Confectionary

Industry data

There are approximately 680 businesses of various sizes currently active in the branch.

 

Industry Sub-division

There are a number of types of businesses:

  • A self-producing confectionary selling at one location only.
  • A self-producing confectionary selling at a number of locations.
  • A self-producing confectionary with a coffee shop at the location.
  • A wholesale confectionary.

A combination of the two latter constitutes a chain of confectionaries/coffee shops acting as branches or franchises.

 

Market Characteristics

  • In recent years, there has been increased development, expansion, and entrance of new agents into the market- beginning with food wholesalers, who manufacture ready-made baked goods, frozen or cold, and ending in home based confectionaries preparing gourmet foods which are sold either privately or to coffee shops and restaurants.
  • Consumers are accustomed to quality products.
  • There is a growing tendency in the market for consumption of natural products, products with healthy additives, and low fat products.

 

Customers: Defining the Target Market and its Size, Market segmenting

The target market includes the general population, according to income level, geographical vicinity, and taste preferences.

 

Competition

The industry is competitive, and a number of agents are active within it:

  • Food manufacturers, who produce and market ready-made, pre-packaged baked goods sold at retail food chains, and supermarkets.
  • Confectionaries and bakeries active within large retail chains offering a variety of ready-made baked goods.
  • Home based confectionaries.
  • Other confectionaries and bakeries active in the same geographical vicinity, stressing those that are targeted for the same market.

 

Vendors

Confectionary vendors include vendors for raw materials (flour, sugar, eggs, stabilizers, dairy products, etc.) kitchen equipment, and tools. If the confectionary includes a service area, equipment for the dining area is also required, and includes, tables chairs, tablecloths, utensils.

 

Marketing resources

Marketing in the industry is usually conducted by advertising, displaying salient signposts, and promotional activity.

Creating a reputation and a regular clientele is highly important.

Acting as a franchise for a known chain will allow the business to benefit from marketing and advertising performed by the chain.

 

Factors Affecting Success:

Location, quality, selection, design, service level, reputation, and/or constituting a franchise.

 

Entry Barriers:

A high investment is required for renovation and design, as well as initial equipment and inventory as well as professional knowledge. An additional barrier is the local authority licensing process.

 

Human Resources:

  • Production- professional human resources are required for the production process.
  • Sales- Personnel conducting sales is not required to have professional knowledge, although it is preferable that manager and sales persons have previous experience. At Many confectioneries, the sales and production positions are interchangeable.

 

Required Equipment:

  • Kitchen- work counters, stoves, refrigerators, kitchen equipment including molds and serving dishes, storage shelves.
  • Sales area- display shelves and refrigerators, sales desk.
  • Cash register or computer (including inventory management, telephone and fax.
  • If there is a dining area, dining equipment is also required.

 

Required Investment

  • Remodeling the store- dividing the store into a sales area, a display area, and a hidden storage area, while following foundation and construction licensing requirements.
  • Purchasing required equipment, as noted above.

Cost may vary according to type, size, and level of confectionary.

 

Industry revenue and profitability

Yearly revenue and profitability percentage are derived from the store’s location, price level, and quality of products. Raw yearly revenue is only an average.  Sales tend to increase during holiday periods.

Raw weighted cost- 30% in retail sales, 38-46% in wholesale.

 

Typical Terms of Payment

  • Customer sales are conducted in cash, check, or credit cards. Occasionally, the business owner will allow a customer to pay with a postponed check or use credit card installments.
  • Wholesale confectionary- 60-90 day credit.
  • Purchase from vendors ranges from cash to 90-day credit.

 

Risk Level:

The food industry is at a high risk. The highest investment required is in appropriating and remodeling the location, an investment which will be completely lost in case of failure. A partial return on the supply investment may be possible, as the market is abundant with used supplies.

 

Licenses and Certifications:

Licensing from local authorities is required. In addition, if the business includes production, a production license is required from the Ministry of Health.

 

Insurances:

Business insurance (for content and inventory), third party insurance, employer’s liability insurance, loss of income insurance, and food poisoning insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.

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