Sunday, April 28, 2013

Chinese bakeries chains total war

A little more than 1 year ago many bakery chains arrived in central China, Changsha. 

Some of the chain are based in mainland China for a long time: Rosa, Milo coffee, Dio Coffee, New Mario. 
Now they must face the fierce new comers: Kengee, 85°C... Most of these chains come from Taiwan, Hong-Kong, Japan, Korea. Their concept matches well Chinese customers. With the change of mainland Chinese customers, now is the time for the Chinese bakeries total war

I will introduce you to some of the main competitors.
But first let me tell you how these bakeries chains work and what is their offer.



How the bakeries concept works?
They produce all their product in some central factory.
It is then delivered to many outlets.

In all the bakeries, customers will take a tray and select themselves the cakes, pastry they want. Then they will give the tray at the cashier and pay.

In all the bakeries, the space is divided into three parts:

  1. A corner for small cakes, breads: cheaper price
  2. A corner for birthday cakes and pastry: more expensive
  3. A counter where you pay, bring your tray and your selection. You can also order drinks at the counter





What is the food offer?
The bakeries food offer can be divided into different categories:
  • Birthday cakes 
Children and young Chinese people like to buy beautiful birthday cakes. They are willing to pay the price: 100 to 300rmb a cake! Also cakes are sold for wedding. And this is another huge market in China. Until recently the cakes choice was rather poor in term of taste (not really good, even according to Chinese standards) and presentation (not really beautiful, creative).

  • Cakes and bread
Children and young people like to have snacks either in the morning before going to school, university, work, either after classes, work around 5, 6pm

Chinese customers don't dissociate bread from cakes. In fact they will simply buy some bread to eat as a snack and not during a meal as we do in western countries.

Most customers will pay small prices: Under 10rmb they will not perceive the cake as expensive. Therefore you will see many 8, 9.5rmb cakes. Another price barreer is below 5rmb. You will see many 4, 4.5rmb cakes.


  • Coffee, tea, drinks
In China there is a huge market for take away drinks. There are hot drink during winter and cold drink during summer.

With the boom of Starbuck more and more Chinese customers now take away coffee. But bakeries also have a few sits available

  • Ice cream
Some bakeries sell western style ice creams to take away.
Other bakeries choose crushed ice cube with syrop kind of ice cream.

  • Small pastry
Bakeries also have some individual pastry. They cost 10rmb or more. It is a way to introduce customers to the birthday cakes. These pastries can keep for a longer time.

  • Pizzas, sandwiches, spaghettis
In some case the bakeries sell take away dishes. This is a new product category in a few outlets based in train stations...



How much is made from the different product category?
  1. I believe bakeries make more income from the small cakes and bread category (probably around 45%). Customers like to eat them everyday as snacks.
  2. Not far behind comes the birthday cakes (30 to 40%). A bakery will make a huge margin selling a birthday or wedding cake. During special celebration cakes sell well: Christmas, new year, moon cakes...
  3. Take away drink are another growing source of income (20 to 25%). Drinks sell well in summer time.



Who are the customers?
The bakeries target children with their parents, often with their mother, young people, wealthy college and university student.
With the one child policy, young people have a huge buying power in China.

Bakeries target the whole population. 
Some products such as the cake and bread are cheaper. While other product such as the small pastry are more expensive.



Let me introduce some of competitors:

It has a good offer. It is one of the new comer. I believe it comes from Korea?
I think they are a little below 85°C in term of presentation and taste. But it is just my opinion.





New Mario
It is a older chain based in China for already a long time.
It is getting beaten up by the new comers. The shop decoration is not as good as the new comers. The cakes presentation is not really good. Their products are not tasty.



Rosa
I have told you about this chain in a previous article.
It is a old chain. They have many difficulties to face the new comers and lose market share fast... They need a new offer, fast...: improve product their presentation & taste.





85°C
I believe it is the best concept.
I is difficult to do better: a beautiful and modern decoration: many light effect, tasty cakes, strong cake presentation, drinks, a few seats available, good marketing strategies: they arrange their product perfectly, a larger product choice than competitors...

They have everything. And customers feel this way. They rush in to buy all day.


85°C crushed Starbuck in Taiwan
85°C has a lot more than other chain.
It has more than Starbuck In Taiwan 85°C crushed Starbucks thanks to its wide product: tasty, good looking cakes offer... 









A sandwiches: more like a cake or snack. It is sweet and salty

This place has the supermarket strategy: they will show all the more expensive cakes higher. If you look for cheaper cakes then you need to look at floor level...
I took a french croissant. Nothing like we have in France. Still it was rather good knowing that butter is expensive in China. Therefore it would be too expensive to reproduce the french croissant

I took a coffee.
There are a few seats in the shop.




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