty-gritty of Bakery Business inside this write-up.
Does the Market for Bakery Product Exist?
Bakery products such as, Bread, is a highly nutritious food eaten in one form or another by nearly every person on this planet. It is a good source of vitamins, protein, and carbohydrates.
Bread is a necessary part of human diets for over one hundred years in all parts of the world. Because of this important truth and over a century history of bread in our daily food, it has a huge market.
Nigeria has large populations with purchasing power who eat bread with local foods such as pap, bean cakes, porridge beans, etc.
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Considering these facts, investing in a modern bread making factory could be a good business venture.
There is always a demand for food and catering services everywhere. People need catering at their weddings, parties, corporate events and so on. And if you are an amazing cook or you have an amazing team who can cook, then it is time to put your skills to good use and launch a catering business. However here are a few things you must tick off the list before you launch your business.
Locate Mentors Before you Start bakery Business
Mentors can easily tackle the question, how profitable is bakery business if you are willing to get one to guide you.
For every business, you have people who have been in it for a long time. Find these people and get adequate information about the business from them.
They will tell you the equipment to buy, where to buy them, the types of bread to sell, how to get a bakery license, marketing tactic to sell your bread, where to hire good staff, etc.
Having a bakery is a hugely profitable business venture.
With the love Nigerians have or baked goods ranging from the very popular Agege bread, to chin-chin, meat pie, cakes, small chops and so on. There is a huge market to be tapped into. Demographic actors favor this business highly because age, religion, gender or location is no barrier to the consumption of baked goods.
As long as you can develop creative market strategies, you can smile to the bank, banking at least a million naira every month.
Nigerian has a huge population; a profit margin of 10 Naira on every product sold to 1,000,000 people every month gives a total of 10,000,000 every month. This sounds pretty easy right? This might not be a one day journey for the owner of a bakery, but it is an achievable estimate, given the right strategies and attitude to marketing.
Please note that your products have to be of good quality, finger licking deliciousness and well packaged with top notch hygienic considerations. You want to sell a crowd pleasing product in order to pull funds from the crowd. Making it affordable and available is also a plus that will drive in increase in sales.
Do you have an existing bakery or are you intending to start a bakery and you are looking for ways to make it more profitable?
Do a market survey to find out the demand in the market that present Bakeries are unable to meet. The survey could also find out whether those bakeries serve their customers well, the size, quality and flavor of bread buyers prefer.
Use this market survey to produce a feasibility report to discover whether the business idea is worth doing.
Source for Start-up Capital
The opportunity you have discovered in the market (i.e. the recognized demand the market is unable to meet), will affect the amount of start-up capital you need to start the business.
Secondly, the size of the business, site, class of staff, equipment, and measure of raw materials you would need, will give you an idea of the amount you need to open the business.
Get a Business Plan
You can verify how profitable is Bakery business by writing a detailed business plan as you prepare to open a Bakery.
Get and use the feedback you got from market survey and the feasibility report, to write a business plan that will enable you serve a hungry part of the market that want your product.
The business plan will analyze the amount of start-up capital you need, the source of capital – whether to use loan, your savings, a mix of both or collect funds from family and friends.
The business plan will have a marketing plan, the number of staff you need, cash flow, break even and sensitivity analysis, and the kind of equipment you need, etc. That is how important a business plan is, so never start a business without one.
You ask yourself how profitable Bakery business is, as you consider the cost of equipment and other materials you may need to start the business.
Buying the right equipment is very important. The size of bakery, the opportunity you want to take, site and the startup capital, will help you choose the equipment to buy.
The list of equipment is as follows: mixers, foreign electric baking oven or local wood heated oven, large tables, refrigerators or water chillers, dough divider, dough molder, bread slicer, bread pans, water proof wrapping sheets with your label on them, display shelves for storing freshly baked bread and a van for distribution.
After the installations of the machines, make sure you keep services of skilled technicians for maintenance of the machines.
Primary Baking Materials
The key materials needed for baking are flour, yeast or baking soda, butter, sugar, water, flavors, etc
Get Government and Regulatory Approvals
Make sure you get necessary government approvals. To be on the right side of the law, pay the fees and meet all regulatory requirements for setting up food business in the country.
For example, get a license to run a bakery from government authorities. Join the local chapter of the Association of Nigerian Bakers, to guide and give you advice on rules and regulations to obey.
Read More: How to Register a Product in NAFDAC
Get a Good Location
Get a good place that is near the buyers you wish to serve. Without a good place sales will be difficult. If wholesalers, retailers and public are unable to reach you easily, that will cause the business to fail.
You may put it in the busiest place in your community, close to a busy major road, near a market or even near a school. It depends on the part of the market you wish to target. Without enough demand, there would be no business so get a place with enough traffic.
Safety of Lives and Property
Nigerians are careless in this area. They lean more to the spiritual when you ask them to get insurance. Do not follow that negative trend. Fix a fire alarm in the premises and get an insurance coverage for the business.
Hire the Best Staff
How profitable is bakery business without good staff?
The simple answer is that your staff is the most important thing after the business plan. Therefore, make sure you hire those working in the industry with basic experience.
Appoint experienced staff to work as baker, flour mixer and molder. Others are oven operators, carriers, Bread pan openers and cleaners, etc.
These jobs are essential for making excellent bread that will not only surpass set standards, but also compete favorably with other products in the market.
After making the bread, you would have to sell them. Hiring marketing staff with vital knowledge of bread distribution is the key to sale.
Identified Problems and Solutions
Bread does not have long shelf life so you must sell them off to avoid waste.
Secondly, you should store your bread making ingredients in dry and well-ventilated rooms to avoid spoilage.
Wholesalers have a habit of carrying stock on credit and returning unsold ones to the Baker. Look out for this bad trend and find a way to solve the problem without losing your customers.
Is Bakery Business Profitable?
How profitable is bakery business you may ask after reading this far, the truth is that profitability in any business depends on many factors; such as good staff, working capital, niche, place, good marketing strategy, customer services, and management of human and material resources.
Take note of the following avenues to tap into the profit making potentials of a bakery:
SALES/ DISTRIBUTORSHIP OF PACKAGED GOODS:
This might be the biggest profit generator for you. As long as your products are good and taste delicious, people will buy it.
You would be surprised at the demand you will get if you put out your products even if it is just in the counter space of your shop or hawked in traffic or displayed in a partner supermarket or store.
Ensure that your products are freshly made with quality ingredients, have an attractive packaging and display them beautifully.
With good marketing staff circulation of the bread to resellers would be easier. Establish distribution networks to market your bread to the consumers.
Your buyers include distributors who buy wholesale, small retailers, grocery stores, supermarkets and public. Work out how you would sell your product to these buyers in the distributive chain.
You may wish to sell strictly on cash basis or grant credit to some of them. Follow advice of mentors and your business plan.
This is another income generator. It helps if you have a flair for teaching, and if you don’t, you can employ a few people who do, to teach the art of baking.
As long as your products have a good reputation, you would be surprised at the number of people who are willing to be taught by you. Training in Nigeria right now range from as low as 20,000 Naira to as high as 250,000 Naira.
This training fee could include the cost of materials to be used during the training, certificates, incentives like aprons and chef caps and so on.
If for instance you take on 20 students at 100,000 Naira that makes a total of 2,000,000 Naira. Impressive isn’t it? I am sure you didn’t see that coming.
This is perhaps the most popular way of making money as a bakery in Nigeria there are lots of events from Monday till Sunday, across the country.
The events include but are not limited to weddings, naming ceremonies, business meetings, conferences, and birthdays and so on. There is usually a need for food or refreshment of some sort at these events particularly the very popular finger foods aka small chops.
Wedding cakes cost anything from between 50,000 Naira up to 500,000 Naira, depending on the style of decorations and the number of tiers the cake has. Small chops are usually billed per number of expected guests; it could go or as high as 500 Naira per guests are even more depending on the kind of snacks you are serving.
That is quite a lot of profit, if you handle as little as five events every months you could be making profit as much as 1,000,000 Naira per month.
You need to handle this aspect very well, because positive referrals and reviews could land you your next customer. Make sure that the goods are well presented, taste really nice and if you have a signature product which is a crowd pleaser, events are a good way of introducing them to the larger public.
The healthy and organic food market is fast growing in Nigeria, developing products that are tasty but healthy like Nellie’s will bring in a lot of income for you.
Your client base will usually be the elite and the middle class who can afford to pay you well for these innovative creations.
You have to do a lot of research and study market trends in order to create products that are healthy and delicious. This is a new niche that could generate a lot of income for you if you devote time to creating healthy alternatives to fattening snacks.
You could land a gig as a baking show host on TV and that could land you some sponsorship or even brand ambassador appointments with companies like Baker’s choice, because of the uniqueness of your brand.
To avail yourself of all of these opportunities you have to be willing to stretch yourself, break up new grounds and shatter glass ceilings.
You have to be willing to invest heavily in the business and not just money, your time, creative juices are very important. Build a standard and strive to get better every time.
Be open to criticism so you can correct your mistakes and please your customers, offering them immense satisfaction.
Do not allow anyone tell you it can’t be done, it has been done and more and more people are doing it every day. Turn your business into a money making venture.
Other Strategies that Lead to Success in bakery Business
How profitable is Bakery business is a question the following strategies that leads to success will answer in the affirmative. Yes! Bakery business is profitable if you do the following simple things in your business.
- do research to find out what your potential customers can pay for your bread
- know the size and types of bread that would sell for different localities.
- find out the flavor your potential customers would love and give it to them.
- develop expertise at producing a brand of bread unique to your bakery
- stay for a long period in that business – be committed
- have a plan for the business – be flexible
- build systems for running the bakery and practice delegation of duty to your staff
- develop marketing prowess in the distribution and sale of your bread
- produce quality bread and make it a norm in your business
- have a fair price for your products
- do advertisement; use the bakery’s website, digital and social media, etc
- get referrals from satisfied consumers of your bread
produce varieties of bread with special aroma, taste, softness, and flavors.
For many entrepreneurs whose question is how profitable is bakery business, this post has shown you why the business is attractive.
Let me restate that Nigeria has large populations with purchasing power who eat bread with local foods, therefore establishing a bakery is a lucrative business provided you hire good staff, run it well, put it in a good place, sell at a fair price and make the sizes and flavors of bread which your buyers want.
Now that you know these facts about bakery business, go and start yours today.