MBAX 6100

Entrepreneurship and Small Business Management

Feasibility Plan Parts I & II

Auntie Carlas Frozen Bread Dough

March 20, 2007

Carla Ooyen & Masashi Tsuchiya

Product Concept
Frozen Premium Bread Dough
The premium quality, flavor, and smell of homemade artisan bread without the hassle of
mixing, kneading and forming the dough.
Premium quality bread dough sold in the freezer section.
At home, the consume thaws, rises, and bakes.
Product will be made of natural or organic ingredients
Manufacturing will use old dough techniques for premium flavor
May offer unusual, specialty or holiday selections such as panettone, stollen, or Greek
Easter bread
May sell in an oven-safe, recyclable container for added baking convenience

Market Analysis Size and Growth

Market value of all Bread and Roll retail sales in the World1
$145.7 billion in 2004 (2.4% growth in the past five years)

Market value of all Bread and Roll retail sales in the United States 2
$13.5 billion in 2006 (1.3% growth in the past five years)
$14.1 billion projected by 2011

Downturn in 2004 due to low-carb diet trend, but market rebounding by 2005

Rhodes International reported in 2006 that sales of Rhodes frozen white bread dough are
increasing at 8% annually. 3
Bread market hit bottom in May 2004, demand is stronger now. Vice president of HomAde
Foods agrees sales of 2005 1st quarter have increased.4
The U.S. governments release of the revised food pyramid is reminding consumers of the
importance of whole grains in their diet. 5

Market for bread and related products has been and is expected to continue to be almost
flat for the next few years.6

Market value projections in billions of $

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$10.50

$11.10

$11.40

$11.70

$12.00

$11.40

$11.20

$11.20

$11.40

$11.50

(Difference in figures from other market size data is due to different source of data)

Market Analysis - Trends

Increasing gourmet premium market

According to Fortune magazine 7, a gourmet bakery in Paris, Poilane, sells about $18 million annually, to 50
different countries, to celebrities like Robert De Niro and Steven Spielberg, and to three star French chef
Alaim Ducasse, who buys 5000 metric tons per year. Long distance distribution is done within 24 to 48 hours
by FedEx, with price ranging from $10 in Paris to $47 in the U.S.
Artisan bread market is increasing

By 2003 sales of premium breads totaled $933 million, or 16 percent of all bread sales, and were continuing to climb
Artisan and specialty bread sales have increased 23% from 1998 to 2003. 9
Specialty breads add cachet. People are looking for more sophisticated flavors 10

Increasing need for convenience

Experts interviewed all agreed that consumers of natural & organic products were looking for more
convenience
Rhodes advertises convenience: They are both freezer-to-oven rolls that come in a re-sealable laminate
bag. They thaw, rise and bake in 30 minutes 11

Market Analysis - Trends

Increasing market for healthy foods

Organic food is increasingly popular.

(Bread) is not surging quite as aggressively as other organic segments, its showing respectable growth.
The consensus of the experts interviewed was that the Organic market is continuing to grow.13

Anti-allergy food (non sugar, gluten free, etc) is increasingly popular.

Whole grain bread is increasingly popular.

12

Gluten free, sugar free, allergy free bread will sell.14

Whole grain bread market was slow in 2000 to 2003, however in 2004 sales increased 3.3% from previous years sales. 15
In 2005, 73 new products were introduced with specialty grains such as spelt, buckwheat, kamut, quinoa, and pearl
barley.16

In 2006, wellness will again be one of the industrys top influences; the relationship between health and
food has become big business.the comeback of carbs will add fuel to the growing interest in breads 17
Young mothers want to feed their babies better food. 18
People are looking for natural version of everyday products. 19

Market Analysis Market Segmentation

Industrial Bread and Artisan bread

Industrial bread

Artisan Bread

Mass produced bread

Mainly white bread
Frozen dough available
Bakery made rather than mass production
Premium gourmet bread
Organic, Sugar free, Gluten free, Allergy free
No frozen dough available

World Bread and Roll market in 2004

20

Europe: $95.3 billion with artisan bread having a 60% share

The U.S: $13.1 billion with artisan bread having a 12% share
Asia-Pacific: $12.8 billion with artisan bread having a 30.5% share
Japan: $5.6 billion in 2006, which is about 48% of Asia-Pacific market, with artisan bread having a 20% share
India: $1.5 billion in 2006
China: $1.1 billion in 2006

Refrigerated market = $252.4 million in 2003

Frozen market = $443.0 Million in 2003

Market Value of the U.S. Bread, Roll and Bun dough retail sales (Excluding in-store use such as
restaurant) 21

Market Analysis Demographics

Demographic 1: Bread consumer consumption of bread in 2003 22

Penetration rate is more than 95% across all following segments

Number of loaves consumed weekly

Percentage of users by age group:

Bread consumers by gender:

Percentage of users by race/ethnic origin:

Bread consumption by region:

45% of buyers purchase 1 loaf per week

31% of buyers purchase 2 loaves per week
12% of buyers purchase 3 loaves per week
21% are 35 to 44
19% are 45 to 54
19% are 25 to 34
13% are 18 to 24
12% are 55 to 64
52% of buyers are Female
48% of buyers are Male
72% are White/non Hispanic
12% are Black
12% are Hispanic
4% are Asian
36% live in the South
23% live in the Midwest
22% live in the West
19% live in the Northeast

Market Analysis Demographics

Demographics 2: White bread and Whole Grain bread

White bread buyers tend to be:

Whole grain bread buyers tend to be:

23

Spanish, Hispanic
Young 18 to 34 years old
High school graduates
With children
Live in a rented property
55 years or older
College or Graduate school graduates
Retired
No children
Live in own home

Market Analysis Threats

Little growth in the bread market: currently between -3% to 3% per year
Raw material supply

Weather issues such as a drought could cause a raw ingredient shortage.

Possible insufficient ingredient supply. The demand for organic products is increasing faster than the supply
of raw ingredients. 24

Economic downturns reduce the demand for premium products.

Market Analysis - Market Structure

Retail route (major route)

Manufacturer (finished bread or dough)

Wholesaler
Retailer (sometimes bake from dough)
Consumer

Manufacturer (finished bread or dough)

Wholesaler
Restaurant, Caf, Sandwich shop, etc.(sometimes bake from dough)
Consumer

Manufacturer = Retailer (all process by retailer)

Consumer

In-store use

Own-production (Bakery)

10

Market Analysis Opportunities & Niches

Opportunity

Market trend for premium bread needs

Huge world market for bread export opportunity

Higher share of artisan bread in Europe and Japan (than in the US)
Ocean freight = about $0.30/loaf 25

Niches

No premium frozen bread dough in current bread market

Jason Vincent, Category Manager - Frozen Foods for Wild Oats, feels that there is a need for natural/organic
frozen bread dough and is surprised that no one has yet entered that niche. The long shelf life is a key
attractive characteristic. He feels the market is probably 2 to 3 units per week per store.
Adam Schneider, natural food broker, indicated that he could sell the hell out of a par-baked frozen bread
product.
Increasing market segment for premium bread.

Market Analysis New Distribution Channels

Internet e-commerce
Other form of direct sales to consumers
Export opportunity

11

Market Analysis - Conclusion

Feasible, there is a niche!
No direct competitors no premium frozen bread dough manufactures exist currently.
Consumer interest is favorable - Increasing demand for healthy foods such as organic.
Consumers are looking for natural substitutes for everyday products.
Growth opportunity - The U.S. share for artisan bread is lower than most other developed
countries. As people get more health conscious and taste sensitive, the market will grow.
Export opportunity - Europe accounts for about 64% of world bread market. Japan
accounts for about 48% of Asia-Pacific bread market. Both countries with higher artisan
bread share than U.S.

12

Competitive Analysis Industry Structure

Carrying Capacity

The bread industry is fairly slow growth (see Market Analysis section).
Frozen food section of grocery stores is limited in size. Securing space for a new product
means that an existing product looses space (or is no longer carried).
Must have a niche product that fills a customer need.
Frozen premium bread dough could gain space by fulfilling an unmet need. 26

Degree of Stability

Fairly stable demand for bread from year to year. A staple of most peoples diets.
Seasonal variations in demand. Higher demand near holidays, such as
Thanksgiving, Christmas, Easter and Mothers Day.27
Diet trends, such as the Atkins low carb craze in the early 2000s, can
have a serious negative effect.

Complexity

Grocery industry generally requires working with suppliers, distributors, brokers, and retailers.
For local market entry, it is sometimes possible to avoid working with distributors or brokers. 28
Selling in food service chain to restaurants would require same chain as grocery industry
unless sales market is only local.
Obtaining necessary health department and FDA approval can be complicated.

Industry Evolution

Bread industry as a whole is mature.

Organic food segment is in the later stages of the high growth phase. Retailers are starting to
see me-too products rather than new innovations. 29
Organic growth opportunities are tied to convenience and replication of traditional (not-sohealthy) products.

13

Competitive Analysis Barriers to Entry

Economies of Scale

Large manufacturers
Receive discounts for buying ingredients in large volume. Power to affect supplier costs.
Marketing budgets are larger. Profits of large volume products can help support marketing and sales of
lower volume or introductory products.

Entry level companies

Lack of volume equates to higher ingredient costs.

Marketing costs cannot be spread over product line.

Customer Loyalty

Because there is currently no retail frozen premium bread dough, customers would currently
have no brand to be loyal to. First entry advantage might deter customers from switching brands
if a new competitor entered the market.
If a known baked bread brand, such as Rudis, were to enter the market, customers would be
more likely to buy known over unknown.
Loyalty to baked breads brand could deter customers from switching to frozen dough option.

Proprietary

Recipes competitors may not be able to replicate that customer-winning flavor.

14

Competitive Analysis Barriers to Entry

Capital Requirements

Building a manufacturing facility from scratch is costly. For example, a 18x24x12 freezer
space would cost about $90K for parts and installation. 30
Copackaging agreements with licensed manufacturers are a means of avoiding the necessity to
build a factory.
Unused capacity can be rented from manufacturers or restaurateurs (approximately $10 to
$14/hour).31 This is a low capital way for a small company to test the business concept without
major investment.
Cold storage facilities, such as Atlas Cold Storage, offer storage and inventory management,
thus reducing the need for on-site freezer space.
Cold storage freight services alleviate need for company purchase of refrigerated truck fleet.

Access to distribution channels

Must convince retailers and distributors to carry your product. They may not be interested in
dealing with small manufacturers.
Do not have direct access to customer if using standard distribution channels.

Government Regulation

Must follow state and local Department of Health commercial food safety requirements (cant
start a food business in your garage).
Must register with the FDA and follow food labeling guidelines. 32

15

Competitive Analysis Degree of Rivalry

Price point issues

Variety of entrants in bread market means that price comparison is inevitable.

Premium, natural, and organic breads generally sell in the range of $3-$5 for a 1 pound loaf of
bread.
If frozen bread dough is priced significantly above baked options, consumers will substitute.

Rivalry is somewhat friendly. Competitors provide coupons and promotions to

encourage consumers to purchase their produce, but price wars are not an issue.
Big manufacturers, such as Pillsbury or Wonder, that have the power to squish
competition wouldnt be interested in a small niche market like frozen premium bread
dough.

16

Competitive Analysis Major Competitors

There are no direct competitors in the premium frozen bread dough category, so we focus
on indirect competitors. Key indirect competitors include:
Frozen traditional bread dough

Rhodes International - frozen loaves in white or wheat. The white bread compares to a
traditional sandwich loaf little flavor, soft texture.

Frozen pre-baked traditional

Pillsbury Oven Baked Crusty French Mini Loaves a household brand name producing an
extremely average convenience bread product.

Frozen pre-baked natural or organic

Alexia - frozen baked artisan bread rolls. Known for producing a quality product.

Fresh natural or organic

Rudis Organic Bakery produces a wide array of certified organic breads, primarily sandwich
style.

Grocery bakeries

Grocery bakeries produce a large variety of fresh baked breads of varying qualities. Natural
food grocers generally produce a higher quality product.

See the Competition Matrix in Appendix 2 for a detailed comparison of competitors.

Possible Future Competitors:
Current baked bread manufacturers could easily produce a frozen dough product. Its really just a
matter of making slight modifications to production and packaging.
Food service companies, such as Bridgford, Ralcorp Frozen Bakery Products, and Richs, produce
frozen dough or par-baked bread and could fairly easily offer a retail product.

17

Competitive Analysis - Competitor Self Perception

Rhodes Bake-N-Serv 33
Enjoy hot, homemade quality white bread fresh from
your own oven. Available in three or five loaves per
package. Just thaw, let rise, & bake!
Family owned company committed to quality

Rudis Organic Bakery 34

Our Mission is to be the leading manufacturer and
supplier of branded certified organic breads. We are
dedicated to the highest standards of quality, taste,
packaging and communications. We are committed to the
families we serve and look to bring warmth, sincerity, joy
and a higher quality of life to our people, our customers
and the world.

Alexia 35
Alexia Foods, Inc. produces a full line of 100% all
natural, trans fat free, premium frozen products for the
oven, microwave or fryer that deliver outstanding gourmet
flavor from freezer to table in just minutes.
Convenient and versatile, Alexia Artisan Breads bake
up beautifully and complement any dish.

18

Competitive Analysis Basis of Competition

Convenience vs. Quality

Shelf bread is part of a weekly shopping trip. Sacrifice freshness and quality for a product that
will easily last a week.
Frozen (pre or par baked) bread products offer the convenience of fresh baked bread without
an immediate trip to the store. Sacrifice immediate use, and sometimes flavor, for a product with a
longer life.
Fresh bakery products come in 2 categories:
Cheap and not so tasty. Good if you are already making a quick trip to the store.
Higher quality products may have a very good artisan flavor, but freshness deteriorates quickly and an ondemand trip to the store is required.

Frozen bread dough requires some planning, but allows one to make fresh bread without the
hassle of mixing, kneading, or forming, and no on-demand store trip is required.
Premium frozen bread dough offers high quality ingredients and flavor and medium convenience.

The level of convenience is tied closely to ones proximity to a store (rural populations).

Reputation For big industry players, like Rudis or Rhodes, their reputation is a key
competitive factor.
Consumers will try product based on name alone.
New ventures do not have brand recognition

Specialty Offering specialty products, such as gluten free or vegetarian, is a key

competitive factor for many small bread makers.

19

Competitive Analysis Control over Prices, Costs, & Channels

Prices

Consumers know what bread costs. Limited ability to charge a premium price.
Consumers are highly unlikely to buy bread that cost more than $5 a loaf, based on what is
already competitively available.

Costs

A start-up is going to have a difficult time getting price breaks from suppliers. With the relative
shortage of natural and organic ingredients, suppliers have a fair amount of power.
Conversely, some market factors have made standard ingredients more expensive, which
means there is less marginal cost to going organic. For example, due to natural disasters,
regular sugar is currently only slightly cheaper than organic sugar (40/lb. vs. 50/lb.). 36

Channels of Distribution

Large grocery chains require distributor relationships.

Introduction in local stores can provide a means for bypassing the distributor.
Internet sales could be a creative means of connecting directly to retail customers.

Competitive Analysis Market Domination

No direct competitor
Many small businesses in the natural and organic bread market
In the Frozen Bread/Rolls/Pastry Dough category, Rhodes International has 40% market
share, Homade Foods Inc. has 44% and General Mills (including Pillsbury) has 10%. 37

20

Competitive Analysis Conclusion

Bread manufacturers are not currently addressing the market niche for premium frozen
bread dough.
Existing indirect competitors could enter this niche market fairly easily if they wanted.
Future competitors, such as food service companies, could also enter this niche.
Market size is small so there is little incentive for large companies to enter the market.
There is a market opportunity for premium frozen bread dough, and currently no direct
competition, but there is no barrier for future entry.

21

Endnotes
Global - Bread and Rolls, Datamonitor industry market research, October 31, 2005.
2 Japan Bread and Rolls, Datamonitor industry market research, December 1, 2006.
3 D. Gail Fleenor, Rising Sales: The Comfort and Aroma of Home-Baked Bread, Rolls, and Biscuits are Available From a
Wide Array of Tasty, Convenient Items in the Freezer Aisle, Frozen Food Age, December 2006. Vol.55, p18.
4 Renee M Covino, Bread is Back: Oh What a Difference a Year--and the Return to Balanced Eating--Makes on the
Frozen Bread/Dough Category, Frozen Food Age, April 2005, Vol.53, p28.
5 Baby Boomers and the U.S. Food and Beverage Industry, December 2005, p95.
6 Market Trends: Fresh Bread and Related Products, August 2004, p2, p9
7 Tom Sancton, Fortune magazine, Jun 22, 2007, Vol.115, p157
8 Bread, Cake, and related products Encyclopedia of American Industries. Online Edition, Thomson Gale, 2006
9 Market Trends: Fresh Bread and Related Products, August 2004, p7
10 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p114
11 Baby Boomers and the U.S. Food and Beverage Industry, December 2005, p83
12 See Call Reports - Lind Iggi, Jason Vincent, and Scott Roy
13 See Call Report - Tom, Vitamin Cottage
14 The U.S. Market for Whole Grain and High Fiber Foods, April 2005
15 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p117
16 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p21
17 See Call Report - Adam Schneider
18 See Call Reports - Adam Schneider, Jason Vincent
19 Renee M Covino, Bread and Dough for a Crisp Fall: Get Customers Ready for the Autumn Baking Season with More
Frozen Bread, Dough and Rolls--Now Highlighted with Extra Health and Convenience, Frozen Food Age, June
2006, Vol.54, p24
20 Market Trends: Fresh Bread and Related Products, August 2004, p61.
1

22

Endnotes
Simmons Market Research Bureau, Study of Media and Markets Fall 2004
Global Bread and Rolls, Datamonitor industry market research, October 31,
2005
23
Market Trends: Convenience Home Baking Products, February 2004, pp84-86.
24
See Call Report - Jason Vincent
25
See Call Report - Mr. Sato
26
See Call Report - Jason Vincent
27
Frozen Dough Handbook, Volume 61, p10, Rhodes International Inc.
28
See Call Report Scott Roy
29
See Call Report - Jason Vincent
30
See Call Report Scott Roy
31
See Call Report Lind Iggi
32
http://www.cfsan.fda.gov/list.html
33
http://www.rhodesbread.com/
34
http://www.rudisbakery.com/about_us/mission.jsp
35
http://www.alexiafoods.com/index.html
36
See Call Report Scott Roy
37
Market Trends: Convenience Home Baking Products, p51, February 2004.
21
22

23

MBAX 6100
Entrepreneurship and Small Business Management
Feasibility Plan Part III

Auntie Carlas Frozen Bread Dough

April 24, 2007

Carla Ooyen & Masashi Tsuchiya

Market Analysis Summary Market Trends

Size and Growth

Market size of all Bread and Roll in the United States is more than $10 billion. Low future
growth rate. Details as follows;

Market value projections in billions of $

(source: Market Trend, Fresh Bread and related products, August 2004, p2 and 9)
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$10.50

$11.10

$11.40

$11.70

$12.00

$11.40

$11.20

$11.20

$11.40

$11.50

Increasing gourmet premium market

Artisan bread market is increasing

By 2003 sales of premium breads in the United States are about 16 percent of all bread
sales, and continue to increase. 1
Artisan and specialty bread sales have increased 23% from 1998 to 2003. 2
Specialty breads add cachet People are looking for more sophisticated flavors 3

Organic food is increasingly popular.

Anti-allergy food (non sugar, gluten free, etc) is increasingly popular.
Whole grain bread is increasingly popular.
Young mothers want to feed their babies better food. 4
People are looking for natural version of everyday products. 5

Increasing market for healthy foods

25

Market Analysis Summary

Segmentation

Industrial Bread (mass produced, mainly white bread)

Artisan Bread (bakery made, premium gourmet, organic, natural, etc)

Bread penetration rate is more than 95% 6

Typical whole grain bread consumer: 55 years or older, College graduate or higher
education, retired, no children, and homeowner

Market Threats

Little growth in bread market.

Raw material supply weather issues or surge in organic ingredient demand could cause
supply shortage
Economic downturns reduces the demand for premium products.

Market structure

Retail route : majority of bread products

In store use :

Own Production : Bakery

Manufacture Wholesaler Retailer Consumer

Manufacture Wholesaler Restaurant/Cafe Consumer
Manufacture/Retailer Consumer

26

Market Analysis Summary Opportunity and Niches

Opportunity

Increasing market trend for premium artisan bread

Huge world market (opportunity for export)

Niches

No premium frozen bread dough in current bread market.

New Distribution channel

Internet e-commerce
Other form of direct sales to consumers
Export opportunity

27

Competitive Analysis Summary

Industry Structure

Carrying Capacity - limited space in the frozen food section, must find a niche
Degree of Stability - Fairly stable year-to-year demand. Diet trends can have a serious negative
effect
Complexity - have to work with suppliers, distributors, brokers, and retailers.
Industry Evolution
Organic food segment is in the later stages of the high growth phase. Retailers are starting to see metoo products rather than new innovations. 7
Organic growth opportunities are tied to convenience and replication of traditional products.

Barriers to Entry

Economies of Scale large manufacturers can get volume discounts

Customer loyalty to existing brands
Capital Requirements must secure necessary product space & equipment
Distribution Access - Must convince retailers and distributors to carry your product
Government Regulation must meet State Department of Health & FDA requirements

Degree of Rivalry

Price Point must be competitive with other bread options

Power big manufacturers have power to control market if desired

28

Competitive Analysis Summary Major Competitors

Key competitors in the bread industry include:
Frozen traditional bread dough

Rhodes International - frozen loaves in white or wheat. The white bread compares to a
traditional sandwich loaf little flavor, soft texture.

Frozen pre-baked traditional

Pillsbury Oven Baked Crusty French Mini Loaves a household brand name producing an
extremely average convenience bread product.

Frozen pre-baked natural or organic

Alexia - frozen baked artisan bread rolls. Known for producing a quality product.

Fresh natural or organic

Rudis Organic Bakery produces a wide array of certified organic breads, primarily sandwich
style.

Grocery bakeries

Grocery bakeries produce a large variety of fresh baked breads of varying qualities. Natural
food grocers generally produce a higher quality product.

See the Competition Matrix in Appendix 3 for a detailed comparison of competitors.

Possible Future Competitors:
Current baked bread manufacturers could easily produce a frozen dough product. Its really just a
matter of making slight modifications to production and packaging.
Food service companies, such as Bridgford, Ralcorp Frozen Bakery Products, and Richs, produce
frozen dough or par-baked bread and could fairly easily offer a retail product.

29

Competitive Analysis Summary

Basis of Competition

Convenience vs. Quality - Shelf bread with long life vs. Fresh bakery product with better taste
but shorter life
Reputation - For big industry players, like Rudis or Rhodes, their reputation is a key competitive
factor. New ventures do not have brand recognition
Specialty Offering specialty products, such as gluten free or vegetarian, is a key competitive
factor for many small bread makers.

Control over Prices, Costs, & Channels

Consumers know what bread costs. Limited ability to charge a premium price.
A start-up is going to have a difficult time getting price breaks from suppliers. With the relative
shortage of natural and organic ingredients, suppliers have a fair amount of power.
Large grocery chains require distributor relationships, but there may be creative alternatives to
the traditional channel, such as local stores or internet sales.

Market Domination
No premium frozen bread dough in U.S. retail market
Many small businesses in the natural and organic bread market
Conclusions
Bread manufacturers are not currently addressing the market niche for premium
frozen bread dough.
Existing indirect competitors could enter this niche market fairly easily if they wanted.
Future competitors, such as food service companies, could also enter this niche.
Market size is small so there is little incentive for large companies to enter the
market.

30

Venture Analysis Opportunity and Need

Opportunity for Frozen Bread Dough

Market trend for premium bread needs

Huge world market for bread export opportunity. Higher share of artisan bread in Europe and
Japan (than in the US)8
No premium frozen bread dough in current retail bread market.
Jason Vincent, Category Manager - Frozen Foods for Wild Oats, feels that there is a need for
natural/organic frozen bread dough and is surprised that no one has yet entered that niche. The
long shelf life is a key attractive characteristic. He feels the market is probably 2 to 3 units per
week per store. 9
Adam Schneider, natural food broker, indicated that he could sell the hell out of a par-baked
frozen bread product. 10
In 2004, the natural foods bread and baked goods category grew 14.1%. 11

Problem: Not everyone has the joy of experiencing fresh baked bread

No time to make nutritious, great tasting bread.

May not live near a bakery where premium, natural, or organic bread is made.
Not everyone has the skill or desire to make good bread from scratch

31

Venture Analysis Opportunity and Need

Compelling Need

Physical we all need food to survive, and bread is a major part of the American diet.
Physiological Faced with increasing obesity and health concerns, Americans have a need
for healthier products
Shoppers want to see high levels of specific nutrients and specific health claims on Nutrition Facts

labels and whole grain is one of the most important claims.

12

[reaffirmed by customer survey data]

Emotional

Want the satisfaction of feeding a nutritious product to loved ones

Fresh baked bread makes people feel warm and comfortable
Relieve the stress of needing to find time to make the product oneself
To relieve the stress of hectic lifestyle, want convenient, fast and fresh products: As lifestyles change
and people having lesser time for baking, refrigerated and frozen categories seem to be more
convenient to bakers rather than preparing from mixes. 13

Social
Consumers want to join peers in showing increased concern for sustainable practices. They want
products that show their Awareness of earth-friendly farming practices and desire to recycle and
conserve energy 14

Want a fresh, homemade product to serve friends at dinner parties. 15

16

32

Venture Analysis - Product

Product Description

Performance
Product will rise and bake dependably to produce a consistent taste and texture.
Ingredients will be natural or organic. Nutritious whole grain options will be offered. No
unpronounceable ingredients.

Dough is made using old-world multi-day build processes to provide optimum flavor complexity.
Packaging will protect product from freezer burn to guarantee taste and texture once baked.
Loaves will be sold in packages of 2-1 lb. loaves or 3-10 oz. loaves.

Cost

Availability

Target retail price per package is $7.99 [for 2-1lb or 3-10 oz.].
Promotional discounts or coupons would be available (generally required by distributors and grocers).
Discount price (such as 90% retail) could be offered for direct sales (such as internet).
Carried by natural grocers and mainstream grocers, specialty shops
On-line purchases available for local customers or those willing to pay for refrigerated/dry-ice freight.
Consumers required to make cash purchases, but Company will have to maintain credit terms with
distributors or other commercial purchasers.

Social

Service

Use product performance superiority to build a name that people can trust.
Fun brand that consumers of all ages can enjoy
Customer as marketer, spreading the word to family & friends

Money-back product quality guarantee

Possible organic certification
Comprehensive, easy-to-use website with long list of categorized FAQs
Specialized instructions to meet variety of customer cooking styles
Customers feedback actively solicited and acted upon.

33

Venture Analysis - Product

Product Range (based on consumer survey results)

Flavors

Sizes

Shapes

Stage 1: Whole wheat, multigrain, sourdough

Stage 2: Rye, bagels, specialty such as cinnamon raisin
Stage 1: Package of 2-1 lb. loaves
Stage 2: Package of 3-10 oz. loaves
Traditional loaf shape
Consumer option to cook without pan for an artisanal, free-form shape.

Stage 1: First stage of introduction

Stage 2: Product expansion phase

Meeting Customer Needs

Product targets need for healthier, convenient products. [See Opportunity/Need and Unique
Benefits sections for more details]

Production & Delivery

Rented bakery & warehouse space, used bakery equipment (if not pre-equipped space)
Contract refrigerated freight services for transportation.
Internet sales will require overnight shipping w/special packaging (customer pays shipping
premium)

Product Design Refinement

Investigation of freezing techniques, such as flash freezing, to optimize stability of product quality.
Investigation of partial proofing before freezing to speed thaw times.

34

Venture Analysis Customer Survey Summary & Conclusions

General Survey

Mixed response to idea:

Concerns - The time involved and the possibility that the bread wont taste good in the end
Varieties

Price

Whats Important

Most bread is purchased in the supermarket bread aisle

Many like the idea and thought it seemed simple: Seems just like laying out meat.
Others hated it: I pay people to bake for me

Whole wheat was clearly the top choice.

Multigrain & Sourdough were the secondary selections
Limited interest in other varieties such as rye, bagels, white, pita, and cinnamon raisin
Standard Loaf: $2-6
Small Loaf: $1-3

Superior flavor is very important

Natural/Organic, Whole grain, & Freshness are fairly important
Price & Shelf Life are only somewhat important

35

Venture Analysis Customer Survey Summary & Conclusions

Prototype samples survey

Liked the appearance, taste of the loaf

Concerned about the bread taking a long time to thaw and rise

Suggestions

One respondent felt more likely to purchase after trying.

Felt that a bigger loaf was probably better given thaw/proof time.
Including pan added to convenience
Would purchase the bread for special occasions, like dinner parties.
Good for people who dont know how to bake.

It tasted like the

best store-bought
bread or bakery
bread that I have
ever had. My
husband would like
to put in an order
already!

Consider making bread rings of sectioned bread to speed up the proofing.

Really soft doughs proof much more quickly than dense wheat and rye doughs.
To attract attention, I might put seeds on and in some of your breads

Conclusions

There is consumer interest in the product.

Need to investigate methods that might allow much quicker thaw/proof times perhaps
partial proofing.
One surveyor left the bread in backpack overnight, refroze, and then tried again. Flavor was
still good. This suggests that a partial rise might be an option.
Really great directions and website are needed to meet different customers needs. Some
want detailed directions, some go by feel, etc.

36

Venture Analysis Targeted Consumer Market

Targeted Consumer

Demographics

Cook of the family, generally women

Parents in their late 20s to late 30s
College educated professionals
Baby Boomers (Early 40s to early 60s)
High income households ($50K+)
Semi-rural to rural consumers where bakeries are less accessible

Psychographics
Believe in a healthy lifestyle which is supported by nutritious foods
Believe in the benefits of regularly purchasing natural/organic products because they are good for
them and good for the environment
Want to feed their family (especially children) a quality product
Want to replace traditional products with healthy alternatives

Social status
Grew up in a lower to middle income family (more likely to have experienced fresh baked bread)
Middle class values with an upper income
Family is important, but the rest of life gets in the way

37

Venture Analysis Targeted Consumer Market

Distribution

Retail Route: Manufacturer Distributor Grocer Consumer

Food Service: Manufacturer Distributor Food service/Restaurant as Consumer
Internet or Local Sales: Manufacturer Consumer

Target markets opinions on current offerings17:

Generally satisfied
Decent, but not always fresh or tasty doesnt last longartisan breads are hard to
come by
Theres a lot of choice out there; but not much when it comes to baking at home

Consumers appear willing to try the product as long as performance concerns can be
mitigated.
Buying decisions are made by the family grocery shopper. Survey results indicate
that:

Superior flavor is very important

Natural/Organic, Whole grain, & Freshness are fairly important
Price & Shelf life are only somewhat important

38

Venture Analysis Unique Benefits

Major Benefits

Health
Nutrition - natural/organic ingredients, whole grains, lack of processed ingredients are better for the
body
Taste like going to a French bakery, not the day-old section

Emotional
Love serving quality ingredients to family and friends
Achievement for those who havent had success making own bread from scratch
Convenience dont have to make a mess mixing or forming. No flour to clean off the counter. No run
to the store for bread.
Comfort can enjoy warm fresh bread straight from the oven
Memories - smell of fresh bread baking takes you back to Grandmas kitchen

Social

Service

Sustainability organic ingredients are good for the environment, as is recyclable pans and packaging
Personal Relationships make friends think you slaved all day and are an amazing baker!
Helping hand website and customer support line are like cooking with a professional chef in the
kitchen. Youll always have answers to problems and questions.

39

Venture Analysis Unique Benefits

Uniqueness of Benefits

Rhodes frozen bread dough can also provide convenience, achievement, comfort, &
memories benefits
Organic bread makers, such as Rudis, provide health, convenience, and sustainability
benefits
Only Auntie Carlas can provide all of these benefits through its quality manufacturing,
packaging, and excellent customer service!

Educating the Market

Teaching them that bread can be in the frozen aisle

Sampling product to prove that its dependable, easy, and tasty

In-store demonstrations
Website information

40

Venture Analysis Sustainable Competitive Advantage

Ventures resources

Financial

Physical assets

Recipe

Location (Boulder)

New idea

Low capital requirement to start and run the venture

Founders have personal savings to commit to starting venture
Founders can take personal loans and use credit cards to provide additional financing
Spouses to keep food (in addition to bread) on the table

Low requirement for plant and equipment

No incoming ownership of physical assets
Rent kitchen space to avoid initial capital requirements
Ability to produce nutritious & tasty product
Health sensitive consumers who would buy healthy food
Healthy image of the town
Easy access to local Natural Food industry
New frozen dough product that is easy to bake

41

Venture Analysis Sustainable Competitive Advantage

Ventures capabilities

Knowledge

Contacts

Website

Management Two CU Leeds MBAs!

Product expertise and production experience - Carla
Export experience Masashi
CU Alumni network, Deming Center, entrepreneurship professors
Access to the knowledge of Boulders natural food experts
Family & Friends to help build a full service website that will help to draw & keep customers

Barriers to entry that venture faces

Regulatory
Must meet state board of health regulations. This is easy if renting shared/incubator kitchen space that is
already certified.

Proprietary

Bread is not high technology, so there are no trade copyrights or patents to battle.

Customer Loyalty

Distribution

Competitor Response

Loyalty to baked bread brands could deter customers from switching to frozen dough option.
Getting customers to look in the frozen section for bread
Have to convince grocers to find room in limited freezer space to carry our product.
Have to convince distributors to carry product line.
If a known baked bread brand, such as Rudis, were to enter the market, customers would be
likely to buy known over unknown.

more

42

Venture Analysis Sustainable Competitive Advantage

Barriers venture can create

New distribution and retail system

If we can create our own private distribution or/and retail channel which other manufactures can not
imitate, this would function as a barrier.

Customer brand loyalty

Because there is currently no retail frozen premium bread dough, customers would currently have no

brand to be loyal to. First entry advantage might deter customers from switching brands if a new
competitor entered the market.
Create a taste that consumers cannot forget
Build consumer trust in the quality of ingredients
Build complete product line one stop purchase of all frozen baked products
Create website that consumers like to visit, builds camaraderie, and answers all of their questions.

Trade secrets

Create unique recipes and baking processes competitors may not be able to replicate that
customer-winning flavor.

43

Venture Analysis Risks

Marketing

Will the consumers buy?

With current financial projection, break-even sale volume is about 250-1 lb. loaves per day. Based on
an initial sales estimate of 3 loaves/variety/store per week [based on Jason Vincent interview] and
assuming 4 initial product varieties, product would have to be in 146 stores to reach break even
volume.
If this break-even volume cannot be obtained before savings are depleted, the venture will fail.
Another low-carb diet craze could kill the venture before it gets off the ground.

Price structure
Every dollar change in sale price has a huge impact on revenue. $1 increase in retail price reduces

break-even sales to 175 units per day. On the other hand, $1 decrease in sale price increases breakeven volume to 450 units per day.
By decreasing retailers or distributors mark up by 5% (from 35% to 30%), it will decrease break even
sales unit by 15. On the other hand, increasing 5% will increase the break even number by 20 units.

Distribution and Grocer acceptance

Even with creative marketing strategies, venture is unlikely to achieve necessary volumes if
acceptance in traditional grocery channel cannot be quickly obtained.

Finance

Assuming founders can finance $100,000, the venture will not last more than three years
without achieving the break even sales volume. Sales must grow above break even number
within three years or the venture needs to be re-financed.

44

Venture Analysis Risks

Competitors

If existing well established bakery such as Rudis entered the market, consumers may prefer
Rudis because of brand familiarity. The venture needs time to create its good brand image
before facing competition.

Economy

Bread is a commodity product, thus less economic impact on total consumption of bread.
However...
Consumers may shift to low priced bread in sluggish market.
High quality, high priced bread is price sensitive.
The venture cannot reduce price and stay profitable.

45

Venture Analysis Financial Projections

See Appendix 1 for Financial Projection Assumptions

46

Venture Analysis - Conclusion

Compelling needs

Physical need for food

Physiological need for better ingredients
Emotional need for increased convenience, connection to loved ones
Social need for special occasions

Survey suggests that (potential) consumers are interested.

Frozen bread dough has unique benefit of easy baking at home environment.

Almost no barrier to entry

How to create barrier is the key question.
Opportunity to expand.

Relatively low investment required

High gross margin
Final profitability depends on the sales volume
Break even sales volume is about 250 loaves per day, can we achieve it?

Proof of the target markets interest

Benefits
Sustainable advantages

Profitability and Investment

47

Venture Analysis - Recommendations

Recommended further research

Possible barrier to entry that can be created

Regulation

Opportunity of sales

Opportunity for expansion

Distribution channel
Retail channel
Recipe
FDA Organic requirement
International Organic requirement
Possible sales volume
Export market research
Other (similar) products such as cookies, cakes, pet treats, religious needs (Jewish people bake
religious bread every week)
Sale to business customers such as restaurant, cafe, or even local bakery

Prepare prototype

Prepare a unforgettably delicious organic bread dough.

Investigate freezing/thaw procedures that are more convenient.

Prepare a business plan

Take MBAX 6170

Prepare business plan

48

Endnotes
Bread, Cake, and Related Products, Encyclopedia of American Industries. On line Edition, Thomson Gale, 2006.
2 Market Trends: Fresh Bread and Related Products, August 2004, p7.
3 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p102.
4 See Call Report- Adam Schneider
5 See Call Report- Adam Schneider
6 Market Trend, Fresh Bread and related products, August 2004, p67.
7 See Call Report - Jason Vincent
8 Global Bread and Rolls, Datamonitor industry market research, October 31, 2005.
9 See Call Report - Jason Vincent
10 See Call Report- Adam Schneider
11 The U.S. Market for Whole Grain and High Fiber Foods, April 2005, p66.
12 ibid, p68.
13 Market Trends: Convenience Home Baking Products, February 2004, p58.
14 Baby Boomers and the U.S. Food and Beverage Industry, December 2005, p89.
15 See customer survey results
16 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p72.
17 See customer survey results
18 Panera Bread Corporate web site, www.panerabread.com
19 National Average of Baking Industry, www.BizStats.com
20 Great Harvest Corporate web site, www.greatharvest.com
1

49

Appendix Contents

Appendix 1: Financial Projection Assumptions.. 29

Appendix 2: Customer Survey.. 33
Appendix 3: Competition Matrix.36
Appendix 4: Call Reports37
Appendix 5: Feasibility Plan Parts I & II70

50

Appendix 1 Financial Projection Assumptions

Revenue

Number of units sold per day (based on what the venture needs to sell)

Price

Year 1 = 50 units per day

Year 2 = 150 units per day
Year 3 = 300 units per day

$4.00/unit (1 lb loaf) at retail

Other baked premium organic bread = about $4.00/lb
Retailers mark up = 35% (see Call Report : Scott Creevy)
Distributor's mark up = 30% (see Call Report : Scott Roy)
Assumed wholesale price = $2.28/unit (1 lb loaf)

COGS - Ingredient costs for basic 1 lb. loaf of organic white or wheat bread:

9 oz. Organic flour @ $0.63 to $0.80/lb = $0.47 - $0.60/loaf (probably cheaper at whole sale)

6 oz. Water @ almost nothing = $0.01

0.25 oz. Sea Salt @ $44/lb < $0.01
0.1 oz. Yeast @ $2.60/lb = $0.02
Total material cost = $0.51 to $0.64/loaf
Total cost (labor included) $1.00/loaf (1 lb)

Bobs Red Mill (www.bobsredmill.com) 25lb at $15.75

Shop Natural (Guistos Flour) 50lb at $40.00

51

Appendix 1 Financial Projection Assumptions

Operating expenses

Sales and Marketing

General & Administration

Depreciation

Sales promotion $400/month (10 free samples per day + $100 printed promotions per month)
Transportation $300/month (1800 miles per month / 15 miles per gallon / $2.5/gallon fuel cost)
Communications $300/month (2 land lines X $50 + 2 mobile phones X $50 + Internet/web $100)
Other expenses $150/month
Total $1,150/month (fixed cost at constant for all three years)

Bakery space $750/month ( 750 F kitchen space at $1 Rent / F / month)

Pay check $6000/month ( 3 workers including 2 founders X $2000/month)
Total $6750/month (fixed cost at constant for all three years)
$16,000 equipment / 10 years life = $1,600 per year

Investment Required

Capital Expenditures (only required at year 1)

Working Capital

Other major expenses

Dough mixer $6000 (used, capacity 60qtrs)

Freezer $10,000 (new, 8 x 10 walk in)
Other equipment $2000 (used sink = $1000, Used counter and other = $1000)
Payment to suppliers = cash on delivery ( +0 days)
Payment from retailers = cash by next month day 20 th ( -1 day to -50 days )
Average negative 25 days of sales amount
Installment of equipments and other $1000

52

Appendix 1 - Financial Projection Assumptions

Comparables Financial information

Most small bakeries are privately owned. No financial information except larger public
companies.
Panera Bread (only company owned bakery and cafe section) 18
COGS = about 30% of sales amount
Labor = about 30% of sales amount

National average of baking industry 19

Out of 5,354 companies

Average COGS = 56% of sales amount

53

Appendix 1 - Cost of starting a franchise

Great Harvest (Franchise Retail Bakery) 20

Initial fee

Average Initial Franchise Fee $30,000

Travel & Training Expenses $381-$12,000 average $4,488
Real Estate & Improvements$8,348-$172,022 average $70,586
Equipment $44,341-$140,727 average $78,325

Opening Inventory

Prepaid Expenses

Ingredients & Supplies $2,750-$27,000 average $8,346

Signs $615-$23,793 average $5,953
Grand Opening Advertising $400-$8,689 average $3,495

City, County, State, Landlord $400-$21,232 average $6,420

Organizational Costs
Legal, Utilities $425-$42,475 average $10,063
Working Capital (Cash Reserves) $5,000-$70,000 average $12,285
3 Months Rent $4,455-$18,600 average $10,383

TOTAL ACTUAL INVESTMENT $107,608-$352,322 average $225,682

54

Appendix 2 Customer Survey

Survey of Monday night MBAX 6100 class

Response to Idea:

Yes: 17 Maybe: 2 No: 9

Seems just like laying out meat
I pay people to bake for me
Already have a breadmaker. Hobbyist breadmaking
need already filled
Offer companion product like dip
Is frozen less healthy?
Like frozen Jewish breads, would like more options

Concerns

Price

Whats Important

Demographics

Worried that making bread is tough. Is there room for

baking error?
Time involved maybe a weekend activity, want
instant
Having to remember to thaw ahead of time/ planning
Will it taste as good as bakery products?
Over/under baking
High Altitude baking

Varieties Rank

The overwhelming choice: Whole Wheat

Next: Multigrain & Sourdough
Some interest: Rye & Bagels
Limited Interest: White & Pita
Special Interest: Cinnamon Raisin

Standard Loaf: $2-6(10)

Small Loaf: $1-3(5)

Superior flavor is very important

Natural/Organic, Whole grain, &
Freshness are fairly important
Price & Shelf life are only somewhat
important
Whats missing: good baguettes

Male: 25 Female: 3
Household Size:6(1) 10(2) 2(3) (4+)4
Age Group: 3 (18-25) 10 (26-30) 8

(31-37) 1 (38-50)
Primary Shopper? Yes: 13 No: 7

How much do you buy per week:

2(0) 6(1) 6(2) 6(3+)

Where do you buy: (No/Maybe/Yes)

Supermarket bread aisle: 8 / 2 / 8

Supermarket bakery: 2 / 1 / 6
Supermarket frozen section: 1 / 0 / 3
Bake at home from scratch: 1 / 0 / 1
Bake at home using mixes: 1 / 0 / 1

55

Appendix 2 Customer Survey

Survey of Professors/Administrative Staff

Thought product seemed like a good idea

Concerns

Thawing long enough/sufficient rise

Under/overcooking
Freezer burn/Freshness
High altitude baking
Will it taste like homemade?

Expected price

Multi-grain & Whole Wheat top variety choices

4 Females/1 Male
1 (31-37) 1 (38-50) 3 (50+)

Comparable to fresh-baked prices

$1.50 to $3 for large loaf
$0.80 to $2 for small loaf

56

Appendix 2 Customer Survey

Survey of classmates given prototype samples of product to try

4 Women & 1 Male

3 Loaves of Rye, 2 loaves of sourdough
Liked At least 1 was ready to make purchases!

Concerns

Use

Suggestions

Conclusions

the convenience of pan

The appearance of the baked loaf
The flavor: tasted great, having hot bread
One respondent felt more likely to purchase after trying
Generally thought that a bigger loaf was probably better given thaw/proof time.

It tasted like the

best store-bought
bread or bakery
bread that I have
ever had. My
husband would like
to put in an order
already!

Bread took a long time to thaw and rise, takes a lot of planning ahead
ecological impact of disposable pan
would purchase the bread for special occasions, like dinner parties
Good for people who dont know how to bake
consider making bread rings of sectioned bread to speed up the proofing
Really soft doughs proof much more quickly than dense wheat and rye doughs
to attract attention, I might put seeds on and in some of your breads
Need to investigate methods that might allow much quicker thaw/proof times perhaps partial proofing
One surveyor left the bread in backpack overnight, refroze, and then tried again. Flavor was still good.

This suggests that a partial rise might be an option.

Really great directions and website are needed to meet different customers needs. Some want detailed
directions, some go by feel, etc.

57

Appendix 3 Competition Matrix

Manufacturer

Product Description Quality

Frozen white or wheat
Rhodes Bake-N-Serv bread dough
Traditional
American Flatbread
Pillsbury
Alexia
Nature's Path
Food For Life
Rudi's
Whole Foods

Breadworks

Visual Appeal Convenience

Shelf Life
Medium - simple Medium - thaw and
but good
bake
Low
Long
Medium - thaw and
Frozen pizza dough
bake
Natural
Long
Prebaked frozen miniPoor - squished High - bake 20
loaves
minutes
Traditional
Very Low in transit
Long
High - bake in 8
Prebaked frozen rolls Artisan-Natural
Medium-High
minutes
Long
Medium - sliced Medium - must
Baked, frozen, sliced Organic Vegetarian
bread
thaw
Short

Price

Strengths
Weaknesses
Well known frozen dough "Tastes like
Wonder Bread"
$3.29 for 3 1lb. Loaves brand
$9.99 for 1lb
Poor appearance
and taste

$4.19 for two loaves

Household brand

$3.69 for 10.5 oz.

$3.79 per 14 oz. loaf

Trusted name
Roll size only
Good for consumers with Not mainstream
allergies
appeal

$4.79 per loaf

Good for consumers with Not mainstream

allergies, vegetarians
appeal

$3.99 to $4.29

Quality

High

Medium - sliced Medium - must

bread
thaw
Short
Medium - sliced
bread
High - ready to eat Short

Artisan

High

High - artisan

High - ready to eat Very Short $2.99 to $3.99 per loaf Convenience & Taste

Short shelf life

Artisan

High

High - artisan

High - ready to eat Very Short $3.00 to $5.40 per loaf Very Fresh

Short shelf life

Baked, frozen, sliced Organic Specialty

Shelf entry sandwich
bread
Organic
Fresh baked, bakery
Local bakery
produced artisan
bread

Taste

Not fresh baked

58

Appendix 4 Call Reports

Index of Reports:
1. Beth Swanson, Rudis Organic Bakery
2. Kyla Duffy, former owner Nutballz
3. Scott Roy, President, Boulder Ice Cream
4. Adam Schneider, Owner, United Sales & Service
5. Jason Vincent, Category Manager, Frozen Foods, Wild Oats Corporate
6. Linda Iggi, Owner, Amazing Grains
7. Scott Creevey, Owner, Great Harvest Bread
8. Soichiro Sato, Manager, Clear freight
9. Tom, Store Supervisor, Vitamin Cottage
10. Name Unknown, Bread Sales Supervisor, Whole Foods

59