The Economics of Croissants

CroissantsPicking up from a piece in The Economist there are lessons to be learnt in managing supply and demand for perishable products. In one New York bakery it costs US$2.60 to make a croissants that sells for US$3.60. If it makes 100 but only sells 70 it loses US$15 (cost = US$260  and sales = US$245). Furthermore, the bakery loses money as it refuses to sell leftover croissants. However they have a couple of solutions to this problem:

  • Don’t just sell croissants but other food that has a much higher profit margin – fancy salads and sandwiches.
  • Use the information on sales to cut waste e.g. demand and supply
  • No sweet items on Monday or Tuesday as people are feeling the effects of enough sugar during the weekend.
  • With bad weather there are fewer customers therefore demand decreases
  • Note the school holidays as there is less demand
  • Supply more after fasting (Yom Kippur) by the Jewish customers
  • Fine tune supply after checking sales after each hour

“Also offer sugar treats at the end of the day and make them expensive. They add colour to the shelves and make them look full which attracts foot traffic at the end of the working day.”

Source: The Economist 29th August 2015

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