Niche and Profitable

No-sugar-added, low-carbohydrate, nut-free, dairy-free, egg-free and
gluten-free. These are a few of the labels gaining attention in stores
these days. Can one product cater to all these needs? Probably not. Can
one bakery cater to all these needs, and still remain profitable?
Definitely.

No-sugar-added, low-carbohydrate, nut-free, dairy-free, egg-free and gluten-free. These are a few of the labels gaining attention in stores these days. Can one product cater to all these needs? Probably not. Can one bakery cater to all these needs, and still remain profitable? Definitely.

Let’s start with The Cake Shop — a cake, pastry, and cookie shop, based in Ottawa, Ont. Even the location — in a strip mall beside a large, grocery chain — has not stopped the business from carving its own market, with dedicated customers.

Managed and run by a mother-daughter team, Faye Kaplan and Nadine Hecht, the shop opened in 2000, selling traditional wedding cakes, pastries, and cookies. Their philosophy is to offer customers good quality, wholesome treats, without compromising on taste and ingredients. They use only the freshest and finest ingredients available, including real cream and butter – no substitutes, unless it’s for a special diet customer.

After a couple of months, The Cake Shop started receiving numerous requests for special dietary products. Being small allowed a quick response to customers’ needs, and before they knew it, Kaplan and Hecht were making no-sugar-added cookies, dairy-free birthday cakes, and gluten-free wedding cakes.

The requests for nut-free products started rolling in, and by January 2006, The Cake Shop became a nut-free establishment. This was a turning point of the business. Between the demand for no-sugar-added cookies and nut-free birthday cakes, The Cake Shop is turning people away. It is small, niche, profitable, and busy, refusing to be swept up into an expansion drive. In Nadine Hecht’s own words, “Ottawa is starved for quality, nut-free kids’ birthday cakes and desserts. Also, our biggest surprise has been the demand for cookies – especially no-sugar-added. We could split our business into two parts, and open The Cookie Shop!”

Their secret is to listen to the customer, adapting and modifying The Cake Shop’s product offering to customers’ wants, needs and desires. Hecht says they have found that customers are willing to pay a premium for a quality product. The business’ biggest challenge, right now, is finding good staff, and retaining them.

Another niche market success story is Lakeview Bakery, based in Calgary, Alta., owned and operated by Brian Hinton, for the past 17 years. Some might call Hinton a visionary, since he has been ahead of his time in this business. He started baking organic goods long before most people had even heard of organic. His passion for innovation motivated him to experiment with different ingredients, creating unique and delicious-tasting breads and baked goods.

Lakeview Bakery initially started business as a general bakery, but Hinton soon realized that there was a demand for organic baked goods. Given this, the bakery went organic. That was 12 years ago, and Hinton and crew haven’t looked back. Lakeview is the oldest organic bakery in Calgary. It also sells a wide range of special dietary products, including organic, gluten-free, egg-free, wheat-free, and low-carbohydrate breads, cakes and pastries. Lakeview Bakery breads can be purchased directly from the retail store, or from select grocery stores.

Being organic is the primary reason for the business’ success, as it created a niche market for the bakery. Hinton finds his clients are willing to pay that little bit extra for a superior quality product.

Lakeview’s biggest challenge is accessing locally produced ingredients because, as the demand for organic and special dietary products increases, the supply of ingredients tightens. Hinton continually looks for new ways to make his products better. The bakery is always trying out different ingredients — the test is in the taste.

Next, let’s take a look at Heartwood Bakery and Café, a wholesome bakery and restaurant in Halifax, N.S., owned and operated by Laura Bishop for over 10 years. The business specializes in a variety of vegan and vegetarian baked breads and treats that are gluten-free, egg-free, wheat-free and dairy-free. In the “special diet” category, Heartwood sources local organic ingredients, and uses them as much as possible.

Bishop launched her bakery-café realizing there was a need for vegan and vegetarian baking. From the moment Heartwood opened its doors, the café has had a steady stream of loyal clientele.

The bakery is imaginative and creative in the ingredients used, and continually experiments with substitutions for sugar, eggs, dairy and wheat. Initially, the business primarily targeted vegans and vegetarians. But these days, Heartwood Bakery is attracting a much wider market — particularly because people are always on the hunt for good quality, home-baked breads and wholesome treats. As long as customers are willing to pay for quality products, the operation is able to manage the escalating ingredient costs.

Its restaurant has contributed significantly to the business’ overall success, and allows customers to “sample” Heartwood’s products — after which, it’s only natural to shop at the bakery. As they say, “the proof is in the pudding” – or muffin, slice of cake, or butter tart.

With the majority of its clients being vegan or vegetarian, Heartwood sweetens all its baked goods with maple syrup, rice syrup or apple cider, and uses carob chips, instead of chocolate chips. Its clients are typically older, but Bishop has noticed an increase in the number of young people in the bakery, particularly university students.

Selling niche products can be your reason for success. It places you in a different category from the “big guys” — setting you apart from the competition. Instead of worrying about what you’re going to do when that big grocery chain opens up across the street, focus on what you can do better. It is much easier for the owner-operated store to cater to varying and special needs, than for a larger store. Individual retail bakery operations tend to be smaller, and can respond quickly to market changes. What’s more, they develop a relationship with their clients, and this, in turn, makes their customer base more loyal. Often, a successful product line is created as a result of customer requests – word-of-mouth (whether through the Internet, text messaging or just shared at the water cooler at work) shares the news about the “wonderful store”, the “have to have” new product, and the bakery’s “outstanding” customer service.

Customer service, relationship building, personalized product lines, comfortable environment – these are elements that set unique niche retail operations apart from their competitors, and give them an edge in today’s commercial marketplace.

These businesses prove that you can survive and run a profitable business in a niche market. The great thing about these three successful operations is that if they were all in the same city, they would all survive. They offer unique products to unique consumers, but still hold general appeal.

Debbi Arnold is principal of DA Consulting – Marketing Solutions for your business. She can be reached at: debbi@daconsult.ca , or visit www.daconsult.ca.