Why is it that a loaf of bread is commonly priced between $1-$2.50?
…seems like one heck of a profit to me…any bread industry people here want to share what they know?
Maybe cause it’s what people are willing to pay? A typical loaf of bread has at least 20 slices. Even at $2.50, your most expensive price, that’s only a quarter for 2 slices. That’s pretty cheap. I doubt there is any demand for it to be cheaper.
A quarter for two slices of bread does not sound cheap to me, considering that I can bake an entire loaf of white bread for about that much (and homemade bread actually tastes good). When I buy bread, I get the good stuff at a bakery thrift store. I pay 95 cents there. The same stuff at the grocery store costs $2.50 (for a 24-ounce loaf).
You can only bake a loaf of bread for a quarter because you work for free and are not including the cost of engery to run the oven.
I’m not a bread industry insider, but I doubt they make all that much profit. The basic ingreds. may be inexpensive, but then you’ve got the cost of packaging and delivery. Bread is rather perishable, so the whole operation - baking, packing and delivering - all has to be done in a timely manner, and you’ve got to pay people who can perform these jobs efficiently. Then there’s the factory-bakery itself. You have to maintain the equipment and the building. And taxes, businesses pay all kinds of taxes. So how much of that $1.89 is really profit?
At my grocery store the regular sized loaf of plain white bread is $0.85. The economy size loaf is twice as big for $1.19.
I was including the cost of running the oven, but not my labor. It takes less than a half hour of my time to make six loaves. That doesn’t include rising and baking, during which I can be doing other thins, like posting here.
A few years ago, Amy Dacyczyn (a/k/a the Frugal Zealot) estimated the cost of a loaf of whole wheat bread (1 part whole wheat flour and 2 parts white). Prices for white bread will be lower. Prices are likely higher now, but the relative price should be about the same
from the supermarket: $1.49
made from frozen dough bought at the supermarket: $ .68
bought at the bakery thrift store: $ .57
homemade and baked in the oven (includes electricity for oven): $ .27
made in a bread machine (includes electricity, but not the cost of the machine): $ .26
Now do it again and include the cost of the oven in which you are going to bake the bread (or the cost of the bread machine). Pro rate a portion of the rent you pay, and where you say your labor is free because you can do other things, the baker says his labor is not free because he WON’T be doing other things. Buy a truck to get the bread from your oven to the table.
Now, you are willing to go to the trouble to bake your own loaf of bread and save $1.50, I am willing to save myself the trouble and pay $1.50 for the convenience (especially if Webvan delivers it for me and I don’t have to go to the store).
In addition, though they may try, the bakery will not be able to precisely estimate their sales. They will usually overproduce, and the cost of the extra bread will be added to the cost of the bread. This goes for other losses too (mice, moisture, shoplifting, wackos squeezing the bread to death…)
Also remember that both the store and the bakery want to make a profit.
Now if we can only figure out why commercial bread tastes so bad…
Good point. Why does it taste so bad?
Don’t forget the grocey store also has a markup on the price.
My father works for IBC (International Brands Corp) a congolmerate of bread companies, so if your question hasn’t been answered be specific and I’ll find out.
BTW since my father works for IBC I get all the free out dated Ding Dongs/King Dons I can eat.
It’s actually Interstate Brands Corp and it dosen’t look like they are making a killing.
http://quicktake.morningstar.com/Stock/snapshot.asp?Country=USA&Symbol=IBC
Actually supermarkets make very little profit on anything they sell. Typically its only a couple of cents. They make money on volume.
You aren’t just paying for the wheat in the bread. A certain percentage of the price is used to cover fixed costs like capital (trucks, factories) and variable costs like labor and materials.
obfusciatrist also made an excellent point. Economies of scale allow the bread factory to produce millions of loaves at $1.50 per loaf. For you to bake your own bread, taking into account time, materials, etc. it would cost you a lot more.
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2.50 for a loaf of bread? That seems way too expensive for a loaf of bread. At a little local bakery I go to, french bread is 5 for a dollar. They have Wonderbread and some generic whitebread too, but its only about 1 dollar for a loaf.
What you pay for a loaf of bread and the cost incurred to make that loaf of bread are not really connected.
What you are paying for the bread is what the market will bear. You know, that whole “supply and demand” thing that I slept through in Macroeconomics.
The costs for making the bread are going to be the direct costs: your raw materials, flour, yeast, water and any other additives (such as preservatives and mold inhibitors), your labor and your variable overhead.
I seriously doubt labor is a significant portion of the cost of a loaf of bread. The major bakeries I have seen are VERY automated.
Your variable over-head is the electricity/gas used in the ovens, the mixing machines, etc.
Where you incur significant costs is in the fixed over-head. Fixed O/H are the items that you would incur expense on no matter if the bakery made one loaf of bread of a billion. Depreciation tends to be a significant portion of over-head, especially considering the high cost of those machines. The administrative staff is also in the fixed over-head, from the company’s president down to the file clerk. All over-head.
Therefore while you say you can make a loaf of bread for such-and-such, you are only talking about the direct costs. I bet the bakeries are making bread for a heck of a lot less than you can when just talking about direct costs seeing how they make use of economies of scale! Now absorb the rest of the costs of the business into the cost of your loaf of bread and you have a rather more expensive loaf of bread.
Regards.