Shumi’s Hot Cake1 : Challenges in Dealing with the Rapidly Changing Market

Shahneela Naheed2
Tilka Farzana3
The scenario

Shumi’s Hot Cake is one of the pioneers in the baking industry of Bangladesh. The
renowned bakery was launched in the early 90s in Dhaka by a simple home cook- Mrs. Farzana
Shaikh Shumi, who built the business out of sheer passion and her love for baking. Shumi’s
passion for culinary arts began at a very young age- when she was only ten. Young and amateur
in baking but curious to learn, Shumi- consistently proved to have a knack for baking while
experimenting with her sisters on food items with new ingredients and flavors, using a simple tin
oven. Her eagerness towards baking continued even after she got married. On one certain
occasion, Shumi expressed her craving for cake from a renowned bakery, without knowing its
unusually high price. Although her loving husband, who was a government employee- living on
a budget, managed to fulfill her much desired wish, it literally cost them a fortune. This
distressing incident shook her so awfully that from that moment onward Shumi promised to
prepare baked goods all by herself without making any excessive household expense. To
actualize such ambition, Shumi needed an electric oven but she had to wait for two years as her
family could not afford one. Finally, in 1983, Shumi baked her very first cake on her first born’s
birthday.
Within a few months of its inception- Shumi’s Hot Cake became a familiar name when it
came to “Shumi’s Black Forest Cake”- their most popular item. They are the first bakery to
introduce this cake among the cake admirers. Their customers ranged from general consumers to
celebrities to foreign nationals to ambassadors and to political figures. Shumi’s Hot Cake quickly
became everyone’s favorite. They had the first mover advantage with a strong brand name and a
reputation of quality food at an affordable price for all. Shumi’s Hot Cake dominated the
industry for more than two decades. Their brand name is still imprinted in customers’ minds
when it comes to the black forest cake.

1
The case has been prepared based on the information provided by Mrs. Farzana Shaikh Shumi, the owner of
Shumi’s Hot Cake.
2
Senior Lecturer in the Department of Marketing and INB at North South University.
3
Lecturer in the Department of Marketing and INB at North South University.
 Over time, customers’ taste preferences have evolved and the new trend is to have
fondant cakes with elaborate designs- which has turned into an art form. These cakes come in
various themes such as superheroes, cars, safari, minions, wonderland, floral, etc. and that too
with a wide range of flavors- like, key lime, bananas foster, peanut butter cup, chocolate and
vanilla swirl, hazelnut almond, ginger spice, coffee and cream, caramelized vanilla and so on.
For any occasion be it a birthday party, engagement, wedding ceremony, anniversary, bridal
shower, baby shower, valentine’s day, New Year’s Eve, Christmas party, housewarming,
Halloween, or corporate events etc. cake has become the center of attraction and a must have for
all occasions. As a result, contemporary bakeries are offering cakes with new designs and flavors
with jaw-dropping artwork. Shumi's Hot Cake has more than 18 flavors; however, due to their
poor communication and promotion skills, the market is less aware of the availability. Because
of their every day cake orders that they work on, alongside being understaffed, they prefer not to
take complicated and intricate fondant designed cakes.
Recently, there has been a remarkable change in consumer lifestyle. Because of busy
schedules, lack of helping hands at home and growing traffic congestion - consumers prefer
restaurant food to be delivered not only at home but also at the workplace. To accommodate such
demand- market is offering online shopping opportunities and express delivery systems for
almost every consumer good including food.
In spite of the above-mentioned cultural shift and business possibilities, Shumi’s Hot
Cake has not taken enough initiative to tap into the expanding market because: 1) to reach the
optimum utilization of such baker's skills, Shumi's needs to employ more chefs so that beside
their everyday cake orders, they can concentrate on making some of the more intricately detailed
designer cakes. 2) There is a shortfall of market research from Shumi’s for forecasting product
demand and exploring customer needs. This is one of the reasons they often run out of food
which has eventually led to customer dissatisfaction. 3) In this digital era, an active presence on
social media is crucial for any business operation. For products like cakes and bakery items-
consumers usually demand for pictures to pre-order. However, Shumi’s Hot Cake puts less effort
for online promotion although it has improved recently. 4) Though Shumi’s Hot Cake has a
contract with online food delivery entities for online order and express food delivery, by the time
the delivery-men reach their outlets for pickup, the food would get sold to other customers due to
heavy demand. It seems that there is lack of correspondence between both the parties. In
addition, inventory information of the company is not regularly updated due to the absence of a
digitalized inventory management system. 5) These days it is extremely important for any
company to stay in touch with existing and potential customers and take care of their questions
and concerns yet Shumi’s have not created any customer database. Therefore, it lacks active
consumer relationship management. 6) Shumi’s has contract with only one food delivery
company thus missing out on sales opportunities via other companies, 7) Nowadays, fancy party
cakes are prepared not only by commercial bakeries with outlets but also by many individual
bakers who take customer orders over phone and online without having any physical outlet. So,
the exact number of competitors is unknown and surprisingly all of them are on high demand.
Hence, these countless competitors pose a serious threat to Shumi’s making the market more
competitive. 8) The industry has a major threat of product imitation. Shumi’s Hot Cake has
experienced that too. Two of their top chefs had left after a year of training and opened a new
bakery right across one of their outlets. This shows a serious threat of product imitation and
possibility of corporate espionage where trade secrets get revealed by the competitors. Although
this issue needed to be addressed right away, Shumi’s Hot Cake did not take any initiative to
retaliate against it. 9) Shumi’s currently has one manufacturing plant at the outskirts of Uttara
from where the products get delivered to 30 outlets within Dhaka. They could open more
branches within the capital city however having one factory is certainly not sufficient for
distribution in every corner. This shows a lack of value delivery network in its distribution
channel.

The Journey of Shumi’s Hot Cake: The initial days, the struggles and the golden era

Mrs. Shumi always enjoyed experimenting with her food. As she continued with her trial
and errors during initial days- words spread among others about her such interest. Neighbors
would frequently visit her place to try out her inventions. This gave Shumi an opportunity to
observe others’ reactions and take them as valuable feedback for her next venture. Shumi called
them her “food tasters”. In 1985, an event in Shumi’s life heightened her passion to such a level
that from then onward there was no turning back. Shumi was living in Jessore Air Base with her
family (her husband was serving with the Bangladesh Air Force). It was the 10th anniversary of
an important Bangladesh Air Force event. High profile guests were invited including senior
government officials, officers from Bangladesh Air Force, Army and Navy and their family
members for the grand celebration. Back then, the only feasible transportation system from
Dhaka to Jessore was by air. Among the list of menu there was a “20 pound three tier cake with
an eagle on top” which was ordered from a five-star hotel in Dhaka and was transported to
Jessore. By the time it reached the destination, the cake was not in good shape anymore and was
not presentable worthy. Hence, an instant executive decision was made that- Shumi would be
given the responsibility to bake this gigantic cake overnight. This was undoubtedly a huge
challenge for any unprofessional baker from managing all the important ingredients to final
execution in a remote and less developed city like Jessore. But for the talented and meticulous
Shumi- it was a piece of cake and she passed with flying colors. The guests relished the cake so
much that they wanted to meet the baker assuming it came from a commercial bakery. As Shumi
appeared- it was her “first public appearance” in the mass. This monumental honor instantly
boosted her self-confidence to bake on a large scale. Following this event, Shumi started getting
frequent requests to provide canteen food (refreshments like sandwich, shingara, samosa),
birthday cakes for neighboring kids and families, picnic food and so on. Although she kept all
the requests, the ever humble Shumi refused to take any money in return.
Shumi took such great pleasure in baking that whenever she visited her friends and
families, instead of buying them gifts, she would bake her own cakes and bring them over. As
the name “Shumi” became more popular- neighbors consistently insisted Shumi to start her own
cooking class. Ultimately, she had to keep their request and started one at home. One could learn
20 items to bake at BDT. 2,000 only. Unfortunately, Shumi could not continue this for long due
to her neighborhood restrictions from the authorities. But the cake orders kept coming every
single day. At one point, she had so many orders that it became very difficult to manage
everything at home. Eventually, Shumi’s husband encouraged her to open her first outlet and go
commercial.
In the early 90s- the baking industry in Bangladesh was dominated by the Christian
community. At that time, a famous patisserie at Sobhanbag shut their business and the store was
up for sale. When Shumi was looking for a space to set up her outlet, this was her preferred
choice. However, it was very expensive and unusual for a woman to start her own bakery and
that too in the predominant community. Nevertheless, Shumi managed to finance with the help
of her relatives, went against all odds and started her own business venture. That is how Shumi
inaugurated her first commercial outlet of 180 sq ft at Sobhanbag in 1991. This outlet remained
number 1 in terms of sales for the first 10 years of operation. Initially, she wanted to name it
“Baker’s Basket” but her husband insisted on keeping her name in it. Since all her items would
sell very quickly- came the idea of “Hot Cakes”. After all the ifs and buts- “Shumi’s Hot Cake”
was up and running by the first Muslim woman in this industry. Shumi’s Hot Cake still has that
homemade mouthwatering taste and richness in its cakes, specially their mud cake and black
forest’s tastes are unparallel in comparison to any other equivalents supplied in the market,
which can be considered to be their competitive advantage. Due to its superior product quality,
Shumi’s Hot Cake’s growth has been over 14 percent over a period of last 30 years between
2005 to 2021.
The company has been maintaining a direct distribution channel ever since it started
operations. Their main operation is in Dhaka where all the baked items are distributed to 30
outlets from its factory located in the suburbs of Uttara. This indicates the company follows
intensive distribution. Currently, among all the branches- the ones on Banani 11 and Baily Road
are the busiest and most popular ones. They also have 5 branches in Chittagong with 1 factory to
deliver from. Consumers have to visit stores in person to place orders and purchase. Shumi’s Hot
Cake is yet to encourage the customers to place online and telephone order facilities. Recently,
the company has added an indirect distribution channel too, where consumers can order through
one of the online delivery platform. Altogether Shumi’s has around 300 employees including all
its management levels and factory workers. This sole proprietorship business has turned into a
family run private limited company in 2009. The business is operated by family members at the
top management- including Mrs. Shumi, her husband, two sons, two daughter-in-laws, daughter,
a sister-in-law and a brother-in-law. Some of them have culinary backgrounds from renowned
overseas institutes.
Shumi’s Hot Cake, currently, has four product lines: 1) cakes of various flavors (such as,
vanilla, chocolate, black forest, special black forest, red velvet, mud cake, rainbow cake, choco
delight, butterscotch caramel, cheesecake etc.). Shumi’s Hot Cake does cakes for various
occasions like Valentine’s Day, Father’s Day, Mother’s Day, Eid, Christmas, Victory Day,
Independence Day, Baby Shower, Halloween, corporate events, etc. Also, evidently, Shumi’s
Hot Cake has noticed increased sales on such special occasions, indicating catering to the
demand of the market. 2) desserts (for instance, black forest delights, chocolate brownies,
muffins, cream rolls, eclairs, mousse etc.), 3) breads and biscuits (for example, breads, dry cakes,
salted biscuits, butter cookies, plain cakes, fruit cakes, pineapple cakes, jam rolls etc.) and 4)
savory items (like beef bun, chicken bun, beef roll, beef pizza, chicken pizza, shingara, beef
samosa, chicken samosa, etc.). The desserts and savory items are low end products ranging from
BDT. 20 to BDT. 150, purchased frequently hence, these are convenience goods. These items are
popular mainly among students and households as afternoon snacks. On the other hand, cakes
and breads and biscuits are mid-ranged items. Therefore, these are shopping products which
require some planning before purchase and shopped less frequently. Shumi’s strategy is to
produce in bulk quantities and hence utilizing their major workforce in the production of their
buttercream cakes and other pre-ordered decorated cakes in fondant or buttercream. Shumi's Hot
Cake has certified chefs with professional expertise, certified from different renowned
institutions- both local and international. Moreover, some of the chefs have experience of up- to
25 to 30 years. The company also has a Facebook page followed by over 48,000 members and is
now adapting to the market driven strategies.

Industry analysis

According to Bangladesh Auto Biscuit and Bread Manufacturers Association

(BABBMA) and Bangladesh Bread Biscuits O Confectionary Prostutkarok Samity (BBBCPS)-
this industry is sustaining a 10-12% growth since 2000 due to the change in consumer food
habits and rising disposable income (Wardad, 2021). It is an industry with BDT. 80 billion
annual transactions generating 60% from the automated units, 36% from traditional units and 4%
from imported goods (Wardad, 2021). The country’s per capita bakery goods consumption is
currently 2.09 kg/year which was barely 0.43 kg in 2008 (Wardad, 2021). According to the
importers- the current market share of the imported baked items has reduced from 15-16% to less
than 4%- due to the superior quality of products at competitive price and import substitutes
which indicate that the bakery and confectionary industry is rapidly becoming self-sufficient.
The sector also generates an employment of more than 2 million people including the factory
workers and front-line staff. By evaluating the market potential- the leading conglomerates have
captured a market share of more than 60% with massive investments, advanced and automated
manufacturing process, higher production volume and a wide range of products and marketing
capacity. Besides providing the quality products at a reasonable price- the local automated
bakery and confectionery are also offering home delivery options through the food delivery
service entities like Pathao, Foodpanda, HungryNaki, Chaldal and so on. All of these clearly
indicate that the bakery industry has a huge market potential and will continue to grow in future.
A company must conduct a competitive analysis to identify its competitors- whether they
are local or international, large or small, old or new, strong or weak- and analyze their products,
sales and marketing strategies. If we survey the bakery and confectionary industry- the direct
competitors of Shumi’s Hot Cake i.e. those who offer cakes and pastries as their core products
are Cooper’s Bakery, King’s Confectionery, Mr. Baker, Secret Recipe, California Fried Chicken
(CFC), The Flourist, Bread and Beyond, The Red Window, Baker’s Cupcake and so on. In
addition, there are many online bakeries which make their products at home and deliver to the
consumers. Among the indirect competitors- there are Olympic Industries, PRAN, Partex,
Haque, Nabisco, Bongas, Akij, Bashundhara Group, Kohinoor Group etc. which specialize in
breads, biscuits, buns, rolls etc. According to BABBMA- Olympic Industries is the largest
manufacturer, distributor and marketer of biscuits in Bangladesh which is able to satisfy 20-25%
of the market demand and has invested BDT. 420 million to strengthen its production capacity
(Wardad, 2021). PRAN is the market leader in cakes and buns capturing a 25% market share.
Nabisco Biscuit and Bread factory is the oldest biscuit brand that offers more than two dozen
baked products. Akij Group has also entered the market and sells its products with a dominating
distribution channel through local retail outlets, online and brick and mortar grocery and
departmental stores and roadside tea stalls. Due to the rapid growth of information technology
and multi-functional benefits of social media platforms- several online bakeries specialized in
fondant cakes, flavored cupcakes, brownies, cookies and other desserts have also gained
considerable popularity in recent times. To name few- they are Punizz Kitchen, The Cookie Jar,
The Baking Pit, CakeSake, Caketopia, Baker’s Cupcake, Sugar Rush Cupcakery, Cake World
etc. These contemporary bakeries are performing equally well and posing serious challenges to
the store based traditional outlets. Besides, the bakery and confectionary industry export baked
goods worth BDT. 5 million (Wardad, 2021). This further indicates that Shumi’s Hot Cake has a
golden opportunity to meet overseas consumer demand and gain an International market share.
Initially, Mrs. Shumi ran the business single handedly with her husband at work and three
little children at home. Even after all the inconveniences- she never compromised on food
quality. Her “homemade” goods played a big role in promoting the business. Customers not only
loved them but also felt safe especially if visiting from abroad. Shumi learned all about her
customer feedback from their small talks during store visits which motivated her to provide the
best in quality. In the beginning, her menu line included shingara, samosa and sandwiches
besides her soaring demand for cakes- 30 of each item. The business would break even only if it
made a sale of BDT. 1,500 a day. Within six months of the operation- Shumi made profit and it
was her first sale worth BDT. 3,500. Soon Shumi started receiving orders for cakes from
everyone, especially embassies, foreigners, high officials and political figures. With continuous
positive reviews, Shumi was open to the idea of launching more stores and only had she known
that one day she would run so many outlets across the city. Yet, Shumi’s could open a greater
number of branches in other parts of the country and better dominate the industry.
From the very beginning of its inception, Shumi’s business motto was “Shumi’s for
everybody”- affordable for all. Once in a meeting with the members of the Bakers’ Association,
Shumi was questioned as to how she maintained such low prices and the competing bakeries
doubted her food quality. She explained that she kept the low price as she built the business out
of passion and not to run a family. For example, one pound of her most popular “black forest
cake” was priced only BDT. 100 back in the year 1992. Her two-pound cakes always weighed
more (about 3 to 4 pounds) because she wanted her customers to get good value for money. Till
now Shumi’s has maintained this rock bottom price- 1200 gms of Shumi’s black forest cake is
available at BDT. 1,550, whereas 1kg (1000 gms) of black forest cake of Shumi’s close
competitor is priced at BDT. 1,700.
The current generation is excited about fancy cakes with themes and they are ready to
pay a premium price. These days, the contemporary bakers have come up with innovative cake
designs and variations in tastes. Cakes with extravagant designs like multiple tiers, sugar prints,
figures, art work, spectacular fondants, and mouthwatering flavors are common for any occasion.
However, Shumi’s is still offering their traditional designs with a few basic flavors. Because of
lack of product innovation, they are missing out on a huge opportunity to grasp the market.
Nevertheless, they are slowly coping up in terms of catering to the modern-day design variations.
Though unfortunately, Shumi’s is yet to be well known for making/selling fondant cakes of
various customized designs, Shumi’s Hot Cake, in recent years has taken initiative into this fast-
evolving market via making fondant cakes and other modern cake designs to cater to the latest
consumer demands.
Forecasting demand is one of the prerequisites to run any business smoothly. In the case
of Shumi’s Hot Cake, it is apparent that their product demand is not well projected because they
get frequent complaints of supply shortages from customers. Customers have become very
demanding and they look for convenience- express food delivery systems like Pathao,
Foodpanda, HungryNaki, Shohoz, are there to make life easier. Problems were initially faced
while/after collaborating with a food delivery platform, i.e, food would get sold out before the
delivery man would reach the stores to collect their online orders. Hence, indicating a lack of
communication between the two parties and a lack of updated digitalized inventory management
system.
In order to thrive in such a competitive market- it is vital to stay in touch with customers
be it current or potential. Shumi’s biggest challenge is its absence of online presence and
negligence of promotion which has led to detachment with consumers. Moreover, accepting
online and telephone orders with software support is also missing in its business operations.
Despite the popularity- it is lagging behind not only in updating about the latest product offerings
in the most efficient and timely manner but also in getting valuable consumer feedback, queries
and suggestions. As mentioned before, Shumi’s Hot Cake takes online orders, and delivers to
respective clients by themselves too (especially throughout the pandemic), however, the
company encourages ordering by physically visiting the outlets. It is also believed that Shumi’s
need to take initiative in taking queries and complaints and responding to those to improve
customer engagement.
In an interview with Shumi, she mentioned that she does not want her competitors to go
out of business because competition is good for the market. This is quite unusual from any
business perspective because in many cases it was found that the competitors are trying to grab
Shumi’s market share with innovative and market-driven strategies. Shumi’s Hot Cake should
set an ambitious goal not only for revenue and profit generation but also to grab more market
share. Corporate espionage is a serious threat to any business where trade secrets get revealed by
the competitors. Shumi’s Hot Cake has been a victim of this when two of their trained chefs left
after a year of work and opened a bakery of their own. This is unfortunate for Shumi’s and
undoubtedly unethical. Hence, they must develop a constructive plan to prevent such unforeseen
situations.
It was found that Shumi’s is a bit shy in expanding their operation into the overseas
market. This bakery has become so popular that its name and fame even went beyond the
borders. It once received a proposal from a foreign company to open 100 outlets in Bangladesh
in 2005 and to eventually go international. This was a massive opportunity for Shumi’s Hot Cake
to grow and step into the international market. However, Shumi decided not to go for it because
the return on investment would not have been worth all the efforts such as promotion,
distribution, etc. She was not sure about the business growth into the foreign lands and was not
comfortable with the idea of franchising. Although Shumi’s did not take the offer, yet it indicates
the lucrative opportunity it had for overseas business expansion.

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