China’s tiny baked goods category now ripe for foreign investment

Though its baked goods market is 125 times smaller than its counterpart in Europe, China still holds enormous potential for businesses exactly because of this low per-capita consumption.

At the same time, it is a troublesome market in which to “assess as well as access” baked goods, ingredients and intermediate manufacturers due to the complexity of the population and its consumption patterns, a report has found.

The new analysis from Geneva-based food and beverage analyst Giract also found that the penetration of frozen technologies in baked goods will increase in the future. 

This is a positive sign of the growing maturity of the market,” said Dr Kaushik, the study’s lead researcher. 

In China, where labour is abundant and cheap, it may be counterintuitive to see penetration of a high-end technology for production of baked goods. But, increasing complexity and diversity of products in industrial bakeries is driving the requirement for frozen solutions. It is already deployed in 20% of western style baked goods in the country, by Giract estimates.”

There are different methods by which frozen technologies are deployed in the baking industry. These include fermented and unfermented frozen dough, and parbaked and fully baked frozen goods. Method popularity varies by channel. 

This is where the intuition of method popularity kicks in. In the artisanal sector, which is a significant part of the bakery industry, the penetration of frozen technologies is very low,” Dr Kaushik said. 

The artisanal sector is about 56% of the total baked goods market in China by value. The highest penetration of frozen technologies, was in branded/packaged baked goods.” 

He also highlighted the immense opportunity provided by China for bakery ingredients suppliers and intermediate manufacturers through high tech solutions.

Dr. Kaushik, who has been tracking global markets for ingredients and intermediates since 2009. “20% of China’s western style baked goods industry is estimated to be a whopping USD 5.6 billion by Giract”, he said.

Market leaders include Puratos, Angel, ABF ingredients, Dow-DuPont, Palsgaard and Stern, though Chinese manufacturers are dominant in single-ingredient supplies of enzymes or emulsifiers. On the other hand, western suppliers have come in with a solutions approach and are therefore dominant in intermediates. 

It is a different way of thinking. Western ingredient companies come in with many years of experience in presenting a solutions approach to their bakery customers,” said Dr Kaushik. 

This trend is changing and we are seeing many local and medium-sized bakery companies also interested in frozen technologies. Soon the local ingredient manufacturers may also decide to go to the intermediate/solutions way.”