Blue Ocean Example: Differentiation & Low Cost ... Plus a Bagel Recipe

French bakeries compete in a red ocean of bread while ignoring bagels, a low-cost obvious opportunity.

The simultaneous pursuit of differentiation and low cost is a poorly understood concept. Here’s an example opportunity and a bagel recipe.

Google Maps tells me there are 16 different bakeries within a kilometer of my home. If I’m willing to drive a few minutes that number more than doubles. This doesn’t include grocery stores that offer fresh bread, only stand-alone bakeries.

Vive Le France.

This raises two obvious questions. The first is if carbs are really that fattening why are the French typically so fit? I asked a French girl, the daughter of a friend, what family’s do after buying a half-dozen baguette. She looked at me like I was crazy and answered “eat them.” The mystery remains.

More to the point, how do all these bakeries survive when they sell essentially the same thing at the same price? Some bakeries with exceptionally good bread have long lines but few seem to struggle. And yet the vast majority seem to sell the same things: soft baguettes, traditional baguettes, a few types of bread, croissants, and pains au chocolate.

What would happen if a French bakery tried a blue ocean approach focused on differentiation and low cost?

I have just the product (or, in blue ocean terms, “strategic offering”) … bagels.

As I outlined in a prior post, I love bagels. My family owned east coast delis and I grew up with traditional bagels. Not the round white bread with a hole in the middle monstrosities that are common now; traditional hearty delicious bagels. In the US, there aren’t many good traditional bagel bakeries and here in France — despite that bread is the national food — there’s essentially nothing outside Paris and Lyon.

Yet bagels are simple to make, contain inexpensive ingredients, and use largely the same ingredients and processes French bakers already use to make everything else. Why not whip up a batch of a few dozen bagels every day for a month and see how they sell?

Besides requiring little or no new equipment, bagels also open a market to noncustomers — expatriates who want bagels but don’t otherwise eat as much bread as the locals. Like all noncustomer exercises, this doesn’t at all exclude traditional customers; I suspect the French might love bagels every bit as much or more than Americans. Like all strong noncustomer groups, bagel eaters are additive to a market, not competitive.

Finally, but importantly, adding bagels to the product mix would be a low-cost, low-risk experiment. Bagels are inexpensive to make. Therefore, the cost to bake and sell a few types for, say, a month is negligible. At the very worst a bakery will lose a small amount of money and end up donating a bunch of bagels to charity.

There is a common misperception that blue ocean opportunities are enormous and require a large investment. In fact, countless opportunities are low-cost strategies to redefine the boundaries of an existing market and make competition irrelevant without spending a fortune. Finally, it’s important to remember that low-cost means your low-cost; blue ocean products and services often sell at a premium. Even when they cost less than similar offerings they’re more profitable. Price your bagels as high as the mass of consumers are willing to pay no matter how low your internal cost structure.

As French blue ocean consultant Esther Teixeira pointed out, changing the lineup of a bakery is unusual and the French are loathed to do something that’s outside French culture. Besides that bakeries don’t offer bagels she noted they also don’t offer English muffins despite the large number of English expatriates living in France.

This is, of course, exactly the reason to try something new, to go into a market where others aren’t. Blue ocean opportunities are often counterintuitive. They “feel” wrong, at first glance, exactly because competitors aren’t already doing them. This is exactly what makes them potential blue ocean opportunities in the first place. After all, the French also typically eat French food but Italian and Chinese restaurants thrive in France.

With that, here’s my bagel recipe which any baker will notice looks eerily similar to any other bread recipe except for the shaping and boiling.

350ml water
1 packet/10 grams yeast
Big pinch of salt
550 grams bread or high-gluten flour + extra
2 tablespoons (big spoons) malt extract or brown sugar
Big tablespoon baking soda
Toppings (sesame seeds, kosher salt, poppy seeds…)

Heat water to 110F/44C

Add 1 tablespoon malt extract or brown sugar & yeast and mix

In a big bowl sift the flour and add the salt

When yeast mixture is bubbly add to the dry ingredients

Mix with a fork adding flour until the dough is less sticky

Switch to your hands, sprinkling flour until not sticky

Knead until smooth and slightly sticky, 5-10 minutes

Transfer to a clean oiled bowl and cover. Let rise until doubled or longer.

Cut the dough into pieces, eight big or ten normal size bagels.

Turn the pieces into ropes and form into a bagel. There are lots of web videos about how to form bagels. Here’s a good one:

Let rise another 30-60 minutes on the counter. Some people recommend letting rise overnight in the fridge. They’d never fit in our fridge and I’m impatient so I’ve never done this but go ahead if you have the space; let me know how they turn out.

Fill a big frying pan 2/3rds with water and add baking soda and another big spoonful of malt or brown sugar. Heat the water until it’s slightly boiling.

Preheat the oven to 400F/220C. Bagels cook at high heat.

Get an oven rack or two with parchment paper ready.

Put the bagels in the boiling water for one minute then flip and let boil another minute, two minutes total. A bit of trivia to impress your friends and family: this is the reason bagels have holes. The hole allows the water to reach more surface area making the outside of the bagels crunch while the inside remains soft.

Pull the bagels from the water and add toppings by dipping them. Some people brush with egg: that makes toppings stick better and the finished bagels shinier.

Cook for about 16 minutes until the bagels look finished. Some say turn halfway through; I’ve never done this but imagine it can’t hurt.

Pull and let cool a few minutes.

Eat. Or slice in half and freeze the bagels, reheating them by toasting later.

Some notes:

Brown sugar works but malt extract makes noticeably better bagels. It’s available at lots of online stores and also beer-making stores if you have one nearby. There’s a fresh type that’s gooey and a dry kind that’s powdery. I use the dry because I don’t have any room in the fridge to store the fresh after opening. Here’s a link to a store with malt extract to see what I’m talking about. Different flavors of malt make different flavor bagels; experiment to see what you like (they’re all good):

Use whatever toppings you want but if you choose, say, blueberry bagels please don’t tell me; they’re an abomination that’d make my ancestors roll in their graves. Plain egg, toasted sesame, poppy, onion, garlic, sea salt, or a combination of all of them to make everything bagels work great.

This makes great bagels but a steam oven would make better ones. Traditional bagel bakeries cook them on wooden planks. Other recipes say to use a pizza stone.