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Third and Fourth Tier Cities Set to Drive Mainland Bakery Sector

With the appeal of baked goods having reached something of a saturation point in many of China's larger cities, the industry is focussing on tapping the vast untouched demand in a number of the country's smaller urban markets.

Photo: Shoei on show: Shanghai-based ingredients company promotes its currant range.
Shoei on show: Shanghai-based ingredients company promotes its currant range.
Photo: Shoei on show: Shanghai-based ingredients company promotes its currant range.
Shoei on show: Shanghai-based ingredients company promotes its currant range.

Smart food processors and "fast fashion" food service equipment are the new bright spots of China's bakery industry. According to exhibitors at a recent trade show, bakeries will develop in the direction of mixed operation and by selling coffee and drinks in addition to bread and pastry.

This year's China Bakery Exhibition extended over an area of 65,000 sq m and welcomed exhibitors and attendees from across the entire baking-industry chain. This saw raw-material suppliers, manufacturers of baking machines, packaging designers, specialist logistics companies and niche training companies all converge on Guangzhou's Pazhou Complex for the three-day event.

The scale of the exhibition reflected the way baked food has moved into the mainstream across the mainland, becoming a staple for many families. This year, the country's bakery sector is expected to be worth RMB401.3 billion (US$59 billion), and predicted to rise to RMB550 billion by 2020.

At the same time, the wide range of exhibitors at this year's event was seen as indicative of how the sector is changing, with many bakery operators branching out into related areas, including the provision of coffee and other beverages.

While the variety of baked food on offer has notably increased over the years, the shelf life of many related products has been abbreviated, with an increasing number of consumers only willing to purchase fresher – and thus healthier – items. Another trend also re-shaping the industry is the surge in demand for bakery items in many of China's third- and fourth-tier cities.

Third- and Fourth-Tier Cities

One of the many mainland baking companies to see China's smaller cities as driving the industry's next tidal wave of expansion was the Shoei Foods Corporation, a Shanghai-based specialist in baking materials and a leading supplier of premium dried fruit and nuts from around the world.

Photo: A triple-decker dessert from Maxim’s.
A triple-decker dessert from Maxim's.
Photo: A triple-decker dessert from Maxim’s.
A triple-decker dessert from Maxim's.

At present, the company primarily sells raw and supplementary baking materials to bakeries, cake shops and food-processing plants. Although the most substantial portion of its output is divided between four of China's largest cities – Beijing, Shanghai, Guangzhou and Shenzhen – Cen Yubin, the company's Sales Director, sees its likely future growth as coming from the third- and fourth-tier cities.

Expanding upon the evolving markets in the smaller cities, Cen said: "Our offices in Shenyang, Tianjin, Xinjiang and Chengdu have all reported growing demand from many of the surrounding towns and townships. Although the level of consumption in these areas is still relatively low, there is huge potential."

According to Cen, the company principally distributes through direct sales, but is looking to work with local retailers in order to supply some of the more remote areas. Overall, he sees baked foods as being most popular in the coastal areas of eastern China, although demand is also growing in the central and western regions.

Cen also maintained that baked foods are particularly popular with younger consumers, a view shared by Bo Xin, Channel Sales Manager of Kolb Huizhou, a Guangdong-based manufacturer of bakery equipment.

Summarising the immediate prospects for the sector, Bo said: "While soft European-style bread – crispy outside, but soft inside – was once very popular in the first- and second-tier cities, it has gradually fallen out of favour as new alternatives have emerged. Such bread, however, remains hugely popular in the third- and fourth-tier cities.

"The current generation was introduced to baked food at a very young age. As they grow up, baked food will remain a staple part of their diet, a development that only has positive implications for the bakery market."

Bakery Cafes

With competition rife in the mainland bakery market, many establishments have found it difficult to remain financially viable by selling solely bread and pastries. This has led to increasing diversification in the sector, with many exhibitors at this year's event keen to showcase the wide range of options on offer, including the sale of coffee and other beverages, as well as ice cream and traditional Chinese-style pastries. In order to facilitate the sale of such items, several exhibitors were promoting smart baking equipment, as well as a range of fashionable beverage systems.

One option to catch particular attention was Kolb Huizhou's range of Atollspeed ovens. These simple, yet stylish, items are available in silver, black and red options.

Photo: Odour-free and easily programmable: The Atollspeed range.
Odour-free and easily programmable: The Atollspeed range.
Photo: Odour-free and easily programmable: The Atollspeed range.
Odour-free and easily programmable: The Atollspeed range.

According to Bo, speed of food preparation is the true USP of the range, with each of the ovens capable of storing up to 100 baking programmes, all of which can then be selected at the push of a button. As well as using very little electricity, the units are also said to be ideal for installing in malls or cinemas as they do not require access to ventilation fans.

Another plus point of the Atollspeed ovens is that they retain none of the odours or tastes of items they have been previously used to heat. This is a huge advantage when highly aromatic products – such as the durian pizzas that are hugely popular in Guangdong – are prepared in the same units as foods with less pronounced scents, such as conventional bread products.

Customisable, Healthy Ingredients

Many mainlanders are becoming increasingly conscious of the nutritional value and safety issues related to the food they consume. In order to counter such concerns, many companies in the bakery sector are now looking to reassure customers as to the quality of their products. Shoei, for instance, claims to use only baking ingredients that are free from additives, preservatives, colourings and flavouring essences.

According to Cen, some 50% of all of Shoei's baking materials are sourced from abroad, including all of its dried fruit and nuts content. At the same time, as consumers continually want to try new food items, the company has to constantly update its range with novel and lesser-known items from around the world.

In line with this, Shoei's stand featured a wide array of internationally sourced products. In the raisin category alone, the company had samples from Australia, the US, Turkey and China on offer. Among the other ingredients on show were dried cranberries, pistachio nuts, walnuts, cashew nuts, macadamia nuts, pine nuts and dried fruits. The company was also promoting a low-calorie maple-syrup brand – sourced from southeastern Canada, it was said to be free from all colouring and additives, while containing more vitamins and minerals than sugar or honey.

In addition to its range of raw ingredients, Shoei also has the facility to process any required baking ingredients into different shapes and sizes in line with any client's specific requirements. It also works with a range of cold-chain logistics providers in order to ensure all of its food products are delivered in optimum condition.

Photo: All you need to make a cake…
All you need to make a cake…
Photo: All you need to make a cake…
All you need to make a cake…
Photo: An outsize mooncake from Lailai.
An outsize mooncake from Lailai.
Photo: An outsize mooncake from Lailai.
An outsize mooncake from Lailai.

Chinese Pastries

A substantial number of companies specialising in the supply of Chinese pastries – both the traditional variety and those featuring more of a contemporary twist – were also in attendance at this year's event. Among those specialising in the more classic end of the market was Zhuhai-based Lailai.

This year, the company's most in-demand items included lotus seed paste rice dumplings, osmanthus rice cake, pumpkin and red bean cake and Chaozhou-style mooncakes. According to Li Yongchang, one of the sales staff on the company's stand, Chinese-style pastries are every bit as popular as their Western counterparts.

Giving his take on the current state of the mainland market, he said: "As many bakery products have a relatively short life-cycle, we constantly have to launch new pastry items. We have also been at pains to reduce the sugar content of our range, without compromising the taste. This has proved particularly successful in the case of our newly launched low-sugar mooncakes."

One company offering both traditional Chinese pastries and several Western-style products was Guangzhou-based Zhujiang. For 2017, the company has looked to extend its selection of mooncakes, adding meaty, fruit, vegetable and flower-tea options to its range. One of its most popular new additions, however, is a range of upmarket Western-style mooncakes.

Among the other innovations on show was a new range of meat jerky produced by Hubei-based Wugongji, and a selection of low-fat macaroons in 11 different flavours from Dongguan's Erzhi Nainiu (Two Cows). For those looking more for tips as to how to showcase or market their wares, M Star Soft, a Shenzhen-based software company, had on offer a proprietary system for designing and maintaining bakery-themed e-commerce sites.

Photo: A cornucopia of confectionery courtesy of the 2017 China Bakery Exhibition.
A cornucopia of confectionery courtesy of the 2017 China Bakery Exhibition.
Photo: A cornucopia of confectionery courtesy of the 2017 China Bakery Exhibition.
A cornucopia of confectionery courtesy of the 2017 China Bakery Exhibition.

The China Bakery Exhibition 2017 was held at the China Import and Export Fair Pazhou Complex between from 25-27 May. The event was organised by the All-China Bakery Association.

Jian Wei, Special Correspondent, Guangzhou

Content provided by Picture: HKTDC Research
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