China market report

Be it baguette or mooncake: China’s dynamic bakery market shows no signs of slow-down

By Gill Hyslop contact

- Last updated on GMT

French bakery in Shanghai - a common sight on China's streets as the taste for Western products continues to grow among local consumers. Pic: ©GettyImages/fazon1
French bakery in Shanghai - a common sight on China's streets as the taste for Western products continues to grow among local consumers. Pic: ©GettyImages/fazon1

Related tags: Bakery market, Baking, China

Chinese appetites for bakery products continues to grow unabated, despite a market saturated with Asian brands and a continued upswing in foreign offerings.

Consuming Western bakery products has become trendy in China, due to the increased adoption of Western lifestyles and the Western diet, particularly among the younger generation.

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AB Mauri China's Graham Martin

According to AB Mauri China’s VP Graham Martin, anything that originates from outside China is highly viewed by the Chinese consumer, so specialities like baguettes, croissants, pretzels and kornspits – as well as branded baked products from popular Western franchises like Costa Coffee and Starbucks – are firm favorites among Chinese consumers, alongside the more traditional mooncakes and pinyin.

Cecelia Yang, senior research associate at Euromonitor International, told this site trendy Western products registered the fastest value growth in China in 2016.

Mooncakes

Mooncakes – round pastries typically filled red bean or lotus seed paste and eaten during the Mid-Autumn Festival. Regarded as an indispensable delicacy and offered between friends and family.

Pinyin (蛋糕) – literally translated as ‘this is a delicious cake’.

No stopping demand

China’s bakery sector is showing no signs of slowing down, despite it quickly becoming saturated with both large and artisanal Asian and foreign players, says Dauxe Consulting.

China’s bakery sector has been the most dynamic around the world, growing in double digits in the past decade.

Rapid urbanization, rising disposable income levels, changing food habits and a growing demand for convenience are the key drivers in making baking products popular.

“Based on the results for 2016, China’s bakery market stood at 9.3m tons – the second largest in the world in physical terms, giving way only the US market (14.7m tons),”​ Andrey Bushmelev, market analyst at IndexBox​ ​told BakeryandSnacks.

“In wholesale prices, China’s bread and bakery market is estimated to soar to $34.5bn by 2018 – indeed challenging the US ($36.0B) in value terms globally*.”

Focus shift from West to East

Bakery China artisanal breads

According to Mintel’s ‘2018 Global Annual Review: Bread, Bakery and Cakes,’ consumption of bakery goods in Asia is on an upward curve, in contrast to a more stagnant situation in the West.

In his report, Chris Brockman, Mintel’s research manager for EMEA, describes North America and Europe as mature and often stagnant bakery markets; Asia as a dynamic and fast-growing region for bakery; and Africa holding long-term potential for more value added bakery fare.

In time, he says, these regions will dominate the global bakery scene and become the future battlegrounds for major bakery producers.

Low per capita consumption, high potential

Perhaps surprisingly then, data shows per capita consumption of bread and bakery in China is still low: 7 kg per person against 64 kg/person on average in Western Europe and around 46 kg/person in the US.

Facts and figures

GettyImages Shanghai zhuyufang
Pic: ©GettyImages/zhuyufang
  • China – a country size of 9.6m m2 and a population of over 1.4bn – is the world’s most populace country.
  • Since the introduction of economic reforms in 1978, the country’s economy has been one of the world’s fastest growing.
  • Today, China is one of the biggest traders in the world, with most countries committed to open trading relations.

The Chinese, however, have a particular penchant for cakes and sweet pies and the category registered a 19% CAGR over the past five years, compared to the US (3.8%) and UK (0.4%), according to Mintel.

“China’s bread and bakery market has a significant potential to grow, at least to the world average level of 18 kg/person,”​ said Bushmelev, especially as “consumers become more likely to opt for fresh baked goods such as cakes and bread.”

Mounting challenges

China’s bakery market continues to be highly fragmented, with the top 10 companies accounting for less than 15% of retail value share in 2016, including the top three: Toly, Pan Pan and Dali.

However, Brockman told this site the market is likely to consolidate over the coming years as larger players develop.

IndexBox’s Bushmelev added the market’s growth has already lead to a high level of foreign investment from a large number of foreign companies entering the fray.

A more health-conscious consumer is also dramatically shaping the sector.

Back in 2010, mass production could ensure consumer satisfaction, but today, the “baked in-store” concept is viewed as a healthier choice than factory-made.

China Ted Rich
Rich Product's Ted Rich

This has promoted a surge in onsite bakeries in the retail sector and the rapid expansion of artisanal bakeries.

According to the China Association of Bakery and Confectionery Industry – organizers of the annual Bakery China trade event held in Shanghai – the country now boasts over 100,000 pastry shops and 13,600 cafes.

Going forward, online sales of bakery products will continue to rise.

According to GlobalData, China is the largest e-commerce market globally, surpassing the US in 2017 and accounting for 75% of the estimated $1.75 trillion generated in sales in Asia Pacific in 2017.

GlobalData reports e-commerce sales in Asia Pacific grew at a CAGR of 27% between 2013 and 2017, far higher than Europe (14%) and North America (13%).

At the heart of it all though, taste remains king in China.

As Ted Rich, senior VP, Rich Products Corporation, told this site, it is never more important to know exactly what the consumer wants than in China: it is vital to a company’s success.

Bakery China 2018

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BakeryandSnacks will again be attending Bakery China, Asia Pacific’s largest event for the bakery and confectionery market, in Shanghai in May 2018.

Last year, the 183,000 m2​ space featured over 2,000 exhibitors from 30 countries, including large producers like Rich’s, Buhler China, Arla, AB Mauri and Cargill, among others.

The show also attracted a record-breaking 100,000 plus visitors on its first day of trading.

Bakery China 2018 will be held at the Shanghai New International Expo Centre from May 9-12.

*Figures reflect the total revenues of producers and importers, excluding logistics costs, retail marketing costs and retailers’ margins, which will be included in the final consumer price.

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