What is the market size analysis for hotcakes?

Market sizing is one of the most important business planning aspects for a high tech firm. Fortunately, pancakes are a relatively stable and predictable market and a lot will depend upon the quality of your innovation, applicability of your technology to the unique quality of the pancake experience, and marketing capable of attracting buyers from an already crowded market.

While clear figures aren't always available, it is reasonable to extrapolate market size from figures of related products such as dry pancake mixes and popular American restaurant chains which focus primarily on the pancake experience such as IHOP.

Both of the following comparisons contrast sales figures for both IHOP as well as dry mix markets in 2004 and 2007, then collate this information to determine the relative growth in the number of "pancake experiences" per capita.

The dry mix market has been documented by Chicago based firm Symphony IRI at approximately $160 million in 2004, growing to $250 million at the end of 2009 or about an $18 million growth rate per year (or 11.25%). This means that the dry mix market grew by approximately 34% during 2004 through 2007.

Correspondingly IHOP increased its number of locations from 1186 in 2004 to 1344 in 2007, a 13% increase in the number of locations. However, revenue from these IHOP stores grew from $188 million in 2004 to $330 million in 2007, an increase of 75%, double the revenue increase from corresponding dry pancake mix sales.

Considering that the US population grew from 290 million to 300 million in the same period (and discounting the obvious impact of pancake preferences among demographic groups entering the pancake market), an increase of only 3%, it is clear that the demand both for dry mix as well as restaurant pancake experiences grew significantly per-capita during the same 2004-2007 sample period. It is a possible theory that a market shift has occurred during this period and that Americans are both (a) eating pancakes out more often as well as (b) relying more heavily on mixes than handmade products.

Even conservative estimates make it clear that Americans are engaging in pancake experiences more frequently within these markets. While based upon conjecture, assume that each person who visits an IHOP spends approximately $12 per pancake experience. This means that in 2007, Americans had 27.5 million IHOP experiences. For dry mixes, the number is significantly greater (using a serving size of 28 per container for Bisquick) at approximately 1.21bn pancake servings created using dry mixes (up from 905 million in 2004).

With an aggregreate increase of 33% in pancake experiences among Americans during that period, vs a 3% population growth, evidence suggests that in 2007 Americans were almost 1/3 more likely in 2007 to enjoy a product-based pancake experience than they were in 2004 and appear to want to do so in the privacy of their own homes.

Thus, the market sizing for pancakes in 2010, assuming a modest 10% growth from 2007 would be a minimum of 1,361 million pancake experiences per year just for dry mixes and IHOP alone with a significant growth rate. Further extrapolation based upon the much larger number of diners and restaurants, as well as hand-made recipes surely multiply this figure by at least a factor of 5 to 10, meaning that Americans engage in pancake experiences at least 1 to 2 times per month, per capita, on average.

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