Frozen Dough, Popcorns and E-commerce Steal the Limelight in Bakery China 2016

Frozen Dough, Popcorns and E-commerce Steal the Limelight in Bakery China 2016

China's leading exhibition for the bakery industry, which wraps up today, sends out strong signals for where the the country's bakery industry is heading. It appears that frozen dough and baked goods, as B2B products, will continue to grow prosperously with no foreseeable plateaus in sight, and that popcorns are almost becoming a mainstream packaged food product rivalling deeply entrenched snack products like biscuits and potato chips. Meanwhile, e-commerce is making deeper inroads in the bakery market. 

  1. The frozen dough industry to maintain its vigrous growth

Thirteen company producing frozen dough appeared in Bakery China 2016, an increase of 30 per cent over a year ago. The frozen dough industry has a heavier presence in Guangdong Province, from which four manufacturers (Aokun, Zhuoshi, Yuanbao, Ao Zhi Feng) took up presence in the four-day show. This is the first time for Yuanbao to show up in the Shanghai bakery show - hitherto it had participated in such shows in Southern China only. 

Gaobei Food from Shandong Province was regarded as the black horse of the industry. It attended a bakery exhibition of this scale for the first time but its size of booth and its product ranges surprised quite a few well-established players. It received venture funding of CNY 50 mn (USD 7.7 mn) last year and built a new factory, thus "all of a sudden becoming a powerful head-on competitor", said Hu Xiaochun, Sales Manager of Hangzhou Zhouji, who updates the author with his market views at least once a year since March 2014. 

Egg tart bases and pizza bases are the most common types of frozen dough produced in China. In comparison, frozen dough for croissants, baguettes, etc., are more technically demanding for Chinese companies.

Guangzhou Aokun had the biggest booth in the show among the frozen dough exhibitors. Hu Guangyu, its East China Manager, who has also spoken to the author regularly for three years so far, said his company "will decide in July whether its another factory will be established in North China or East China (in addition to its factory in Guangzhou)". The company's sales soared from nearly CNY 100 mn in 2013 to CNY 150 mn in 2014, and further to CNY 360 mn in 2015, and is estimated to reach CNY 450 mn this year, he said. Early last year Guangdong Ligao Food, one of China's leading food ingredient manufacturers and distributors, invested in Aokun and holds 51 per cent of its shares. 

In 2008, a Swiss frozen dough manufacturer in Beijing was bought by a Hong Kong hotel supply company, while another Swiss company, La Rose Noire, sold 45 per cent of its Hong Kong operations to Bakkavor Group.

Frozen dough manufacturers also produce frozen bread and cakes, blended sauces, and in some cases also sandwiches. 

Christine, a chain bakery with some 900 outlets in China, devotes its entire booth to frozen baked goods, as the Hong Kong-listed Shanghai-headquartered company is turning to frozen food to tap into new sales channels such as hotels and cafes to reverse its sales decline lasting over 3 years.

Of the constraints to the frozen dough and bakery industry, inadequate supply of cold chain logistics services remains the most critical one. Haier Group, one of China's leading household electric appliances makers, is putting final touches to its design of a baking oven with artificial intelligence, but has tried to find a frozen dough supplier with its own warehouses and delivery capability as a strategic partner to ensure ample and sufficient supplies of frozen dough to consumers, in vain, as the frozen dough industry has in general relied on third-party logistics for storage and delivery and is B2B mainly.   

The other constraint is the lack of technical know-how in making frozen dough for an ever expanding number of types of baked goods, thus the industry is hunting European and American talents for their R&D functions. For instance, Xindi Jiahe from Zhejiang Province last year hired a French professional to head up its product development. Meanwhile, training businesses are booming in the coastal regions and one of the hottest training destinations is Korea, which is home to Paris Baguette and Tour Les Jours, both steadily expanding their networks of outlets in China at a time many bakery chains are cutting back on their operational scales. 

Aryzta, one of the world's leading frozen dough and baked goods manufacturers, made its debut in a China-based show of the kind, attracting many curious Chinese gourmets (left). A Westerner demonstrating the making of baked goods from dough (right). 

Popcorns are fast becoming a mainstream packaged food

The popcorn, produced ten years ago mainly by peddlers with a popping machine on the roadside, has become the new darling of the food industry in terms of product development and is edging into the ranks of mainstream packaged food products. The show had around a dozen brands showcasing their packaged popcorns, nearly twice as many brands in the same show a year ago. 

Among them was Bobocorn (抱抱堂), established in Hangzhou in March last year by former staff of Sina, Microsoft, Huawei, Price Waterhouse Coopers, 360 and Want Want. Boasting a sales record of 50 mn cups of popcorns by the end of October last year, it received CNY 50 mn from Hanyi Investment (汉一投资)Orient Food (东方食业基金) and some other investors, in the following month. 

Many brands touted American flavour for their popcorns. The owner of a startup producing popcorns said that he obtained his investment so easily that he did not have to reach to the point of discussing market sizes and growth and market shares, but when he popped out "popcorns represent happiness" in a roadshow, from the panel of investors came a yell of approval. That investor turned out to be a renowned actor, who could not have agreed more on the character of popcorns being so nicely and succintly put by him, and announced his decision to invest right on the spot.  

The excitement over popcorns erupted in early 2014, when Wanda Cinemas, China's leading cinema operator, revealed that it made CNY 390 mn in sales from popcorns and beverages in its 142 cinemas in the previous year, when its corporate revenues were CNY 3.16 bn.

E-commerce is being lauded up to the sky

In 2014, bakery companies were still questioning among themselves whether ecommerce was really a must-have and any endeavours in this regard were experimental in nature. Last year, participants were settled that e-commerce was compulsory for every player and most built up some sort of online presence doing ecommerce. This year, talks of e-commerce become more specific and are focused on the WeChat channel. Some booths specifically put up signs looking for WeChat shop runners, the first time in a bakery show.

One baking ingredient company had some space especially designated for e-commerce channel operators (left). An online cake ordering platform company named Idea Cake joins the scene of Internet bakeries, at the heels of Le Cake, 21 Cake, Couture and Perlo, which adopt the business model of Internet platform for ordering and payment + a central kitchen + its own cool chain logistics (right).

transfer from Sam Gao wrote on Linkedin.