This Bakery Generates $130M
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Morning! It's Thursday, June 8th - Today, we discover how a Vietnamese immigrant family turned a failing coffee shop into a bakery empire, raking in a staggering $130M annually, by mastering a narrow product selection and strategic distribution.
This Bakery Generates $130M
In 1978, the Ly family fled a war-torn Vietnam under communist control in the hopes of attaining the American dream.
Today, they’ve undoubtedly accomplished that goal by creating the largest owned private bakery that generates an estimated $130M revenue annually.
What’s the Business?
Upon arriving in America, the four Ly brothers found what work they could and pulled together $40,000 to purchase a Bay Area coffee shop.
In just a year, they converted a failing coffee shop into Sugar Bowl Bakery and generated $200K in annual revenue.
They claim their initial success was due to their cultural values of integrity and hard work coupled with selling high quality baked goods at an affordable price. However, what skyrocketed they Ly family to national recognition was their entrepreneurial ingenuity.
Early on, Sugar Bowl took out a Small Business Administration loan to purchase a manufacturing facility in San Francisco and distribut to local cafes, small markets, and convenience stores.
Ten years later, Sugar Bowl got its big break after hiring a food broker to find chain store retailers to sell their product. After a Costco representative toured their single manufacturing facility, the Ly family’s palmier baked goods began selling at the warehouse club and still do to this day.
With the attention of big retailers, Sugar Bowl made a crucial decision to close their seven bakery locations and go all in on manufacturing. By putting all their focus into manufacturing, Sugar Bowl Bakery now distributes to stores like Acme, Foodtown, Ralphs, and a variety of convenience stores.
How They Win
When the Ly family shifted their focus to manufacturing, they severely reduced their 400 baked goods options to a selection of just five: palmiers, madeleines, apple fritters, and Duet Bites.
Instead of competing across every baked good category, they’ve mastered the production of these five products. This narrow focus also allows them to easily shift their recipes to match market trends. For example, they were the first baked goods distributor to be certified as organic, gluten-free, and trans-fat free.
Other bakeries that expand nationally cut down costs by using partially hydrogenated oils or other fill-ins. The Ly family refused to diminish the quality of their product and only uses real butter and traditional bakery ingredients.
By using high quality ingredients, they increased the value proposition for both the retailers and the consumer.
Other mass-produced palmiers net an average $.1 revenue, but higher quality and pricier Sugar Bowl palmiers can net $.3-$1 revenue per purchase depending on how the distributor marks up the product.
Hostess baked goods are cheaper than Sugar Bowl’s, but the Ly family won on the gamble that consumers would become return customers after favoring their superior taste that was worth the higher price.
There are approximately 9,000 independent bakeries in the United States. But when they attempt to mass produce their product, they cut corners on quality to increase their margins.
The Lyn family dominated the baked goods industry because they understood that while consumers want easy access to baked goods, they are still seeking something that actually tastes good. Plus, they’ll pay a premium for it.