2024 China Bakery Market Trends , Analyze from C-end market and B-end market
The trend of the baking industry in 2024, to be more precise, is based on our observations of the industry, and we give our own views.
From a global perspective, we are still cautious and optimistic. According to McKinsey's simulation analysis, the number of middle- and high-income households is expected to reach 200 million in 2025, and the number of high-income cities is expected to reach 82. In other words, the continuous advancement of urbanization and the gradually rising income level are expected to continue to drive consumption growth in the medium and long term. This can also be perceived from the overall catering consumption data: in 2023, the domestic catering industry revenue exceeded 5.2 trillion yuan for the first time, setting a historical high, and the growth rate of catering revenue led the growth rate of total retail sales of consumer goods by 13.2 percentage points.
Specifically for the baking industry, the "Special Research Report on In-depth Research and Investment Prospects of China's Baking Food Industry Market in 2023-2028" released by China Business Industry Research Institute predicts that the market size of my country's baking industry will reach 310.2 billion yuan in 2023 and 336 billion yuan in 2024, and the compound growth rate will remain strong.
So, with a consumer base, a continuously expanding baking market and sufficient competition, how will the baking industry develop in 2024? Let's look at it from the perspective of C-end demand and B-end layout.
C-end demand remains basically unchanged
Before we start, it should be noted that the baking market is complex and regional consumption characteristics are different, so the following expression will be somewhat biased, please bear with me.
Breakfast scene continues to penetrate
At present, among the domestic baking consumer groups, the older generation of consumers mostly use it as a snack supplement, and the young group of main consumers, in addition to snacks, are more and more beginning to regard baked goods as staple food, which can be reflected in both store sales and instant online orders.
And the staple food scene is mostly breakfast. According to the "Survey Report on Breakfast Diet of Chinese Residents", 42% of residents spend 0-10 minutes for breakfast, accounting for the highest proportion; 39% of residents spend 10-15 minutes for breakfast, ranking second; and among the reasons for not eating breakfast, time constraints are the main reason, as high as 53.9%. Especially in the relatively fast-paced first-, second-, and third-tier cities, the actual situation is highly consistent. Therefore, the bread purchased recently or bought on the way to work has become the breakfast choice of many office workers because of its convenience and speed.
The number of people living alone continues to grow
In the past few decades, China has shown a trend of gradually transitioning from large families to small families, and now smaller single-living units are beginning to appear. According to the data from the "China Statistical Yearbook (2022)", as of 2021, the number of single people over the age of 15 in the country is 239 million, of which the number of people living alone has exceeded 92 million, and it is predicted that the number of single people will reach 400 million in the future.
This is highly similar to Japan and South Korea. The behaviors of "simplified cooking" and "separate dining" are inseparable from the background of smaller family units behind them. Even in Japan, even in families with more than one person, the phenomenon of family members eating different foods at different times is increasing, which eventually triggered a historic change in "spending on bread exceeds rice".
The richness of local breakfasts and the foundation of food culture in China are strong. However, as the number of people living alone continues to grow, and as the short breakfast time mentioned above has boosted the continuous penetration of baked products in the breakfast scene, this group of people has become the target customer group anchored and continuously sought by different catering formats such as bakeries, cafes, and breakfast shops.
Focus on health and ingredient list
The "2023 Diet Trend Insight Report" released by CBNData pointed out that consumers' table upgrades are mainly reflected in three aspects: health, nutrition, and quality.
Among them, health has always been a continuous and key focus of consumers. On the one hand, various health problems are becoming younger and younger, and on the other hand, rapid online communication has completed the popularization of many baking ingredients (although it is full of a lot of generalized guiding remarks). People's attention to health is no longer limited to the brand's "terms and claims", but further to the specific ingredient list and even the method of making. From the upstream end, we see that major participants represented by Li Gao and Nanqiao are actively deploying product iterations from non-dairy cream to mixed fat cream and even light cream. From the B-end, brands or stores have also begun to actively upgrade raw materials and disclose product ingredients to gain consumer trust. The upgrade here does not mean the upgrade of raw materials from 80-100 points, but the iteration of 60-80 points from raw materials to production methods in the whole region.
Takeaway and cross-regional orders should not be underestimated
In terms of purchase form, instant retail has long penetrated into everyone's daily consumption, and baked goods are no exception. According to the relevant person in charge of Meituan, many young people have extended the habit of buying everything from takeaway from the first takeaway order. This kind of consumption model has high stickiness and will not be reversible except for force majeure. Looking inside, our editorial department's stockpiling of packages is basically choosing takeaway in the same city or cross-regional express delivery. After all, unless office workers pass by a bakery on the way to and from get off work, it is really difficult for them to have the time and energy to go to the store 😂.
However, compared to in-store shopping, this type of instant online consumption is usually limited to a certain extent. For example, perishable stuffings are usually not mailable, and toppings are also difficult to keep in shape, which affects the ordering experience. If it is delivered the next day, the anti-aging of the embryo must be considered. Even more detailed, such as in summer, ice packs are mailed to prevent bread from spoiling, but it is also easy to cause bread aging (0-10℃ is the temperature zone for accelerated bread aging), etc. But generally speaking, online consumption breaks through regional restrictions, giving consumers a variety of choices and opportunities to try new things. Compared with impulsive purchases in stores, online has more relaxed decision-making time to place orders prudently. Therefore, once attracted by the product, the repurchase rate is also quite objective.
B-end competition intensifies as strong opponents enter the game
As mentioned above, the baking consumer group is gradually expanding, and the increase in the number of people living alone has also created more opportunities for the baking market. In response to this, the B-end is also constantly catering to consumer demands and guiding new demands.
New supermarket channels have increased penetration and are facing competition directly
In articles such as "Convenience stores selling bread", "Lawson in Japan", and "Convenience store bread in South Korea", we introduced the performance of convenience stores in Japan and South Korea in the baking market, which are strong competitors of factory bread brands and bakeries. Compared with China, the competition in convenience store channels is more complicated, and the cross-regional layout is quite a test of the degree of connectivity of the supply chain behind it. In addition, the differences in the penetration of consumer habits are difficult to generalize, so this part is mainly focused on channels represented by new supermarkets such as Hema, Sam's Club, and Ding Dong.
The most notable thing is that these new online/offline supermarkets have increased the speed of opening stores, continuously expanded the scope of radiation areas, and regarded baking as an important section, launching OEM/ODM self-owned products. Among them, Hema has implemented it most thoroughly. In addition to cooperating with factories, it has also begun to build its own factories.
The strength of this type of channel lies in relying on a large customer base and voice, which can reduce the ex-factory cost of good products to the extreme, thus reflecting the very cost-effective price. On the one hand, this will continue to consolidate the dietary status of bread, and on the other hand, it will also have a relatively implicit but direct impact on bakeries.
Store formats are more segmented
The above mentioned new supermarket channels will have a relatively implicit impact on bakeries because bakery stores face direct competition from their rivals offline. From our observation, the advantages of regional chain brands in local location selection, cost management and price are a certain degree of dimensionality reduction competition (strike) for independent bakeries, but they are also facing situations such as aging product lines and fatigue in attractiveness. Some regional brands have begun to optimize their products, learn from independent bakeries' products, and even incubate sub-brands with more segmented positioning in the process of seeking change.
The advantages of small-scale boutique bakeries and independent bakeries are that product research and development is more flexible, and they will also pay attention to the advantages of high-quality or even niche raw materials. Compared with the large and comprehensive category development of regional chain brands, independent bakeries pay more and more attention to the main categories, and even gradually highlight the single product development path. Regarding single product specialty stores, we have discussed it in "ChIBao Vol.15", so I will not repeat it here. But in short, in the fully competitive baking market, the trend of store segmentation will continue further, and the era of having both the blue ocean bonus and the blue ocean bonus is gone.
In addition, as mentioned in the previous chapter, online consumption behavior has penetrated into consumers' daily lives, and as a store, it has to actively or be forced to operate online. On the one hand, the cost of online operation and maintenance has increased, and on the other hand, the external packaging and the platform share will further increase the operating costs. Even if it is positioned as a community store, under the siege of intensive store openings and more convenient online ordering, online orders are still needed to maintain revenue. Of course, we have also observed many cases of relying on the accumulated online traffic to land offline stores, which not only reduces the resistance of the initial customer acquisition cost, but also has always been a strong component of sales.
As for the dispute over bread prices, it is foreseeable that there will still be stores that explore the extreme upward. On the one hand, the consumption base of bread is relatively large, and on the other hand, high-quality bread promotes daily food to "small luxury goods". For consumers, it is an exploration of dietary consumption in the smallest unit of money, and for industry practitioners, it is a market boost, but it is just that the market foundation of this part of the high premium is limited.
Exploring niche hits & remaking classic products
Specific to baking products, the trend is still remaking classic products, product integration, and product innovation that focuses more on localization (click here to review).
In addition, the trend of developing niche products will continue. From the Italian bread Marittozo that has become popular in the past two years, the relatively niche Amman roll, to the Hungarian chimney bread that has become popular from Korea to Japan, they are all annual baking products. And Japan has long led the trend of baking in Asia. As the involuted Korean stores "fight to the death" to survive, they have also begun to be learned from by Japan and China in reverse. We will introduce it separately later if there is a chance.
But in general, just like a single product will lead the craze several times in Japan in the past 20 years, how a single product will iterate and develop after popularization, that is, remaking old products, is still an eternal theme. The new creation here not only refers to the upgrading of raw materials, but also includes "micro-innovation" such as optimizing the filling ratio and dough texture, adjusting the packaging and the overall product specifications, and even launching new eating scenes.
Frozen baking is deeply involved in supermarkets and catering channels
Finally, let's look at frozen baking. According to Li Gao's data, the sales growth of bakery stores has slowed down, but the growth rate of supermarket channels and catering, tea, coffee and other channels is relatively fast, and the market capacity continues to expand, which also indirectly proves the difference in product selection between stores and other channels. Looking at the production structure of large-scale frozen dough factories with a high degree of automation, there is little change, and products such as puff pastry, pineapple buns, donuts, and hamburger buns are still the main items.
The advantage of small and medium-sized frozen baking factories is that the production line is relatively flexible, and a certain degree of complex production can be achieved through manual labor to match the differentiated needs of the market.
As for the frozen baked products sold directly to the C-end, they are relatively small in size, and are still mainly frozen egg tart crusts, frozen pizzas and other products. From after-sales evaluations and exchanges with industry insiders, they are mostly concentrated in the mother group. Therefore, compared with C-end products with higher customer acquisition, marketing, and maintenance costs, frozen baking factories are relatively more focused on the distribution channels facing the B-end.
The above is today's content. Compared with giving opinions directly, it is more about sorting out the complexity of the baking market. Behind the complexity lies both challenges and opportunities. We expect to see that in a fully competitive market, businesses can have different development paths, and consumers can choose more diverse products with higher quality.
