Wholesale baking: From crawling to walking to running marathons
For several years now, I've operated under the Ohio Cottage Laws, baking out of my home kitchen, and selling individually or for special events. Rarely did I make more than 8-10 loaves in a single evening. Late last summer, I made the decision to make this the real deal, and spent the winter on a small crowdfunding campaign to have the funds to work out of a local commercial kitchen.
Last week was my first week.
I'm selling at two local farmers markets solely right now (I still have a 9-5 "day job"), but despite a few stumbles and a few adjustments last week, the couple days of baking went rather well. My pricing was spot-on -- no one outright said, "That much?" or even raised an eyebrow -- nor did I sell myself short. All of my ingredient costs, the rental fees for the kitchen ($13/hr prep area, $22/hr oven area), and the fees for the market season are rolled in along with a meager amount for my own labor.
The crux of my post is this: one of the food truck operators at the kitchens (on my first day no less) approached me about "Have you considered wholesale? You've got a lot of food trucks right here." I *had* considered it...but don't know how to price myself. This is especially true because he said that the cheapest he's found rolls was $0.25 each (they were horrible), but most would have to be around $0.35 to be competitive.
Is that even realistic? I sell man-fist-sized rolls in packages of 6 each at the market. Rounding up my costs above to the nearest dollar gives me a price of $9. If I remove the market costs (since I won't BE at the farmers' market), it would probably come to about $7.50 for the 6 rolls or $1.25 each.
I know there's typically a "volume discount" for wholesale, and that's maybe 40%. That gives me a wholesale price of $0.75, and that's only if I'm making an entire 5.5-hour production cycle (remember, I have a day job) doing ONLY rolls and doing about 16 dozen rolls.
Is he more Sam's Club roll minded for what I can produce, or am I just not ready for that level of production to get my prices down to his "market" level?
I do the home based microbakery here in the UK...
Almost everything I do is wholesale - ie. I sell via small local shops, etc. I have looked at doing rolls for local pubs, etc. but they simply won't pay enough for the effort. You really would need to find a local "gastro pub", etc. who wants sourdough soup buns, or something equivalent, or look for cheaper ways to produce your goods.
I wish I could sell a pack of 6 rolls for $9. That's £5.83 right now, or 98p a roll. I sell a whole 400g loaf for that. I offered that to a couple of local pubs, as a boulle with a cross cut so they could easily quarter it to get rustic bread lumps, but had no takers )-:
If you want to see what the cheaper end of the UK foodchain is like:
https://www.aldi.co.uk/en/product-range/fresh-bakery/bakery/rolls/
and that's a "supermarket". Imagine the wholesale price on that )-:
-Gordon
is almost always a mistake for a small-volume producer. I can't speak specifically to baking, but I have advised over 100 small businesses across a variety of industries. In exactly none of those cases was competing on price or even price-matching a half-decent strategy, never mind a good one.
People seldom buy on price. They buy on value, with price being part of that, but only one part. As a small business, your goal is to find a niche within which you produce a product for which there is a buying audience that sees sufficient value in your product to pay a price that will net you a reasonable profit relative to your total investment including both costs and time.
If the people you're trying to sell to won't pay enough for you to make said reasonable profit, then your target audience isn't the right one for your product AND vice versa. You need to change one or both.
Please consider this first. If you do find even 1 outlet for wholesale, more likely than not, they will demand that the product be consistent in size shape and quality, and that your delivery must also be consistent. That second point may mean that your vacations and downtime where you "just aren't in the mood" to bake this week or that friend's wedding out of town will hamper your ability to be a consistent supplier. With a food truck or a farmer's market, you can pretty much set the schedule you want to have.
But if you feel confident that you can live within the constraints of that schedule or you find a buyer willing to meet your personal needs, then by all means, try it!
I've been a photographer for a lot of years both as a hobby and part time business. Several years ago I thought it would be fun to make up note cards for sale. This was met with two problems, people don't use note cards as much as they once did and second, they were tedious and time consuming to make. I couldn't charge more than $15 for a box of five cards given the cost of materials and time. Contrast this to selling a 13x17 or 17x25 inch print which I could get 10 to 15 times as much in terms of the sales price while the material costs were only a factor of 3 greater than the cards.
If you have to drop your prices too much you narrow the profit margin in terms of material costs and you may suffer on the time side as others have already noted. If you small volume sales at the market are satisfactory with higher value added profit stick with that approach. Otherwise, I think you might be looking at a career shift into baking which may also be a consideration.
Thanks to all who've posted thus far.
Another area where I posed this question the person commented that I should stick to the farmers markets perhaps this year until I know *exactly* what the market will bear. If it's a $1.25 roll that I can produce, but the market will only take a $0.90 roll, I need to see if there's a way to produce it (perhaps seeking a dough divider). If I can perhaps push my productivity down to $1.10, it might be a higher end roll...but the quality might entice someone that is seeking that.
Selling to other vendor -- such as the food trucks -- is one thing. However, there's also a good possibility for me to put my breads up at a local deli / market that lets locals sell their goods. Lots of home bakers making cakes and pies, people making preserves, and selling local veggies. She was very open to having me come in there and letting me sell, and my aim is at the very least to put up a small amount there, but even more so, see if she'll take any "overage" from the market days.
The question is: How do I price the breads to sell to a retail situation like that? This is something where she'd be comfortable with me dropping off bread only once or twice a week, so if I need a break / vacation, no worries.
I'll ask how she's buying currently from people, but how does something like that typically work in areas that you all have sold in?
Thanks again all.
-Anthony