8 Dec 2017
The Dough Rolls in as the Mainland Bakery Sector Toasts its Success
The Autumn edition of Bakery China, the mainland's biggest expo for all matters cake and bread-related, proved a fitting celebration of the massive growth of this dynamic sector, which – from a very low base – is now valued at US$71 billion.
At first glance, you might be forgiven for thinking that Bakery China – a twice-yearly Shanghai-hosted expo dedicated to all things cake- and bread-related – could be a tough gig for organisers. The mainland, after all, has never been seen as a market with much of an appetite for baked goods, with its traditional cuisine largely eschewing items prepared in this notably western fashion. First glances, however, can be notoriously misleading.
According to a recent report by Daxue Consulting, a Shanghai-based market-research company, China may soon become the second largest market for bakery products in the world. For 2017 overall, the value of the mainland bakery market is estimated to reach RMB470 billion (US$71 billion), while, in the country's second- and third-tier cities, demand is expected to rise by 30% per annum over the next few years.
Despite such appetising statistics, western bakery businesses have found it difficult to gain a foothold in 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 Paul, the upmarket French bakery chain, which opened across China in 2007 to considerable fanfare, before slinking out of the country, with all of its outlets shuttered, in 2010.
By 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 of these loaf-offering interlopers has been Singapore's BreadTalk and Taiwan-based 85°.
Even given the impact made by a number of non-China Asian bakery chains, the market is still pretty much in thrall to local producers, with new domestic companies springing up on a regular basis. One such newcomer is Nantong Mewe Trade, a Jiangsu-based business specialising in yoghurts, cheese dips and puddings.
Making its debut at the show, the company was typical of many 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.
It's a business model that is becoming increasingly commonplace across China, with many of the smaller bakery businesses opting to brief third-party manufacturers as a means of circumventing problems with their own lack of expertise or infrastructure. For Mewe, this has proven to be the ideal solution, with David Xu, the company's General Manager, saying: "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."
While many US and European producers of baked goods have struggled to make a real impact in the bakery business, they have fared far better in the dairy and confectionery sectors, with a substantial number of overseas exhibitors on hand to testify to their own success. One of the most high-profile of these 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. Although 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 squarely aimed at the B2C sector.
Explaining the company's thinking, Sandy Wang, a member of its management team, said: "We believe that all of our products have huge potential. Our promotional campaign at this year's event has also proved very successful and, as a result, we have met with a substantial number of new customers."
As well as bakery businesses per se, the event also acted as a shop window for the latest baking technology, with domestic businesses – most notably Jiangsu-based Baoli Machinery and Shanghai's own Hofen Packing Machinery – again 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.
Explaining the company's current positioning, Sales Manager Monica Xu said: "We started off concentrating on the Chinese market, but now we are also selling overseas. 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.
Reflecting on both the company's heritage and its experience at the event, Project Manager Rick Jian said: "We have been in this sector for 20 years and now sell our equipment all over the world. In terms of the show, there are not so many people at this autumn event. The spring show was much better and is probably the best expo of its kind in China."
Despite their various specialties and positioning, one challenge for every bakery targeting the domestic market is identifying just which products will be a hit with Chinese consumers. One company that believed its own instincts will put it ahead of the game in this respect was Suzhou-based Foodaily.
Launched in 2014, the company specialises in taking overseas-sourced bakery products – primarily from Japan – and then reinventing them in a way that will appeal to Chinese consumers, with one of its recent successes being its range of bean-paste-filled pancakes. Having worked its magic, the company then sells its newly mainland-friendly products on to local distributors, retailers and online businesses, as well as also consulting with regard to the best packaging approach.
Sharing her experience of the expo to date, Sales Representative Elk Wang said: "We spent about three months preparing for this show and opted to share our stand with one of our customers – Xintron, a waffle maker. Overall, it has been hugely worthwhile. In fact, I would say this has been our best show to date."
As well as identifying prime products, another problem for many bakery companies is the wastage that occurs during the preparation/cooking process, particularly when items stick to surfaces or containers. Offering a possible solution to this particular challenge was Tranquil International, a Hong Kong-based business that has built its reputation by developing innovative silicone products.
In this particular instance, it has produced a range of non-stick silicone-moulded baking trays that allow finished items simply to be pushed out with a minimal amount of residue. Suitable for use at temperatures from -40°C to 250°C, the trays come in a choice of 200 different styles, including several suitable for non-baking applications, such as producing chocolate, candles or soap.
In terms of the company's current reach, Kelsang Su, Head of Overseas Sales, said: "We primarily sell to bakeries, baking schools and baking-supplies shops. In term of overseas markets, the US, Malaysia and Germany are all pretty big for us."
While any such wastage is largely invisible to potential consumers, the appearance and visual appeal of any bakery is just the opposite and represents a vital first hurdle for any catering business looking too woo new customers. Believing it can improve on the hit-and-miss approach to design favoured by many bakeries, Shanghai-based Empire has been helping businesses in the sector upgrade their look for 14 years and specialises in providing strong visual branding.
The company began life producing counters and display cabinets for the catering trade, before evolving into providing a full front-of-shop outfitting service. Among its satisfied customers are said to be two of Taiwan's most successful bakery chains – 85° and Ichido.
Assessing the value of the show as a channel for client acquisition, Sales Director Tracy Liu said: "This is only the second time we have exhibited at the autumn show. Although the spring event is much bigger, both have been good for us and we have, unfailingly, found new customers every time."
Bakery China (Autumn) was held from 25-27 October 2017 at the Shanghai New International Expo Center. The event attracted 307 exhibitors, representing a broad cross-section of bakery businesses, as well as a substantial number of companies from related sectors.
Chen Rong, Special Correspondent, Shanghai