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Cupcakes, Cheesecakes and More: Eating American Baked Goods in the Land of Tiramisu

31/01/2014 11:28 GMT | Updated 01/04/2014 10:59 BST

Since the 2007 crisis, economists continue to have little hope for an upswing in Italy's economy. With the loss of 24% of industrial production and a contracting GDP, the statistics still do not provide evidence of a recovery any time soon. However, macroeconomic analysis based traditional exports and industries will overlook new pockets of growth that have yet to impact GDP. For this reason, we use a different approach, known as Fast Expanding Markets (FEM), for identifying areas of growth and future possibilities. FEM is characterized by spontaneous, market-based economic opportunities.

As an example, the increasingly cosmopolitan nature of Italian urban centers has slowly created a new class of consumable goods: the American baked good. Since the opening of the first documented American-style bakery in 1998, local consumer demand for American-style cupcakes, cheesecake, brownies, chocolate chip cookies and donuts, have been rising rapidly. In spite of the challenging economy, the number of specialty American bakeries found in major cities has grown at a compound annual growth rate of 49% between 2010 and 2013.

These specialty retail bakeries have grown organically through entrepreneurial small proprietors. For instance, California Bakery, a popular Milanese chain, has responded to demand by doubling their number of retail outlets since 2011, and plans to expand into Florence soon. The company's retail outlets currently serve over 100,000 unique customers per month. Additionally, in 2011, the owners also opened a new bakery chain called The Bagel Factory. Between California Bakery and the Bagel Factory, the number of employees grew by over 22% between 2011 and 2012. In Florence, another independently-owned bakery called CarLie's turned a profit in its first year, on revenues of about $200,000 USD. Their clientele consisted of both tourists and Italians, who make up 70% of the customers.

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Source: Stella Tran, Faculty Aide, Harvard University

At California Bakery, the company is careful to cultivate its brand and use proven business tools to keep their bakeries on track. The founders use American operational principles such as extensive training to ensure consistency in their products. Marketing is also an important tool for the bakeries, with many going online to use social media and websites to tell the story of their business and connect with customers. Technology is also helping to reach customers. At California Bakery, the company uses Twitter feeds to enable creative business solutions, including operating a mobile food truck to sell products and posting to Twitter to let customers know of their location in real-time. The combination of solid products, social media usage, and technology, has assisted in growing the market rapidly.

As a sign of how American-style baked goods in Italy are becoming a standard aspect of Italian urban living, a look beyond the traditional bakery tells the bigger story. Since the rise in demand for cupcakes and cookies in the last several years, entrepreneurs have also built up their stores and reputation to offer additional services, including baking classes and serving American-style brunch on the weekends, complete with pancakes, bacon, and eggs. During Thanksgiving, traditional holiday meals featuring turkey, mashed potatoes and cranberry sauce are also available. Still other entrepreneurial bakeries have extended their retail operations to include commercial baking and running small operations inside of business parks and office spaces. Moreover, as another sign of American baked goods becoming more than just a specialty item, full-service restaurants are also beginning to offer specific items on menus, such as bagel sandwiches for lunch and cupcakes for dessert.

In a country known for tiramisu and gelato, the FEM approach for finding pockets of growth in Italy was key to discovering a demand-driven market in American-style baked goods. Once uncovered, an FEM can assist managers and governments in determining regional opportunities to capitalize on fresh market growth and gain market share.

N.B. Thanks to Stella Tran for the research conducted with this FEM.