The bakery owner is a heimishe yid, using a heimishe hashgocho, making the kugel like in der alte heim.
Its a loose definition, as you can see. But it roughly means someone of chasidic background, although not necessarily a “heisa” chosid with a shtreimel and lange rekel.
But its become loosely used in the frum vernacular for any ehrliche yid, be he a chosid, a litvak, a yekke or sefardi.