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Medium Profitability

Grocery Store Bakery

#Consumer / Retail #Retail #Consumer
ProHub Comment

This is a straightforward profitability case that requires systematic cost-revenue calculations and strategic thinking beyond the math. The case is designed to test both analytical rigor and business acumen, with the key insight being that a narrow profit margin of $973/month is vulnerable to small changes in assumptions, making risk and opportunity analysis critical to a complete answer.

Estimated Time 15 minutes
Difficulty Medium
Source Cornell
50 / 100
Our client (Fresh Foods) is an independent grocery store in Chicago and is thinking about opening an in-store bakery and providing fresh baked artisan bread to its customers. However, they need to decide if offering fresh baked artisan bread is a good idea. What costs and revenue items should Fresh Foods consider? Would this be a profitable idea? What would the impact per month be for Fresh Foods?

Clarifying Information

Fixed Costs (additional cost over normal store operations):

  1. Labor Costs: $10/hour
  2. Labor Time Required: 6 hours per day
  3. Utilities: $1,200/month

Variable Costs: 4. Bread: $0.40/loaf 5. Bags (one per bread): $0.02/bag 6. Freight: $3/pallet; Assume 20 lbs./pallet and 1 loaf = 0.55 lbs 7. Storage: $2/pallet; Assume 20 lbs./pallet and 1 loaf = 0.55 lbs

Revenue: 8. Price: $3.50/loaf 9. Bags (one per bread): $0.02/bag