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Bagel industry takes a bite out of giants like Amazon

America loves its bagels.

The doughy demand for the chewy round morsels smeared with cream cheese is still one of the most sought-after breakfast foods around the country, despite the rise of gluten-free, carb-less diets.

Restaurants across the country churned out 848 million servings of bagels in the year ending November 2019, up 7 percent compared to the same time period for the previous year, according to the latest data from NPD Group and Crest Foodservice. And the number of bagel breakfast sandwiches ordered at eateries around the country is up 5 percent compared to a year ago, according to the same data, showing that eaters around the country are increasingly ordering the beloved morning staple.

And despite a saturated market of bagel brands infiltrating the bread and frozen food aisle at grocery stores, national chains and third-party delivery services like UberEats and DoorDash catering to eaters' doorsteps, some local suburban bagel shops continue to grow – and thrive – amid the increased competition.

Expect wrap-around lines out the door any weekend morning at 110 Bagel Market & Bistro in Melville, on Long Island in New York where eaters wait for the signature everything bagel with gobs of cream homemade cheese. The bagel shop, which opened in 2013, feared competition from a new grocery store chain that opened up nearby. But to its owner's surprise, the family-owned shop has seen 20 percent growth in the past year.

“We were a little bit worried when we saw it coming,” Michelle Adamovicz, 47, who owns the shop with her husband Rolando, within a mile radius of two other bagel shops, told FOX Business. “It surprised me because we still have long lines on the weekend. The demand is still here.”

Adamovicz says bagels are made with unbleached flour, hand-rolled and kettle-boiled before they’re baked in the oven for a “fresh and hot texture.” And while she uses all-natural ingredients and even offers flagels (flat bagels) and mini varieties, she admits customers still want to indulge in the carb-loaded goodness.

“People have not stopped eating bagels even with the rise of healthy food," she said.

While bagel shops have the most traction up North, with New York taking the No. 1 spot for being the nation's largest bagel-making marketplace, Atlanta, Chicago, Los Angeles and Phoenix were also among the top 10 cities that have the most demand for bagels, according to data from catering business marketplace ezCater. And each city has its own homage to the bready breakfast staple. Philly-style bagels are typically fermented in small batches, hand-rolled, boiled in Yards beer and baked on wood planks for a chewy, crisp bagel. And a Chicago style-bagel is boiled and around a third of the size of a New York bagel that has a harder crust and is denser.

The option to get bagels delivered is also nearly infinite. Type in the word "bagel" into Amazon Fresh, the e-commerce giant's online grocery ordering service, and more than 200 different results come up for packaged brands with prices ranging between $3.25 to $4.50. But foodies say big tech and food delivery will never cannibalize the old school bagel biz. Like pizza, the selling point is that bagels are best consumed fresh, not frozen, and customers will continue to frequent their local shop for a hot one.

"The commercial bagels are pretty awful. They lack the crust as well as the texture of a good bagel. The best are hand-rolled and you can really tell the difference," New York City-based restaurant consultant Jason Kaplan said. "Fresh-baked bagels are the best and you really can't mimic that with a frozen food commercial product."

Other bagel brands have gone the retail and wholesale route, capitalizing on giving eaters a taste of the beloved morning meal instead of the whole thing. Bantam Bagels, a New York City bagel shop, opened in 2012 after its husband-and-wife team of owners who invested $100,000 of their savings to serve up bite-size bagel balls stuffed with various sweet and savory flavored cream cheese spreads out of its tiny Bleecker Street storefront. As the business gained traction, owners Elyse and Nick Oleksak landed a $275,000 investment from “Shark Tank” judge Lori Greiner after applying to be on the show, catapulting the business from a $200,000 a year mom-and-pop shop to a multimillion-dollar brand expanding into grocery stores and Starbucks coffee shops nationwide. In 2018, the brand was acquired by T. Marzetti Co. for $34 million.

“A lot of the success has to do with the bagel – it holds this nostalgia for everyone from kids to adults. It’s this feeling of comfort no matter where you are,” Nick Oleksak said. “But it became associated with this stigma that you felt guilty about it. People were looking to have that iconic, amazing portable food on the go, but still have the authenticity of what a bagel really is.”

The product and business model is working. And despite the success of its wholesale products in the frozen aisle for an average shelf price of $4.99 for six at grocery stores, the tiny Bantam Bagel shop still exits, and it’s highly profitable. The business grew 100 percent in retail sales from 2018 to 2019, and the company produces 1.5 million bagels per week, Nick Oleksak said.

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