Despite the widespread belief that India does not have a 'baking culture', an increasing number of people are purchasing goods from bakeries. And as a result of this growth, businesses have been compelled to make substantial investments in the development of novel products and the expansion of their production capacities. Not just baked goods, but also bakery-cafes, are contributing to the development of an entirely new market.

According to GlobalData, India’s market for packaged cakes, pastries, and sweet pies is projected to command annual sales of $453.1 million during 2021, up from $423.4 million in Covid-19-hit 2020, with a compound annual growth rate of 5.9 percent projected for 2020 to 2025.

With digitization, changing consumer behavior, and a thrust on rural development, the bakery industry is undergoing major changes in the last two decades. Even consumption patterns have evolved rapidly in the last five to ten years. The consumer is trading up to experience the new or what he hasn’t.  The consumer is looking for products that are innovative, quality-driven, value for money, and various factors. 

With the recent influx of international cafes and bakery chains, on-the-go food has become increasingly popular. With hectic lifestyles, Indian consumers are prioritizing convenience, and as bread and biscuits are fast-moving consumer goods (FMCG), bakeries are a go-to option. This has given a push for cafe bakeries to make baked bread and other items as their USP and sell it through various platforms. 

Paving Path Outside ‘Just Metros’

Founded by Utsav and Aavika Chhawchharia in 2016, this bakery and patisserie chain began with a single outlet in Defence Colony Market, Delhi, and has grown to eight different outlets in Delhi-NCR in the run-up to its pan-India expansion. Other brands like Theobrama, Theos, etc have also started announcing their rapid expansion plans.  

Roastery Coffee was started by Nishant Sinha, Founder, and Owner, who is also the owner of Colocal, a sister brand of Roastery Coffee. And Colocal is a gourmet Indian-origin chocolate brand. The bakery belongs to Colocal where they bake exquisite cakes and cookies. 

He feels that It’s hard to compete with local bakeries because there is always a personal connection. Locals associate local brands with memories of growing up and special life events. “Unless you give them top-notch quality and world-class taste, it’s hard to win them over. And you have to win them over every day. Hence, there can be no compromise with quality ever” he added.

When questioned about expanding to other cities, a few well-known bakeries located in smaller cities said that they did not currently have any plans to do so in the near future. These establishments included The Hazelnut Factory and Butter Story in Lucknow, Nahoum, and Sons in Kolkata, and The Breaking Bread in Ranchi. It may come as a surprise, but larger or national bakery café brands have a smaller market share in cities that are classified as tier 2.

Challenges and Opportunities

While there is demand and appetite for bakery products, the Indian bakery industry faces certain challenges. The industry is generally divided into organized and unorganized, with more than 2,000 organized or semi-organized bakeries, and 1,000,000 unorganized bakeries. Operational efficiency is a major issue in the industry, as is the lack of technology and skilled workers.

Although there are obstacles that are causing losses, there has been a boom in entrepreneurial endeavors in the bakery industry in India. Home baking has always been a popular pursuit, but with new technological innovations, individuals have been able to monetize their efforts. Founded by two women, home bakers.co.in provides a network for home bakers, the majority of whom are female, to promote and sell their products. On a smaller scale, local What’s App groups have become popular to supply neighbors and locals with baked goods, which highlights the power of networking technology.

Organized bakeries in India are also utilizing social media to provide targeted and cost-effective marketing. Lacking the large budgets of international chains, local bakery-cafes are eschewing traditional marketing to rely on word-of-mouth recommendations and social media engagement. Tapping into the artisanal market, smaller bakeries can concentrate on quality over quantity, while larger Indian chains such as Barista and Mad Over Donuts rely on creating larger quantities but with strong branding and associated trust. 

The Bakery industry, which is one of the largest segments in the food processing sector in India, offers huge opportunities for growth, innovation, and job generation. The growth in the industry could be attributed to the changing consumer taste and lifestyle habits. Today, customers are seeking baked goods that are gluten-free, lower on calories and sugars, with alternative ingredients like multigrain and whole-wheat. Besides healthier options, the millennials, in particular, are seeking new flavors and experiences.