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Bakery Market In China

The nutritive value of baked product causes people to choose it as a part of their diet. Bakery product are even imported from foreign country due to high demand. Mainly trend of consumption of bakery product in Chinese consumer comes from Western culture.

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Definition / Scope

Bakery products are food items which are made up of various ingredients like flour, salt, sugar, butter, water, etc. The major bakery products are cakes, bread, biscuits, pastries, etc. Bakery product with better taste and appeal are the choice of consumer. Due to nutritive value of bakery product, people choose bakery product as a part of diet. Bread and biscuit falls under popular breakfast consumed by all consumers worldwide. [1]

In China pies and rusks are also consumed as a baked product. Due to changing eating habits and food trends of people, market of baked goods is characterized by a downward trend in terms of volume demand. [2]

In worldwide market of baked goods, China is set to become one of the attractive sellers. The appetites of bakery product grow in Chinese people. Due to hectic lifestyle of Chinese consumers along with expansion of income of people, Chinese consumers especially students and workers of urban areas choose bakery product as a between meal. In older days, baked goods were not as popular as today. Imported bakery product has become a trend in Chinese market due to better quality and packaging. Consumption of bakery product has become a trend in China. [3]

Market Overview

In the past decade among the food beverage in China, bakery product has shown growth years by years. With growing trend of consumption of cakes and pastries, popping of well stocked, well decorated and high priced dessert shop is going on Chinese market.

Chinese consumers are health oriented so they want food product with quality like low sugar, high fiber, vitamin fortified so that the experts in China recognise the growth of bakery product in overall Chinese market. The demand of bakery is so high that goods are even imported. Pastries and cakes are consumed in all kind of celebrations due to which bakery product becomes the key drivers of growth rate of delicious desserts.

Key Metrics

Metrics Value Explanation
Base Year 2017 Researched through internet


Market Risks

Chinese consumers are highly exposed to western bakery product like sweet and buttery product which is consumed in western countries. Many Asian competitors have saturated and highly competitive market of baked product in Chinese market.

In the year June 2015, 1,344 bakery companies were competing in the Chinese market. According to Bread and Cake Professional Committee of China National Food Industry Association, beside Chinese brands of bakery product, there are various brand who are stealing the market such as 85C (from Taiwan), Bakery Christine (from Taiwan), and Bread Talk (from Singapore).

Geographical condition also affects the production of baked product. Bakery products like bread and cakes have short shelf life. Bakery industries must supply fresh products because of importance of food safety in order to omit food scandals. Large investment is required to set up plant for the production of bakery items which constitutes a major hindrance to geographical expansion, even for large companies.

Leading Chinese bakery have high brand recognition in their regions but only represent 2% of market share in whole market. Foreign players like South Korean bakeries Paris Baguette and Caffe Bene has created competition in the market. [4]

Top Market Opportunities

Until 2017 the market of baked product in China has continued to grow in a healthy way. This is due to highly urbanization, rising income, youth who adopt western diets as their diet plans so as to embrace modern and premium lifestyle. Bakery product meets the demand of ongoing consumer as breakfast or snacks thus bakery product being enjoyed among local consumer in a growing way.

The result showed sales value growth in 2017 outperformed the value CAGR of 13% during the entire review period of 2012-2017. Also with the growing consumer over the bakery product demand creates the value CAGR at constant 2017 prices with likely to slightly outpace that of the review period 2012-2017. [5]

China could create its market highest being 2nd largest market for bakery product by 2018. The consumption of baked product is limited to large cities and to those Chinese who have adopted western culinary habits. Western Europe have 400 opportunities to consume bread whereas Chinese have only 92 opportunities for the consumption of bread. [6]

Market Drivers

There is competitive market of bakery industry in China creating high potential in market. The main reason for attraction of Chinese customer toward baked product is due to rapid urbanization, changing eating habits of food and increase in the income of middle class people. Popping up of well decorated, well supplied and high priced bakery shop creates the market of pastries and cake to rise. [7]

Bread, biscuits, pastries, cakes, cookies are some of the baked product in Chinese market. Total sales of breads and cakes make upto 61% whereas biscuit and other baked product make 39%.

Holiland, Ichido, Maky, Miqi food co., Ltd, Wedome, Christine, 85°C (Taiwan), Yuanzu (Taiwan), Orion (South Korea), Haagen-Dazs (US) are some of the brands in their leading position in market of China. Yogurt cakes, Cheese cakes, moon cakes, western pastries, cream cake, decorative cakes, fruit cakes, chocolate cakes etc. are some of the bakery product that are found in Chinese market.

Similarly there are others bakeries like Paris Baguette (South Korea), Bon Matin Paris, Tous les jours (South Korea), Comptoirs de France (France) who compete in competitive market of China. [8]

Market Restraints

The major factor affecting the bakery market of Chinese bakery industry is the consumption of Western bakery product which has become trend in China. Younger generation particularly adopt these trend to consume western diet which is on increasing manner.

Chinese consumer is attracted to every product that is originated outside Chinese market. Baguettes, Croissants, Pretzels and Kornspits as well as other branded bakery products from Western Franchise like Starbucks and Costa coffee are popular in Chinese market. The appetites for bakery products in Chinese market continue to grow unabated, despite a market saturated with Asian brands and a continued upswing in foreign offerings. [9]

Industry Challenges

The per capita consumption of bakery product is relatively low in Chinese market. The market of bakery product could reach 47 billion dollar in coming years because more people from urban area choose to eat bakery items. Chinese has only 92 bakery celebration per year becoming low as compared to European market.

The consumption of bread and bread rolls in among Chinese consumer is low as compared to western consumers. High level of foreign investment in bakery industry with large number of new foreign companies in the Bread and Bakery Product industry has increased competition among the Chinese manufacturers. [10]

Technology Trends

Taste of Chinese consumer are changing with the influence of Western culture to consume bakery product. There is expansion of International food chains and coffee shops rapidly in the Chinese market and also foreign investors are looking to capitalize on these changing appetite.

Local company “DanLex” is one of the bakery company that offers thousand types of bakery product like breads, cakes, mooncakes, sweet dumplings, dessert, etc. They have highly trained experts who creates western style pastries sticking to standard food safety and production. In order to ensure consistent business process and data management, company also work with partner Qingdao Huazhi Information Technology Company who have system called “SAP Business One” application and “SAP HANA” platform. This system with its accurate data analysis helps the bakery chain to automate its planning in terms of production process and to gain better understanding of buying habits of consumers. [11]

Pricing Trends

Increase in domestic goods prices, agricultural crops like wheat prices and other bakery ingredients price can cause the manufacturing cost to increase. This increasing cost is passed on to consumer in the form of higher prices.

The increase in competition among bakery manufacturers can lead to price pressure which results in reduction of profit levels of manufacturers. Improvement in processing technologies, machinery and industry systems and technology helps manufacturers to operate in efficient manner. [12]

Regulatory Trends

Industrial companies and voluntary enterprises formed trans-regional and trans-department non-profit organization, operating under state administration called China Association of Bakery & Confectionery Industry (CABCI) to specialize in producing bakery products along with candies, chocolates, frozen foods, instant foods, fruits, snacks, etc.

This association comprises the industries for bakery and confectionary products. CABCI creates link between government and its members in order to control national bakery industry as well as ensuring that the legal rights of industries are maintained so as to promote the development of bakery industries. CABCI also carry out research on issues of industries based on policies and regulation of state economic and trade commission which is approved by Ministry of Civil Affairs.

They also raise suggestion and comments to government regarding policies of reform/legislation, participates in elaborating industry programming and plans; participates in the state and industry standards making and revising, and the drawing up of laws. Quality examinations of product, highlighting goods entrusted by government, product appraising and recommendation (related to new products), organizing personnel training, developing contact with related international organization and informing needs of members to related departments are also the functions of CABCI. [13]

Market Size and Forecast

  • Revenue in the Bread & Bakery Products segment amounts to US$15,752m in 2018.
  • The market is expected to grow annually by 5.9% (CAGR 2018-2021).
  • Globally most revenue is generated in the United States (US$67,987m in 2018).
  • In relation to total population figures, per person revenues of US$11.35 are generated in 2018.
  • The average per capita consumption stands at 2.9kg in 2018.

[14]

Bakery products include cake, pastries, biscuits, bread, breakfast cereals and other products. The growth potential of bakery product is shown by the grown per capita consumption trends of bakery products. From the influence of western culture, the demand of baked product is increasing creating huge market potential. The total market size of the bakery products is expected to reach USD 530 billion by 2023, at a 2.6% CAGR during the forecast period. [15]

Baked.PNGBakery.PNG

Market Outlook

There is high fragmentation of bakery market in China creating 15% retail share value by top 10 companies with companies like Toly, Pan Pan and Dali with high share. The market of bakery product of Chinese product is young and dynamic which shows better growth opportunities. Domination of sweet bakery segment is main difference between the market of China and western market. The cost of sweet bakery product is three times the price of bread and bread products which is hard to adopt for Chinese consumer because bread is not their staple food. [16]

The growth of market of bakery product is due to availability of baked products at reasonable price, variety of products, hectic lifestyles, health benefits, rapid urbanization and the convenience of baked product. The demand of bread, cakes, pastries, cookies, pies, rolls and crackers is expected to increase over the forecast period 2018-2025. Global market of bakery product is dominated by European companies and is expected to be the highest revenue contributor until the end of 2020. The global Bakery market is valued at 66900 million US$ in 2017 and will reach 81500 million US$ by the end of 2025, growing at a CAGR of 2.5% during 2018-2025. [17]

Technology Roadmap

“Bakery China” (China International bakery exhibition) is held yearly at Shanghai New International Expo Center to give platform for professional trade and exhibition of bakery product industry all over the world. This exhibition also attracted various e-commerce companies to visit and purchase the bakery product. E-commerce companies like Alibaba and Jingdong has taken market because online shopping has become trend to purchase among Chinese people. The feature of e-commerce is being simplicity, convenience and saving the time of consumers.

If new brands of online companies is introduced then they can get benefit because the investment to open online store is much low, it helps new brands to be visible among users and starting online business can help brand to try the market first and then decide according to feedback from customers. Similarly app like wechat also helps in promotion of brands because it is the most used app in China. Wechat can help the companies to keep in contact with its customers. E-commerce can take important place in Chinese market because consumer gets attracted to online products nowadays. [18]

Competitive Landscape

The bakery market in China is competitive and fierce. Bakery industry mostly launches their product in local area. The market share of bakery is crowded by small and medium scale companies due to low entry threshold.

In order to promote bakery products, bakeries in China apply low price strategy which affects overall profit of industry. The companies decrease cost of bakery product so as to gain profit leading the product quality to be poor. There is no national leading chain brand in Chinese bakery market. Most competitor select specific region to launch their product but top 10 national industries are national.

The three major forces for the bakery market in Beijing are brands such as Holiland, Wedome, 85°C, Bread Talk and Paris Baguette, and the endless network brands. Diversification in brand of bakery inspired the market. Wedome began to sell beverages like coffee which increases their brand marke showing segmentation trend. The industry also looks toward packaging and brand innovation because of developing consumers and high end market in order to gain profit. [19]

Key Market Players

Some of the largest companies in China are:

  • Orion Food Co., Ltd

Orion Food Co. Ltd. was established by South Korean largest manufacturing company Orion in 1997. With consumers changing eating habits, the company has developed new products with accordance to consumers. It has 3 production bases and 4 headquarters in China. Their main products are pies, chocolate cakes, tiramisu and tarts. Orion pie is sold in more than 60 countries and region with international market of 70%.

  • Shanghai Christine Foodstuff Co., Ltd

In 1992 Shanghai based Taiwanese business was established with name Shanghai Christine Foodstuff Co., Ltd. Product of the company are Chinese and foreign pastries, bread, decorative cakes and mooncakes. The company has 5 factories and over 800 franchised stores. The brand image was improved with the establishment of its first flagship store.

  • Huajia Foodstuff Co., Ltd

Huajia Foodstuff Co., Ltd is first foreign-owned enterprises in the bakery industry owned by Hong Kong Garden Co. Ltd (Garden) and is situated in Guangdong province. Garden, Lihua and Xingmu are its major brands.

  • Hangzhou Dingyuan Food Co., Ltd

Hangzhou Dingyuan Food Co., Ltd is established in 1995 with its bakery and bread products. Crisp-bake cookies, muffins, egg rolls and rice cakes are its major products.

  • Labi Xiaoxin Food Industry Co., Ltd

Labi Xiaoxin Food Industry Co., Ltd was established in 2000. It has extended its market over 30 provincial areas nationwide. Products are also exported to North America, Europe and South-East Asia.

  • Other Companies

Wendeng Changgong Foodstuff Co.Ltd, Shanghai Yuanzu Mengguozi Co.Ltd, Beijing Bama Foodstuff Co.Ltd, Guan Shen Yuan (Group) Company Limited, Dongguan Wanhao Foodstuff Co.Ltd [20]

Strategic Conclusion

China is set to become one of the attractive sellers. Chinese consumers especially students and workers of urban areas choose bakery product as a between meal. Consumption of bakery product has become a trend in China. With growing trend of consumption of cakes and pastries, popping of well stocked, well decorated and high priced dessert shop is going on Chinese market.

Many Asian competitors have saturated and highly competitive market of baked product in Chinese market. Bakery product meets the demand of ongoing consumer as breakfast or snacks thus bakery product being enjoyed among local consumer in a growing way. China could create its market highest being 2nd largest market for bakery product by 2018.

The major factor affecting the bakery market of Chinese bakery industry is the consumption of Western bakery product which has become trend in China.

References

  1. http://shodhganga.inflibnet.ac.in/bitstream/10603/46792/5/05_chapter%201.pdf
  2. https://www.statista.com/outlook/40050000/117/bread-bakery-products/china
  3. https://www.dccchina.org/2018/05/bakery-and-bread-consumption-in-china-trend-of-china-imported-bakery-foodstuffs/
  4. http://daxueconsulting.com/bread-consumption-in-china/
  5. https://www.euromonitor.com/baked-goods-in-china/report
  6. https://ins-globalconsulting.com/bakery-market-china-winning-bet/
  7. http://daxueconsulting.com/baking-industry-in-china/
  8. https://www.worldbakers.com/market-insights/health-indulgence-make-premium-baked-goods-china/
  9. https://www.bakeryandsnacks.com/Article/2018/02/15/Be-it-baguette-or-mooncake-China-s-dynamic-bakery-market-shows-no-signs-of-slow-down
  10. http://daxueconsulting.com/bakery-market-china/
  11. https://www.forbes.com/sites/sap/2017/04/10/what-trendy-bakeries-can-tell-you-about-chinas-new-economy/#4579a93f1489
  12. http://files.foodmate.com/2013/files_587.html
  13. https://www.worldbakers.com/event/china-association-bakery-confectionery-powers-bakery-china/
  14. https://www.statista.com/outlook/40050000/117/bread-bakery-products/china
  15. https://www.mordorintelligence.com/industry-reports/bakery-products-market
  16. https://www.bakeryandsnacks.com/Article/2016/09/14/China-s-fragmented-bakery-market-likely-to-consolidate-Mintel
  17. http://www.nbcrightnow.com/story/38518508/bakery-market-global-industry-analysis-size-share-growth-trends-and-forecast-2018-2025
  18. http://ecommercechinaagency.com/foreign-bakery-products-china/
  19. https://www.marketresearch.com/product/sample-7883407.pdf
  20. http://daxueconsulting.com/food-manufacturers-in-china/

Appendix

  •  %: Percentage
  • °C: Degree Celsius
  • CABCI: China Association of Bakery & Confectionery Industry
  • CAGR: Compound Annual Growth Rate
  • Co. Ltd: Company Limited
  • kg: Kilogram
  • m: Million
  • US: United States
  • USD: United States Dollar


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