Fresh From the Oven: The Rise Of Baking Startups With the rise of startups such as Bakingo, WarmOven, Paris Bakery, The Bread Company, Le15 and Just Bake, the baking segment is becoming organized and investment-attractive

Up until six or seven years ago, baking was a highly unorganized segment. Today, we see many of these businesses taking the startup route, rising funding and expanding to different locations. For instance, recently, Bakingo raised its first-ever round of growth capital of $16 million from private equity firm Faering Capital. With this investment, the company aims to have a strong pan-India market presence.

It is currently present in cities like Gurugram, Delhi, Noida, Bengaluru, Hyderabad, Mumbai, Jaipur, Chandigarh, Lucknow, Meerut, Panipat, Karnal and Rohtak.

We also have startups such as WarmOven, Paris Bakery, The Bread Company, Le15, and Just Bake in the space and most of them have taken the institutional funding route to expand further. According to Tracxn, WarmOven has raised a total funding of $1.55M over 2 rounds, The Bread Company has raised a total funding of $2.62M over 4 rounds and Le15 a total funding of $1.04M.

What makes these startups stand out from the crowd of unorganized bakeries is that they leverage advanced technologies such as artificial intelligence, ChatGPT, machine learning and specialize in business models such as cloud kitchens and delivery through aggregator platforms.

A hot segment

Some years ago, the baking industry operated in a relatively unorganized manner, marked by a lack of structure and a many independent players that lacked scalability. However, over the past three years, the baking industry has witnessed a remarkable transformation from being an unorganized segment to a thriving ecosystem of startups. "Many brands like ours have reshaped the dynamics of the market, filling previously unexplored and empty spaces and paving the way for innovation and growth," says Himanshu Chawla, founder and CEO, Bakingo.

The shift towards a more organized and investment-attractive landscape can be attributed to several key factors. "Despite the presence of various small-scale bakery brands in the market, there was a noticeable absence of a national bakery brand committed to quality. And, consumer preferences have evolved significantly over the past few years, with an increasing demand for artisanal and high-quality baked goods. This shift has created a market space that caters to consumers looking for unique and premium bakery products and that's where we have stepped in with over 200 SKU's of cakes and desserts that cater to every taste and palette," he adds.

Experts also say that technology and e-commerce integration have played a huge role. They say that baking startups are today able to leverage online platforms to reach a wider audience, streamline operations, and offer a seamless ordering experience. This digital presence has significantly contributed to the visibility and success of emerging ventures, says Chawla.

Baking as a segment became popular in early 2000s, when India saw the entry of global coffee chains like Starbucks and the establishment of homegrown brands like Café Coffee Day. Then, we also saw the entry of global bakery brands like New York City's Magnolia Bakery which further popularised bakery snacks. Then, specific bakery chains like Mumbai's iconic Theobroma, Hyderbad's Labonelle became part of the bakery revolution in India. Today, we see the rise of baking as specialized category within the startup space.

"Urbanisation, changing lifestyle habits and access have increased demand where bakery products are consumed more frequently and part of regular diet versus as a special occasion treat. Improvement in supply chain & logistics, access to ingredients, social media and marketing have enabled more variety, affordability and access, even online, for this short shelf-life range of products," said Ivy Chin, partner, Inflection Point Ventures.

The tech game

These startups use various cutting-edge technologies to optimize various facets of their operations. Chawla shares some with us:

Forecasting: Forecasting helps these startups harness advanced predictive analytics and machine learning algorithms. By analyzing data, market trends, and external variables, accurate demand forecasts can be generated. This helps in efficient resource allocation and minimizes waste by aligning production with actual demand.

Logistics: Through transparent communication, live tracking features, and optimized routes, these startups have been able to elevate the delivery process, filling the market void for reliable and seamless delivery services.

Inventory & Quality Management: Forecasting technologies play a pivotal role in inventory management. Accurate demand forecasts enable them to maintain optimal stock levels, reducing excess inventory and associated carrying costs.

Experience on Web and App: User-centric interfaces, secure payment gateways, and personalized recommendations based on user preferences define their digital presence.

Some rising trends

One change that has come in recent years, especially after the pandemic, is that with the rise in Internet users and the popularity of YouTube channels, people are increasingly tuning into global food trends. "They have huge aspirations to incorporate them into their lives. Millennials and Gen Z, being well-travelled, lean towards fusion food over traditional cuisines. For instance, young individuals in India may skip traditional sweets in favour of baked goods like cookies and cakes," said Chin.

There is also a rising preference for healthier options and alternatives, especially with an increasing frequency of consumption. "Consumers are actively seeking gluten-free bakery products crafted with alternative ingredients like multigrain and whole-wheat. Additionally, there is a heightened interest in exploring new flavors, making flavor innovation a crucial aspect of the industry. Packaging innovation, inventory management are areas of focus since these are critical for consumer trust as well as growth as scale," she added.