The costs of making and selling delicious cakes have been stable, but not anymore. In recent years, the price of almost every ingredient and supply item has dramatically increased.
We are experiencing global price increases in every one of the staples like butter, eggs, and flour. These changes make the budget management for the cake baking extremely challenging.
This is a problem for every baker, from the at-home bake shop to the large commercial shop. As an example of the kinds of price increases I’ve seen as a bakery owner for 7 years, since 2022, ingredient costs have substantially increased by over 30%.
This is not going to be a short-term fix, and managing this new reality is going to require us to become intelligent planners and think through our decisions in order to keep our businesses. Let’s find out more about it. a
2. Key Factors Driving High Costs
It is also crucial that every baking professional or business operator consider why these fundamental costs are going up. Once that is known, you can develop better long-term strategies.
Multiple factors are increasing basic costs.
Global Supply Chain Issues
Global supply chain challenges remain in effect and are causing delays as well as increased charges to successfully bring goods into Canada. Since these events began after the pandemic, deliveries and imports, and exports are taking even longer. Some specialty ingredients are already more costly and are becoming riskier to receive and confirm on time. If a key imported item arrives late, the ability to make the cake can be eliminated, in turn costing your business money.
Inflation and Currency Changes
Another factor could be inflation and currency changes. Even relatively small drops in your currency’s value can lead to a rapid increase in imported items used in bakery production, such as high-quality chocolate or vanilla extract. A general anticipation of higher overall prices can mean that you must continually monitor and evaluate your budget, as financial stability can change on an almost hourly basis.
Environmental Problems
Increasing environmental costs impact your food costs through bad harvests. Events like droughts or floods directly impact grain, dairy, or sugar production. A bad harvest will result in the supply not being able to meet demand. Consumers immediately feel the effects in the rising price of milk, butter, and flour, all impacted by the price of unfinished goods.
Rising Packaging and Fuel Costs
Rising packaging and fuel costs also rise quickly. Transporting goods to market is more expensive, depending on the availability of fuel. The common consumer wants a better, more sustainable shipping option, which often costs more than traditional packaging, think Custom Cake boxes. The cost of fuel and delivery materials is reflected in the upfront costs of every single product you sell.
3. Impact on Cake Businesses
These rising expenses are more than just larger bills. They create real challenges with how a bakery functions.
- Lower profit margins for home bakers and boutique bakeries. The amount you keep after expenses is declining rapidly. A surge in the cost of primary ingredients like eggs and butter can quickly cut a cake’s profit in half. If you own a larger shop, the loss across hundreds of orders leads to a loss of thousands of pounds annually.
- Inconsistent price for your customers. In a steady market, you can adjust prices every few months. Now, if there’s a sudden price increase in flour, you are left making a decision if you are going to cover the loss or confuse a customer by increasing the price once again.
- Compromising on quality or portion size. The hardest choice to make is when you feel the pressure to use lower-cost ingredients to save expenses. For instance: “Using local butter did help control costs, but changed the somewhat distinctive flavor.” You should stay away from this difficult path, as customers will notice this, and eventually, trust or confidence in your brand will decline.
All these factors increase the presentation cost for your Slice cake boxes. You need to purchase packaging in bulk, or even use standard-sized boxes to reduce this necessary expense per unit.
4. Strategies to Manage and Overcome Rising Costs
No single bakery can stop global inflation, but we can employ several savvy, practical strategies to protect our business and keep our customers happy.
Smart sourcing
Instead of sourcing from large national distributors, deal directly with local farms or mills. Generally, local entrepreneurs can offer steadier prices and secure supply contracts than faraway suppliers since their supply chains are shorter. Since supply is the same risk as variable pricing, by locking in a year’s supply of local honey or local fruit, you will be minimizing your risk.
Bulk buying
When you have the opportunity to load up on sugar, cocoa powder, or vanilla, buy thousands of times! Just be sure to stack and store intuitively to protect them from price jumps later! It works well here, too. Packaging is a great example of things you can buy in bulk, like ordering your Custom Cake boxes from the wholesaler in higher counts than you would typically plan.
Menu engineering
Look over your menu and assess your most and least profitable items on it. Promote less expensive ingredient cakes like vanilla cake, as opposed to chocolate cakes.
Seasonally – if you have local fruits coming in at a high volume and a low cost, consider taking advantage of that fruit as an ingredient in your cake, saving money on your fresh ingredient markups.
Conclusion
Controlling the fast-rising costs in the cake business extends beyond being a good cake baker; it is sound financial planning and smart business. The two tools you may have at your disposal are flexibility and transparency.
If you carefully modify where you source your ingredients, employ menu engineering to emphasize the most profitable items, and be upfront with your customers about the actual cost of providing premium, quality cakes, you are safeguarding your business and your reputation. Additionally, you should be planning for packaging, whether it is an ordinary Slice cake box or a custom specialty cake box. It is just as important to plan for the packaging and the cake.
Controlling costs is challenging, but with a thoughtful plan and transparency, bakeries will be able to preserve the quality of the product and maintain customer loyalty over the long haul.
