Business Environment Analysis of Bakery and Cafe Sector in Nepal

Submitted by:
Aayush Maharjan
Anisha Budathoki
Asim Kafle
Manisha Shrestha
Prabha Chettri
Prashan Bajracharya
Puja Koirala
Reetu Shrestha
Rojina Shrestha
Sadikshya Panta
Utsav Thapa

Weekend MBA 1st Semester Batch: 2022-2024

IIMS College, Lincoln University
June 2022
 Contents
Chapter 1: Introduction ................................................................................................................... 1
1.1 Scope ..................................................................................................................................... 1
1.2 In context of Nepal ................................................................................................................ 2
1.2.1 Online Bakery Business in Nepal ................................................................................... 3
1.2.2 Challenges for bakery and cafe sector in Nepal ............................................................. 3
1.3 Purpose .................................................................................................................................. 4
Chapter 2: Background ................................................................................................................... 5
2.1 Literature Review .................................................................................................................. 5
Chapter 3: Analysis ......................................................................................................................... 7
3.1 PESTEL ANALYSIS ............................................................................................................ 7
Political Factor ......................................................................................................................... 7
Economic Factor ...................................................................................................................... 7
Socio-cultural Factor ............................................................................................................... 7
Technological Factor ............................................................................................................... 8
Environmental Factor .............................................................................................................. 8
Legal Factor ............................................................................................................................. 9
3.2 SWOT Analysis................................................................................................................... 10
Strengths ................................................................................................................................ 10
Weaknesses ............................................................................................................................ 10
Opportunities ......................................................................................................................... 11
Threats ................................................................................................................................... 11
3.3 Porter’s Five Forces Analysis ............................................................................................. 13
Threat of New Entrants.......................................................................................................... 13
Bargaining Power of Buyers.................................................................................................. 13
Bargaining Power of Suppliers .............................................................................................. 13
Threat of Substitute Products ................................................................................................ 14
Competitive Rivalry .............................................................................................................. 14
Chapter 4: Managerial Implication/Recommendations ................................................................ 15
4.1 Managerial Implication ....................................................................................................... 15
4.2 Recommendations ............................................................................................................... 17
Chapter 5: Conclusion................................................................................................................... 19

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References ..................................................................................................................................... 20

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 Chapter 1: Introduction
The term Bakery means the food products made of flour as a principal ingredient and does not
include packaged mixes. From a simple form of bread to stylish elegant cakes, there is something
for everyone when it comes to baked products. Baking has been around for a long time now.
Bakery Products are improved over time as per the different variations and tastes of people. As of
today, bakery products are not restricted to bread, cakes and biscuits but other bakery products
also such as croissants, Danish muffins, cookies, puffs, doughnuts, pretzels, pies, pastry, cream
caramel and many more.

In Nepal, during the time of 1948 bakery products were first introduced as Krishna Pauroti widely
known as Krishna Bakery by the late Krishna Bahadur Rajkarnikar, to satisfy the need of the
leading members of society back then, bread was also counted as a luxury product which only the
rich could afford. Later on, Nanglo Bakeries Private Limited and Makoo bakery were launched in
1981 A.D. and 1988 A.D. respectively. And many more bakeries were introduced in the Nepalese
market where they produced bakery products. The consumption of bakery products has increased
along with the population.

1.1 Scope
According to current market research in the food business, enormous sums of money are being
invested in cafe and bakery items. The processed food business is expanding globally, and the
bread industry has a significant market share. Nepal is also making a significant contribution to
the bakery market. It has created several opportunities in a variety of fields. Many simple and
ordinary dairy merchants are becoming SME cafe entrepreneurs. Even enterprises like Krishna
Pouroti, Nepal Dairy, Snowfun, and many other baking businesses have been operating in Nepal
since 2000. They have a really good corporate trend. They had made a significant contribution to
Nepal's GDP.

Those bakery products that were once only available in the local market are now available
throughout the country and even internationally.

Many Nepalese business houses have acquired franchises in the internationally recognized bakery
industry. The bakery industry is providing a market for all small business owners who are
conventionally producing bakery items. All farmers, dairy farmers, and small merchants who deal

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with all of these things have partnered with the cafe and bakery business. It has given those SMEs
working with small markets a stronger market position. People who have a minor investment can
also go into the bakery industry and make a good profit. It has provided several career opportunities
for both young people and retirees.

1.2 In context of Nepal

Every major city area in Nepal has at least one bakery to boast of. Even local tea shops take a
liking to display doughnuts and fruitcakes.

Nepalese bakery sector is consistently developing day by day and we need to know consumer
perception about those products. Though the first thing that crosses your mind when the term
bakery comes is bread and cakes. But there are much more the bakeries serve nowadays. There are
vast varieties to explore on the menu keeping in mind the rising demand and taste of customers.
Bakeries and cafes these days are known as potential places to enjoy a good meal from breakfast
to dinner, meals or quiet bites throughout the day. To cater for the need of a busy society, not only
bakery items but also fast foods or whole-day meals are also introduced and served in bakeries and
cafes.

In the competitive market with so many bakeries and cafes launching on a large scale, bakeries
and cafes are adopting modern technologies and marketing strategies to sustain themselves in the
market. They are adjusting and adapting to the changes in the choices and food habits of customers.
Besides increasing the sales and maintaining a good hold in the market, they are also focusing on
maintaining the level of quality of products with consistency and hygiene since people these days
are very hygiene conscious. Bakeries that run cafes, offer spaces to meet people, showcase local
art and even host events. Some bakeries are creating jobs for people in need. The growth in
bakeries and cafes is not only a sign of a growing middle-class but of a desire for people to create
a sense of community.

Until the 60s, the number of bakeries in the Kathmandu Valley was very minimal. The influx of
tourists during the so-called “hippie era” of Nepal witnessed the number of bakeries in the Valley
rise significantly. However, the baking business in Nepal started to take off only in the late 80s.

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1.2.1 Online Bakery Business in Nepal
• Expanding online bakeries

During 2014, there was no trend of online ordering and home delivery of cakes in Nepal and
people were also unaware of the idea that they can order cakes online and get them delivered
to their doorstep.

The increasing demand has evolved bakeries and pastry shops in Nepal to turn into e-bakeries.
As of 2018, there were more than 100 online bakery shops delivering cakes to people’s homes.
UG Cakes, Cake Koseli, Cakemandu, Cake Sewa, City Cakes and Creative Cake Nepal are
among the emerging online cake shops in Nepal.

For instance, UG Cakes, established in 2016, planned to add another outlet in November 2018
and expected to expand outside Kathmandu Valley as well to deliver 100 cake orders per day.
UG Cakes estimated the new shop to open with an investment of Rs. 11 million. Similarly,
Cake Koseli planned on expanding to Pokhara in the future. Likewise, Oho! Cake has planned
to open at least 10 more outlets in different parts of Kathmandu Valley in the first half of 2022.

• How e-bakery businesses are run in Nepal

UG Cakes initially collaborated with local bakeries to produce cakes and they adopted this
model for two years and began its bakery for cake production only in 2016. Similarly, Cake
Koseli imports the materials needed to decorate cakes from India and buys other items locally
in Nepal. Oho! Cake runs its operations with imported machines and technology at a capacity
of preparing over 500 cakes with customized designs in a day.

1.2.2 Challenges for bakery and cafe sector in Nepal

While the COVID-19 pandemic created havoc in Nepal, many small businesses were shut down.
For instance, during the second wave of the pandemic, Bakery Cafe had to close down four of its
10 outlets in Kathmandu with its struggle to cut costs and cut its operations by half and lay off
130 employees. However, the challenges faced by Nepalese bakeries and cafe is not limited to
the COVID-19 pandemic. Many pastry and cake shops have closed with the pressures of rent and
infrequent business. Managing logistics is one of the biggest challenges for the bakery and cafe
sector in Nepal.

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There are several other challenges faced by the sector halting the progress of the sector which
include:

• The bakery sector faces stiff competition from countless bakeries particularly due to the rise
of online bakeries.
• Most online bakery shops are facing complaints of late delivery. Delivering cake is a difficult
job since the cakes have elaborate designs that require careful handling resulting in bakery
and cake shops needing more than one person to deliver a single cake.
• Procuring raw materials is also a major concern for Nepalese bakeries and cafes as many
things have to be brought from India, which in turn increases the cost price of the baked
items.
• For online bakeries, a lack of transparency between customers and business owners is
becoming a big problem. Examples of lack of transparency include customers placing orders
and not responding for deliveries or pickup, misleading and confusing staff, frequently
changing the delivery address, refusal to receive the parcel, and delayed payments.
• Despite having different laws and acts, most of the perpetrators in the bakery and cafe sector,
a part of the food industry, are only tried under the Food Act in Nepal which has relatively
lenient punishments, and in many cases, the perpetrators only made to shut their businesses
“till they improve conditions”, which shows the poor regulation of the sector.

1.3 Purpose
Bakery and cafes are established to produce and sell flour-based food baked in an oven such as
bread, cookies, cakes, doughnut, pastries and pies. Some retail bakeries are categorized as cafes-
serving coffee and tea to customers who wish to consume the baked goods on the premises. Some
bakeries provide services for special occasions (such as weddings, birthdays, anniversaries, any
events, etc.) or customized baked products for people who have allergies or sensitivities to certain
foods (such as nuts, peanuts, dairy, etc.)

The main purpose of this study on the bakery and cafe sector is to understand the trends in the
industry in terms of customers preferences, growing number of bakeries, adoption of new
technology and digital platforms and major challenges faced by key players in this sector. Various
strategic environmental analysis tools such as PESTLE analysis, SWOT Analysis and Porter’s
Five Force analysis have been used for the purpose of this study.

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 Chapter 2: Background

2.1 Literature Review

It is stated by Moslehpour. Aulia, and Masarie (2015) that one of the major factors that affect the
tendency to buy any product is the characteristic of the product. As per the study by Akpoyomare,
et.al. (2013), “The characteristics or attributes of a product can distinguish from other similar
products”. They show the essentiality of product-based factors in the creation of perception
regarding, in this case, the bakery and cafe.

As baked products are one of the most commonly consumed food groups, different factors like
price, quality and taste also affect the bakery field. Price is an important factor when it comes to
deciding the rate of products and determining the customer market. Similarly, the quality of bakery
items and the environment of the cafe also play a major role when it comes to the longevity and
reputation of such an industry. Taste is one of the internal cues of bakery products that has a major
influence on people’s purchasing intention of the product, as explained by Moslehpour, et. al.
(2015).

However, as per the studies, we can compare price with the quality of products in both ways-
directly proportional and indirectly proportional. Nasir et. al. (2014) has concluded that some
consumers combine price with quality and value perceptions to decide their purchase and make
perceptions regarding the product. On the other hand, there is an entirely different demographic
that considers quality to be the topmost priority in the perception regarding products and thus does
not let the domain of price manipulate their choices (Dodds, et. al., 1991).

The location where a bakery producer is placed plays a pivotal role in establishing perception
among consumers of potential consumers. Nasir et al. (2014) have claimed in their study that
choosing an appropriate location is one of the most crucial decisions for the companies since the
preferability of the location highly defines the preferability of the product.

One other important element is the overall environment or ambience provided by the place. If the
bakery shop or cafe comes with the provision of a cafeteria as well, certain factors come into
consideration. Nasir et al. (2014) emphasize the need for aesthetic interior and decoration as the
key elements of a great ambience. According to Ajzen (2008), the attitude of consumers towards
certain brands or products primarily determines the buying decisions of the individuals. In addition

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to the attitude towards the products themselves, some studies even shed light on the effect that the
attitude towards advertisements has on the customer’s purchase decision (Shimp, 1981).

Another is the relationship between hygiene and customer satisfaction. Ilieska (2013) stated that
consumer satisfaction adapts to satisfaction of the consumer needs where satisfaction comes in
terms of price, quality and hygienic products. In a business measuring customer satisfaction is
most important and satisfaction is the most reliable characteristic of getting feedback from the
consumers (ARINICHEV et al., 2019).

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 Chapter 3: Analysis

3.1 PESTLE ANALYSIS

A PESTLE Analysis is an analytical tool for strategic business planning that provides a strategic
framework for understanding the external influences on a business. PESTLE analysis is critical to
understanding the external threats & opportunities arising because of the macro environment
developments. Changes in macro environment forces can impact the Porter Five Forces & industry
attractiveness as well thus, significantly impacting the ability of Cafe Bakery to build sustainable
competitive advantage.

Political Factor
It is one of the factors which impacts the long run and cost of business. Due to political instability,
the rules and regulations keep on changing which might bring different changes in the company.
For instance, there is a rapid increase in the price of raw materials to make baked products. For
example, due to Russia and Ukraine war, the price of fuel has increased which impacts other
products as well.

Economic Factor
The purchasing power of an individual determines the economy of the county. Due to COVID-19,
the Nepalese economy was affected heavily. Many people lost their job which in return decreased
the demand for buying goods and services. Fresh bakery product deliveries were decreased during
the lockdown, due to difficulties in ensuring daily deliveries. However, for some businesses new
opportunities have emerged for industrial fresh products.

Socio-cultural Factor
Asian societies are starting to discover the world of bread and pastries as shown by the wheat
consumption in Asia growing by 15% between 2015 and 2017. The bakery culture in Kathmandu
also has been rising among locals in recent years, coinciding with a change in food habits among
Nepalis, who are starting to eat more western-style foods.

The change in food habits is a result of growing urbanization and exposure to western culture. City
lifestyles are changing and with it so are eating habits. Due to the hectic life in big cities, average
Nepali workers have started to buy food that is easy to prepare. An emerging trend before work is
the younger people getting breakfast and coffee at their local bakeries. Bakeries and cafes have
become potential places where people enjoy good meals.
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Nowadays people are mostly influenced by the western culture where bakery items have become
mandatory on occasions such as birthdays, weddings, anniversaries etc. So, due to the large
demand for such products huge number of cafes and bakeries are established.

The bakeries have become popular in Nepal with the growing consideration among people of
baked items as a healthier snack choice. Turing into the demand of customers, bakeries have started
providing sugar-free, egg-free and wheat-free products as well.

Technological Factor
However, the bakery and cake business is highly affected by the technology trends in the country.
Bakery and cafe Industries must assess the trending technologies such as the use of latest software
to manage the accounts of the company for the fewer errors and more profit, accepting payment
via smartphones for the easy and smooth flow, assessing digital marketing strategies for profit
maximization, robotization of service delivery for quick and efficient services, use of advanced
technology for production and packaging for quality control, etc. At the same time, the Bakery and
cafe industry must be aware of consumer behavior and keep updating new technologies.

Environmental Factor
The Bakery and cafe Industry needs to know consumer behavior regarding environmental
concerns. As environmental awareness continues to grow, more consumers have realized the
effects of business processes on the planet. Some consumers have used their purchases to support
companies that develop ecologically friendly practices, such as using compostable packaging and
solar energy. By paying attention to these external concerns and changing their operations, the
bakery and cafe business can make changes that help them protect the environment, retain
customers and increase revenue.

The Bakery and cafe Business can also adhere to the recycling and waste management policies as
well as CSR efforts in the prospective market to retain customers. This business needs to know the
impact of climate change and cope with its supply chain. For example, the demand for coffee and
bakery items could increase especially in winter or the rainy seasons and the demand for cold
coffees in summer.

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Legal Factor
Legal factors often govern – conditions to enter the market, laws to operate in the market, and
procedures to resolve any dispute with other stakeholders. If the legal system is not strong then
Bakery Cafe can face numerous challenges – from consumer petitions to shakedowns from
authorities. The Bakery and cafe Industry must be aware of the country’s laws such as Consumer
protection laws, Copyright and Patent Laws, Health and Service Laws, Business Laws etc. to
provide its services smoothly. These legal factors directly affect the business of the entire food
industry which also include the bakery and cafe sector.

For instance, as per the Food Act 1966, in Nepal, businesses selling food items without a license
are fined Rs. 1,000, low-quality products with minimal impact on health are fined Rs. 5,000 and
manufacturers of inedible foods that severely affect human health or pose the risk of death are
fined up to Rs. 10,000 and sentenced to two to three years in prison, which is not a strict law.

However, according to the Consumer Protection Act 1998, producers or suppliers of goods and
services which threaten the lives of consumers can be sentenced to 14 years, or fined up to
Rs.500,000 or both.

• Case Study: In February 2022, the Metropolitan Crime Division raided Sunakothi-based
Sparsh Foods for making cookies out of expired bakery products of 2019 and selling them as
fresh food. The company had collected expired bakery products from the market, crushed them
and re-made cookies, toasts and biscuits using the stale powder base.
• Case Study: In 2016, the Department of Food Technology and Quality Control (DFTQC)
raided Nanglo Bakery Cafe and found that the bakery products were unhygienic and the plant
itself was operating without a license.

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3.2 SWOT Analysis
A SWOT analysis is a framework adopted in a business’s strategic planning to evaluate its
competitive positioning in the marketplace. There are four aspects studied in a SWOT analysis
which are Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses focus
internally on the business being evaluated, while Opportunities and Threats look at the competition
and things going on externally.

Strengths
• Skilled Staff: Bakery industry in Nepal knows the importance of qualified and experienced
staff as they help the business in the preparation of better-quality products, less wastage,
and increased customer satisfaction.

• Online order and home delivery: Bakery businesses in Nepal realized the importance of
online media after the COVID-19 as the majority of the bakery can now be found on social
media and personal websites. Consumers can order the food online and get it delivered to
their doorsteps.

• Wide range of products: Bakeries offer a wide range of products like pastry, cookies,
doughnuts, bread, buns, muffins and many other items. This gives consumers a wide range
of options.

• Deliver big orders: The ability to deliver big orders for parties and events on short notice
is one of the key strengths of bakeries. The bakeries having an efficient supply chain
management system, a quick workforce, efficient equipment, and access to the raw material
have been successfully delivering big orders to the clients.

• Ready-to-eat meal food: Due to the consumer’s busy schedules and not having time to
prepare meals on their own, they rely on semi-prepared meals and ready-to-eat meals.
Bakery items being ready-to-eat food has been an easy choice for Nepalese people.

Weaknesses
• High Price: Factors like high fuel prices, costly transportation, and supply chain have
increased the overall price of the final product. When the production cost and various other
direct/indirect costs increase, then bakery shops increase the price to meet the expenses.
However, customers don’t like the increase in the price of daily food items.

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 • Expensive Equipment: The bakery equipment used in the Nepalese market is imported
from other countries, particularly India, which makes the investment high for the bakery
business in the initial phase. The equipment available in the local market is not highly
efficient and reliable. So, to reach the breakeven point, bakery businesses with high-end
equipment are compelled to charge a higher price on the items.

• Delayed Delivery: There have been many instances where bakeries and cafes have faced
the problem of being unable to deliver bakery products on time leading to customers being
dissatisfied. The causes for delayed delivery include lack of transparency between bakery
businesses and customers, difficulties with digital platforms, miscommunications,
problems with delivery vehicle or delivery persons, etc.

Opportunities
• Bakery Institute: Bakery businesses having enough space and equipment can provide
bakery training to the interested trainees. This way bakery will have another income source
and will generate skilled manpower.

• Employment opportunity: Skilled workforce can get employment opportunities as the

bakery industry grows in Nepal.

• Healthy diet trend: People nowadays have become health conscious and prefer less
sugary and less oily foods. The bakery industry can target such consumers and offer them
healthy food options.

• Western culture influence: Due to growing urbanization and exposure to the west,
Nepalese have started to eat more western-style food. Cakes have been a mandatory part
of every celebration in Nepalese society. From birthdays, and anniversaries to corporate
events, cakes are never missed out. This shows the huge demand for cakes in the Nepalese
market. Also, breakfast, coffee and bakery items at local bakeries are popular among
youths.

Threats
• High Competition: The bakery industry has become very competitive in recent years as
the newcomers in the industry are massive. The increase in the number of competitors,
particularly online bakeries like UG Cakes, Cake Koseli and others in recent years has

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 brought some serious implications to the bakery industry. Unless the bakeries formulate
proper plans and strategies to deal with the competitors, it might be difficult for them to
sustain themselves in the competitive environment.

• Economic Slowdown: Nepal which was slowly recovering from the pandemic is facing
an economic slowdown. Unfavorable economic conditions in the country tend to put a
burden on the pockets of individuals, which may lead to decreased spending on the part of
customers.

• Customer Dissatisfaction: Many factors like low-quality food, bad service, and high
prices may lead to customer dissatisfaction with the bakery. These dissatisfied customers
may give negative reviews to the bakery which may seriously harm its reputation.

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3.3 Porter’s Five Forces Analysis
Bakery Industry Analysis Porter's Five Forces analysis is useful when trying to understand the
competitive environment facing a bakery industry. It involves looking at competition, barriers to
entry, the power of both buyers and sellers, as well as substitutes for the goods produced.

Threat of New Entrants

Setting up a new bakery and cafe requires a moderate level of investment, making it easy to enter
the industry. The threat of new organizations entering the industry is high when it is easy for an
organization to enter the industry i.e., entry barriers are low. Likewise, the process for setting up a
bakery and cafe in Nepal has comparatively fewer entry barriers compared to other service
industries. So, there is always a threat to existing bakeries and cafes from new entrants and new
competitors. For instance, a person trying to establish his/her own business might enter into a
bakery and cafe business due to low entry barriers and low level of investment.

Bargaining Power of Buyers

Besides the new entrants, the bargaining power of buyers is another important factor to consider.
Since the buyer holds the power to influence the pricing of the industry, the bakery and cafe are
also affected by the buyer’s choice, taste and preference and switching behavior. The buyers have
options to choose from multiple similar bakeries and cafes that keep the power of buyers high. The
number of buyers is many and the switching cost is low. Similarly, the buyers can manufacture the
bakery products by themselves.

Bargaining Power of Suppliers

The suppliers in the bakery and cafe sector include the company who provides raw materials to
the bakery and cafe. The bargaining power of suppliers in these industries is low as the companies
are strong and they have a large number of suppliers to buy from. The bakery and cafe have the
option to buy from different suppliers which put the bakery and cafe in the dominant position and
can buy the best raw materials at low prices. So, the suppliers in the bakery industry do not have
much negotiation power due to a well-developed market for their products. For example, the
bakery and cafe can buy raw materials from a supermarket or a small grocery store.

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Threat of Substitute Products
In Nepal, there is a number emerging of bakery and cafe which produces similar kind of products
and services. Since there are several other bakeries and cafes which are producing similar products
the threat of substitute products is high. The buyers can switch their products at a comparatively
lower price. For example, a buyer can substitute a bakery product of UG cakes with a similar
product of Krishna Pauroti Bhandar with a relatively lower price and the same level of satisfaction.

Competitive Rivalry
Bakeries and cafes are such a business where the competitive rivalry is intense. In Nepal, there are
many businesses which produce similar products with different price levels.

So due to the intense competitive rivalry, the switching cost for a similar product is also low.
Looking at the practical example, there are many bakery businesses which are carrying out their
business activities by opening up a physical store while others are offering bakery items through
online pages on Facebook and Instagram. So, this shows that there exists a highly competitive
rivalry in the bakery and cafe business. Due to the high level of competitive rivalry, various bakery
businesses like UG Cakes have started conducting business via physical stores and online as well.

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 Chapter 4: Managerial Implication/Recommendations

4.1 Managerial Implication

While managing a bakery business isn’t easy, it is more challenging to do all the things required
that will ensure that the bakery business does wonders. It requires both experience and professional
education to manage bakery operations. The best managers are those who listen, inspire and
develop people to become future operation leaders. Proper bakery management becomes critical
when operations become more complex as sales increase. As a bakery scales up, it needs more
tools to better control costs, optimize equipment usage, obtain better prices due to higher volumes,
etc. however, when bakery operations increase in complexity and size, a key thing is to keep things
simple and practical. To uplift the standard of the business, here are some of the things that a
manager needs to keep in mind.

Customer Relationship Management (CRM)

Events like birthdays and anniversaries are primarily responsible for boosting bakery sales in
Nepal. The CRM module captures the customer data from multiple sources (mainly primary) and
updates it centrally in a single location (generally on Google Drive). The customer eating habits
can be recognized using their order history data, which eventually helps you in dishing out
personalized SMS and email campaigns. The use of Sparrow SMS for sending bulk SMS to
customers has been pretty common nowadays in Kathmandu valley and a few other places.
Running loyalty programs also gets easier when you know what your target customers prefer.

You collect your customer data which can then be used for CRM programs. Customers can be
classified based on factors like frequency of orders, age, and more. People will visit your bakery
often if you have a strong CRM system.

Integrate with Online Delivery Platforms

During and after the recent lockdowns, most of the customers have started ordering food rather
than going out and dining. Hence, it becomes imperative for bakery businesses to allow customers
to order online from the store. So, what the business can do is, integrate with platforms like
Bhojdeal, Foodmandu, Khaanpin, and FoodMario which will help products to reach the doorsteps
of the customers. Not only should the bakery and cafe be visible on these online delivery platforms,
but the bakery also needs to make sure that people can order directly through their website as well.

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This will reduce any scope for losing potential clients. That being said, relying fully on delivery
platforms can backfire as they will charge high fees of up to 30% for each order and also the
customers do not get a chance to engage with the baker brand.

Use Technology to Manage Your Bakery Operations

The operations of a bakery business are entirely different from that of a regular restaurant. The
production of the baked items and managing the semi-produced and the final baked items can
become tedious unless proper use of the Bakery Management System.

The major challenge of running a bakery business in Nepal is ensuring a consistent service of fresh
baked goods. Of course, there would be times when it would not be possible to sell off all the items
produced in a day but are good enough to be still sold the next day. Keeping track of the items
which are fresh and which are stale or expired becomes a difficult task. Due to this, using an
integrated Inventory Management System allows for managing the Shelf Life of each item.
Assigning the expiration date for each item in the point-of-sale (POS) will enable the business to
sell only the products that are still good to be sold.

Network with all the Local Business

The bakery business must enter into collaborations with all the local businesses in the vicinity.
This will help to increase the sales further. For example, we have seen, that during birthdays people
tend to deliver their loved one’s cake and flowers as a surprise if they are not in the same city. So,
collaborating with a local florist and helping customers order flowers and cakes and getting them
delivered as a package at the desired place would be highly beneficial for the business. This will
make the bakery business a one-stop point of contact for all those who want to surprise their loved
ones with some extra indulgence.

Try to Stand Out in the Vicinity

Try and bring specific innovation to your bakery business that is not present in the vicinity. This
will keep the business ahead of the competitors. Consider offering gluten-free options or becoming
the only nut-free bakery in the area. If the bakery business is the only one providing a doughnut
and coffee combo, then it is a sure thing that it would attract customers. Hence, following the
upcoming trends, that are yet not exploited to the fullest and then bringing about changes
accordingly.

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Deliver Comprehensive Training

Training lays the groundwork for successful onboarding and employee retention at your bakery.
Each staff member should receive a comprehensive walkthrough of your bakery’s policies, safety
procedures, cleaning requirements, dress code, customer relations, and anything else important to
your brand.

Once the trainee has a good handle on their role at the bakery, the guidance needs to be continued
and encouraged so they can learn, grow, and ultimately add value to the bakery. For example, once
they have mastered taking orders, teaching them the proper way to answer the phone and handling
the requests they receive will go a long way for the business. This will make the employees feel
empowered by the mangers support and trust in them to take on more tasks.

4.2 Recommendations
In the past, the bakery and cafe sector was not that developed and bakers were not regarded as
important. But over time, bakers and pastry chefs gained a lot of respect and are in high demand
resulting in a flourishing bakery and cafe sector. The traditional bakeries and cafes in Nepal are
facing stiff competition from the new online bakeries, which shows the shift in the sector. For the
development of overall bakery and cafe sector in Nepal, based on the findings of this research, the
following suggestions are recommended:

• Gluten-free baked products are prone to risks like demand inconsistency, pricing problems,
sourcing issues, etc. However, with consumers in Nepal increasingly becoming health
conscious, it can be estimated that the market for gluten-free products in Nepal will grow in
the future and has a huge potential. Hence, more significance to health-focused bakery products
can help in further growth of the bakery and cafe sector.

• Low shelf life is a major issue for bakers in Nepal. As shown by the case of Sparsh foods,
which sold expired bakery products, the low shelf life of bakery items can cause the risk of
malpractices by bakeries. To tackle such problem of low shelf life, bakers can adopt different
strategies. Few Nepalese bakeries have tackled this problem by having cut-off days. For
instance, European Bakery (Baluwatar) and Hermann Helmers (Jhamsikhel) keep doughnuts
only on Saturdays, which are sold out by lunchtime.

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• Growing online bakeries is a visible trend in the Nepalese bakery and cafe sector as shown by
the success of brands like UG Cakes, Cake Koseli, Cakemandu, Cake Sewa, City Cakes and
Creative Cake Nepal. Their success can be attributed to factors such as product customization,
use of digital platforms, and delivery services. Hence, for the development of bakeries and
cafes in Nepal, it is important to embrace the use of online platforms like websites and social
media platforms. Besides, it is also necessary to deploy different marketing strategies such as
social media marketing, influencer marketing, giveaways, bakery fest and fairs, etc. They
should also focus on marketing and promotional strategies to attract customers and for better
reach.
• In Nepal, the number of vegan people is increasing. To maintain and keep up with customer
loyalty and demands, bakeries and cafes should acquire vegan certification focusing on
increasing vegan customers.
• To face the stiff competition in the market, bakeries and cafes need to invest in research and
development activities, get valuable customer data and introduce innovative products/services
to set a strong differentiation basis from their competitor.
• In Nepal, consumers still have doubts about online products and services. To cope with this
challenge, the bakeries and cafes practicing their activities online should focus on the quality
and timely delivery of the bakery products to gain the trust of the customers.
• The equipment is the heart of any bakery business, and it only works well when properly
maintained. When the critical equipment fails to work at its peak, it costs the bakery time and
creates waste. Ovens not properly calculated can mean undercooked or burnt food. Following
the maintenance steps provided by the equipment manufacturer for cleaning, storage, and
preparation is very necessary. The machines in the bakery need to be serviced regularly to keep
them working efficiently and to ensure all bakery goods meet high standards and eliminate
waste.

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 Chapter 5: Conclusion

Even though there are lots of challenges for a bakery, we cannot deny that there are still many
opportunities in this sector. Bakery products remain one of the cheapest of the processed ready-to-
eat products in the country. The demand for bakery products will continue to increase in future.

Bakery products are becoming quite popular in rural areas as well. The higher consumption of
biscuits in rural areas could be attributed to their position as a snack, longer shelf life and better
taste which is liked by different cross-sections of the population.

The Nepalese bakery industry has huge potential and is growing year by year. Bakery businesses
are now just not limited to the major cities and have reached different parts of the country.

Existing bakery businesses are expanding their branches and product ranges whereas new players
are entering the market with new ideas and investments. The market has turned out to be
competitive with so many bakeries and cafes launching on a large scale, bakeries and cafes are
adopting modern technologies and marketing strategies to sustain themselves in the market. As
entry into this industry is easy, sustaining is equally difficult. The expensive equipment, high
competition, quality and taste of the food have made this industry highly risky. The COVID-19
pandemic affected the bakery industry as well along with the other industries. The consumption of
bakery items heavily declined and many bakery businesses were highly affected resulting in
temporary and permanent shutdowns.

However, despite the impacts of COVID-19, it led to the emergence of many physical and online
bakeries in Nepal, thereby, boosting the bakery and cafe sector in Nepal. The bakeries and cafes
have taken different initiatives to survive in the competitive world and become distinct from others.

Finally, the bakery industry is rising and gaining momentum. It has provided employment
opportunities to many Nepalese and now many bakeries have started training institutes as well to
generate skilled manpower.

19
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