4 Jan 2018
Success on a Plate
According to a recent report by Shanghai-based market-research company Daxue Consulting, China may soon become the world’s second-largest market for bakery products. The value of the Chinese mainland bakery market is estimated to reach Rmb470 billion (US$71 billion) in 2017, while in the country's second- and third-tier cities, demand is expected to rise by 30 per cent annually over the next few years.
Despite such appetising statistics, Western bakery businesses have found it difficult to gain a foothold on the mainland market, while a number of Asian brands – typically those offering a range of sweeter bread products – have seen their market share soar. One of the most high-profile casualties of this phenomenon was the upmarket French bakery chain Paul, which opened across China in 2007 to considerable fanfare, before shuttering all of its outlets in 2010.
In contrast, bakery businesses from several neighbouring Asian countries have found considerable success on the mainland, especially those that have adapted their product portfolio to match local tastes. Among the more successful has been Singapore's BreadTalk and Taiwan-based 85°.
Shanghai Trade Show
Even with the gains made by several Asian bakery chains, the market is still generally dominated by local producers, with new domestic companies springing regularly. Among them is Nantong Mewe Trade, a Jiangsu-based business specialising in yoghurts, cheese dips and puddings.
"The dessert market is growing, in line with people's increased income and higher living standards, and our business model is helping us to grow alongside it," said David Xu, the company's General Manager.
Debuting at the October Bakery China in Shanghai, the company was typical of many outlets in that it doesn't directly produce its own range, opting instead to outsource designs to an external production facility. It does, however, purchase all of its own ingredients, typically sourcing milk from Australia or New Zealand.
The business model has becoming increasingly commonplace across the mainland, with many smaller bakery businesses outsourcing to third-party manufacturers to circumvent their lack of expertise or infrastructure.
While many US and European baked goods producers have struggled to make a real impact in the mainland bakery business, they have fared far better in the dairy and confectionery sectors, with a substantial number of overseas exhibitors participating at this year’s fair. One of the most high-profile was Sinodis, a Shanghai-based subsidiary of Savencia, a 61-year-old French business well-known for its specialist cheeses and extended range of dairy products.
This year, the company was particularly keen to showcase its Elle & Vire dairy products, its Milkana range of processed cheeses, and its Valrhona premium chocolate selection. While the show was primarily aimed at the B2B bakery market, the company also debuted its online range at the event, a side of the business aimed at the B2C sector.
"We believe that all of our products have huge potential,” said Sandy Wang, a member of its management team. “Our promotional campaign at this year's event has also proved very successful and, as a result, we have met a substantial number of new customers."
Apart from the bakery business itself, the event also served as a shop window for the latest baking technology, with domestic firms – most notably Jiangsu-based Baoli Machinery and Shanghai's Hofen Packing Machinery – putting in a particularly strong showing. In the case of Baoli, despite its range of crushing, mixing and sieving equipment having a number of potential applications, it sees the commercial-bakery sector as its primary market.
"We started off concentrating on the Chinese market, but we now also sell overseas,” said Sales Manager Monica Xu. “Every year, we aim to expand our range and encourage buyers, including representatives of overseas businesses, to visit our production facilities and see our new additions for themselves."
For Hofen, its primary focus was on small and medium-sized bakeries that have their own onsite production facilities. It currently specialises in automatic icing machines for cakes, systems that can fill a range of baked products with cream, and drink-making equipment.
Adjusting to Local Taste
One challenge for every bakery targetting the domestic market is identifying products that will be a hit with Chinese consumers. Suzhou-based Foodaily has successfully done this by reinventing mainly Japanese-sourced bakery products, such as bean-paste-filled pancakes, to appeal to Chinese consumers. The company then sells its mainland-friendly products to local distributors, retailers and online businesses, as well as consults with regard to the best packaging approach.
Wastage is another problem, which commonly occur during the preparation/cooking process, particularly when items stick to surfaces or containers. Offering a possible solution to this challenge was Tranquil International, a Hong Kong-based business that has built its reputation from its innovative silicone products, including a range of non-stick silicone-moulded baking trays that allow finished products to come off easily. Suitable for use at temperatures from -40°C to 250°C, the trays come in a choice of 200 styles, including several suitable for non-baking applications, such as producing chocolate, candles or soap.
"We primarily sell to bakeries, baking schools and baking-supplies shops,” said Kelsang Su, Head of Overseas Sales. “In term of overseas markets, the US, Malaysia and Germany are all pretty big for us."
For more China market opportunities, please visit: http://research.hktdc.com.