Bakeries live or die by waste control. A perfect recipe still loses money if you bake the wrong volume or price pastries like bread.
This guide gives you a UK-focused framework for bakery costing and pricing.
Quick Summary
- Cost by batch yield, not by guess
- Separate pricing for bread vs pastries
- Add a waste allowance before setting menu price
- Use VAT guidance for eat-in vs takeaway
The Bakery Cost Formula
Unit cost = (Batch ingredients + Packaging + Waste allowance) ÷ Units sold
Food cost % = Unit cost ÷ Net (ex-VAT) price
Menu price = Net price × (1 + VAT)Why Bakery Margins Leak
- Overbaking leads to direct waste
- Butter-heavy pastries inflate cost faster than bread
- Packaging adds more than you think
- VAT treatment shifts net margin
Example: Croissant (Illustrative)
- Ingredients per croissant: £0.52
- Packaging: £0.10
- Waste allowance (8%): £0.05
Unit cost: £0.67
Target food cost: 25% (net)
Net price = £0.67 ÷ 0.25 = £2.68
Menu price (VAT added) ≈ £3.22Round to your ladder (e.g., £3.10 or £3.30) and keep price gaps consistent.
VAT Reality Check
VAT treatment differs between eat-in and takeaway, and between hot and cold items. Check HMRC guidance before finalising price targets.
Source: HMRC VAT Notice 709/1: Catering, takeaway food
UK Cost Pressure Signal
ONS reported restaurants and hotels inflation at 3.8% year-on-year in October 2025. If your bakery prices have been static, your margins probably have not.
Source: ONS Consumer price inflation, UK: October 2025
Pricing Structure That Works
- Bread line: lower margin, high volume
- Pastry line: higher margin, lower volume
- Seasonal specials: premium pricing to offset waste risk
The goal is stable average margin, not perfect margin on every item.
Do This Now
- Track your daily bake vs sell numbers and calculate actual waste %
- Build separate recipes for bread and pastries (different cost structures)
- Add a waste allowance to your recipe cost before setting menu price
- Calculate your current food cost % on your top 3 items using net (ex-VAT) price
- Set a monthly reprice reminder for when butter or flour costs move
Related Guides
If you want bakery costs that update as butter and flour prices move, KitchenCost keeps every recipe current.