BakeriesCroissantonomics

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L
essons in managing supply and demand for perishable
products

AIRY croissants, rich chocolate-chip biscuits, wedges of succulent

cake—the goods at the City Bakery, in Manhattan, look delicious.
Maury Rubin, its founder, studied in France. But his best creations are
distinctly American: pretzel croissants (surprisingly tasty), and
recipes for making money.

Mr Rubin is among those bakers who revere traditional methods but

want a fat profit. However, a good bakery is bad business. Flour is
cheap but organic butter, which makes up half a croissant, is not.
Central locations for outlets are expensive to rent. In all, it costs Mr
Rubin $2.60 to make a $3.50 croissant. If he makes 100 and sells 70,
he earns $245 but his costs are $260. Since he refuses to sell leftovers
—all goods are sold within a day—he loses money. “Welcome to the
bakery business,” Mr Rubin says.

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The obvious fix is to raise prices. But Mr Rubin says shoppers bristle
when the cost of baked goods passes a certain threshold. He has two
main solutions. First, don’t be just a bakery. He also sells fancy salads
and sandwiches to office workers, which have higher margins.

Second, use data to cut waste. Mr Rubin studies sales to discern

trends in demand, then adjusts supply accordingly. There are no
brownies or carrot cake on Mondays or Tuesdays—people don’t buy
rich desserts after decadent weekends. He watches the weather
closely, as demand melts in the rain. He keeps an eye on school
calendars, to bake less when children are away. He bakes more after
the fasting of Yom Kippur, when demand from Jewish customers picks
up. And each day, after the breakfast rush, he fine-tunes supply by
checking sales every 60-90 minutes. Trays of pastries are ready to be
baked, but nothing goes into the oven until the numbers are in.

Having no croissants at the end of the day is a sign of success. Late

one recent afternoon, his counter offered trios of fruit on triangles of
rice paper, cooked in sugar. This dessert looks lovely and is cheap to
make. But Mr Rubin will sell only a few, as he makes them expensive:
they are there in part to make his counters look pretty and full, to
draw in coffee-drinkers at the end of their working day. Such
strategies have helped the City Bakery survive since 1990. It now has
seven smaller shops in New York and seven outposts in Japan, with
plans to open in Dubai.