Text/Xiaoyang
Source/ Connection Insight
The once-hot players in the baking track are experiencing a series of pains such as shrinkage, layoffs, and losses.
At the end of November 2022, Standard Chartered Cake Shop of Hutouju (hereinafter referred to as “Hutouju”) released a tweet “Want to talk to you about some changes in Hutouju” through its official account. Due to the pressure, it decided to temporarily withdraw from some regional markets, and then withdrew from Chengdu, Chongqing, Beijing and other cities.
In the following month, the store shrinkage of Hutou Bureau continued. According to the statistics of Lianlian Insight, as of January 2, 2023, the Mini Program of Hutou Bureau shows that there are 41 stores in operation across the country. Compared with 58 at the end of November 2022, the number of its stores has been greatly reduced again. In addition, stores in Chengdu, Chongqing, and Beijing have all been closed.
Source: Hutou Bureau Standard Chartered Cake Official WeChat
At the same time, Hutou Bureau is preparing to open the franchise model, and the first batch of franchise stores is expected to land after the Spring Festival. In addition, Hutou Bureau also reported that it was in arrears with employees’ wages, suppliers’ payment and decoration payment.
The “tiger players” who were once pushed away by capital are now facing financial difficulties due to the calmness of capital.
The concentration of the bakery market is relatively low, but the competition is fierce, and the market has been reshuffled. While new players continue to emerge and seize the market, the “tiger players” have not yet run through the large-scale expansion model and have not broken through the problem of regional expansion.
The market has returned to rationality for the new Chinese-style baking, and the story alone can no longer impress the capital. What is more important is whether the hematopoietic model can make the brand survive for a long time.
Capital does not continue to survive, and “new Chinese baking” is difficult to sustain
Since 2022, capital’s enthusiasm for new Chinese baking has gradually dissipated.
According to IT Juzi statistics, among the 17 investment and financing incidents in the bakery industry in 2021, there are 9 financing incidents in the cake and Western-style desserts field; entering 2022, as of October 25, there are 10 financing incidents in both.
Although the number of investment and financing incidents has continued unabated, compared with the situation in 2021 when the amount of financing exceeded 100 million yuan, only a few new brands have obtained financing since 2022, and the amount tends to be rational, such as Longmen Bureau Standard Chartered Dim Sum, Crisp Pin Bureau, etc., financing The amount is at the level of one million or ten million yuan.
For example, in March 2022, Longmen Bureau Standard Chartered Dim Sum received 5 million yuan in angel round financing from Blackstone Capital; in July, Supin Bureau announced the completion of 50 million yuan in angel + round financing; “Casbury”, founded by Qing Qing, received ten million yuan in financing; in October, the zero-sucrose bakery brand “Crane Suo” received ten million yuan in angel round financing. .
Picture source Standard Chartered Dim Sum Official Weibo of Longmen Bureau
In contrast, the financing situation of top players is not optimistic.
Momo Dessert Bureau (hereinafter referred to as “Momo”) is one of the players who are vying for the baking track by VC. When Momo obtained financing in the early days, it only opened two stores. In March 2021, Xu Xin, the founder of Capital Today, took the initiative to fly from Shanghai to Changsha to meet Wang Yuxiao, the founder of Momo Dim Sum Bureau. According to reports from Chinese entrepreneurs, the night Xu Xin arrived in Changsha, the two chatted for more than 7 hours, and reached an investment intention the next day. Momo won the fifth round of financing since its establishment.
In 2021, when the funds are sufficient, Wang Yuxiao also mentioned in an interview with the media that the Momo Dim Sum Bureau needs to expand rapidly, “If I don’t do it now, the market will belong to others.”
But since 2022, Momo has not waited for new financing to come in. In February 2022, Momo conducted a round of organizational structure adjustments, transforming from focusing on brand building in the past to focusing on operations, and abolished 40% of brand employees.
In addition, according to the data of Zhaimen Restaurant, from January to November 2022, Momo will open 12 new stores. Compared with 58 in the previous year, the number of new stores has decreased by nearly 80%.
Both Momo and Hutouju have experienced the dilemma that capital no longer follows the investment continuously, and the latest financing of the two will stay in July and December 2021.
Picture source Momo Dim Sum Bureau official micro
Without capital transfusion, and no profit model has been explored yet, under the huge financial pressure, players can only choose to shrink strategically. While closing poorly managed stores and stopping store expansion plans, staff optimization is being carried out.
Under the epidemic situation, many catering companies have carried out strategic contraction, but the hidden worry of the new Chinese bakery brand does not only come from the influence of the market environment.
The bakery category has attracted the attention of young consumers, but the data shows that young people have not yet formed a “taste bud loyalty” to the bakery category. According to the Meituan Catering Data View, a comparison between baking and milk tea categories shows that in 2021, the per capita transaction frequency is only 1, and the baking is much higher than the tea; while more than 5 times, the baking category is all behind the tea. The consumption stickiness of bakery products is not high.
At the same time that “taste bud loyalty” has not yet formed, the development model of Hutouju and Momo – focusing on the core business district of the high-end market for expansion, adopting the production method of roasting and cooking, etc., requires high store opening costs, but Nowadays, the new Chinese bakery players are still in the early development stage, with weak self-hematopoietic ability, and the profit model is not clear.
For new Chinese bakery players, only enough funds can drive the company’s product development, store expansion and scale improvement. When the capital chose not to continue, the new Chinese bakery players also suffered a blow.
Is the franchise model a “life-saving medicine”?
Under the difficult financing and financial pressure, Hutou decided to embrace the franchise model.
On December 12, 2022, Hutou Bureau stated that it will start franchising, turn to direct sales and “business partners” in parallel, recruit “business partners” in some cities, and start the partnership store business. The first batch of partnership stores will officially open after the Spring Festival next year.
Hu Ting, the founder of Hutou Bureau, believes that from the perspective of profit efficiency, management division of labor and profit distribution, the partnership system is more conducive to large-scale growth in the changing environment.
In the bakery market, especially in the new Chinese dim sum market, franchising has not yet become an industry phenomenon, and other major players have not opened franchising, but some players have explored.
Taixia Pastry, established in 2018, has accelerated its store expansion in the past two years. It has about 280 stores. However, in 2021 and January-October 2022, it will open about 130 and 100 new stores respectively. The franchise model tried in the past two years.
Under the background that Hutouju has to suspend store expansion and accelerate store closures, the franchise model will ease the pressure on Hutouju and help it seize market share.
Source: Hutou Bureau Standard Chartered Cake Official WeChat
However, the entry threshold for new consumer brands has never been low, and Tiger Head Bureau also continues this feature.
According to the business partner application form of the Hutou Mini Program, the franchisee is required to apply independently, and cannot find a partner, and must participate in the daily operation of the store full-time and manage it personally. The option of “self-owned funds that can be invested in franchising” involves an investment range from “below 1 million” to “2 million to 3 million”.
According to Franchise Star, a service platform for investment promotion and franchising, the franchise fee of most brands in the bakery category is less than 500,000 yuan. reached 1 million yuan.
For franchisees, Hutou Ju’s brand positioning and product quality are attractive to a certain extent. However, Hutou Ju has not yet reached the stage of large-scale expansion, and its presence in not many cities has limited influence in the national market. The threshold for joining is high.
For franchisees, the brand trust of Hutouju is not as good as other established bakery brands.
At the same time, franchise stores have obvious disadvantages in terms of staff and food control. Taking new tea drinks as an example, directly-operated brands such as HEYTEA and Naixue are more stable in terms of taste and service than franchised stores such as COCO and Shanghai Ayi. In the field of catering such as hot pot and new tea drinks, players who are positioned in the mid-to-high-end market have mostly insisted on direct sales for a long time.
Judging from the pricing, store decoration and other routes of Hutouju, its positioning in the baking market is biased towards the middle and high end.
Source: Hutou Bureau Standard Chartered Cake Official WeChat
From the perspective of market layout, the positions of new Chinese bakery brands are concentrated in first- and second-tier cities. Tiger Head Bureau once set its sights on Shanghai, until January 2, 2023, it has a total of 12 stores in Shanghai. Momo Dim Sum Bureau entered Beijing in a large scale, opening stores in many popular business districts such as Xidan Joy City and Chaoyang Joy City.
The status quo of other new Chinese bakery brands is similar to Hutouju. For players, the hidden dangers of the franchise model cannot be ignored. In the important stage of building a brand image, the franchise model may also affect consumers’ evaluation of the brand.
Although the current market environment is pushing one brand after another to find ways to save themselves, players need to continue to explore whether the franchise model can help brands change the situation.
The baking track under the changing situation,
“Hematopoiesis” has become a common proposition for players
Two star players, Hutouju and Momo, have suspended their expansion, and established bakery companies such as Christine and 85 Degrees have also encountered development difficulties, and there are many negative voices surrounding the new Chinese-style bakery.
However, there are still new players emerging on the track. Longmen Game Standard Chartered Dim Sum, KUMO KUMO, Cranes, etc. will all obtain financing for the first time in 2022. The emergence of new players may affect the survival and development of old players.
Consumers in the domestic bakery market prefer “high quality and low price” products. The “China Catering Development Report 2022” shows that in 2021, bakery brands with per capita consumption of 21-30 yuan accounted for the highest proportion, reaching 33.2%; followed by 10-20 yuan, accounting for 25.2%; more than half of the per capita consumption of baking brands was 30 below yuan.
However, the unit price of new Chinese-style bakery brands is more than 30 yuan. In an interview with LatePost in September last year, Wang Yuxiao, the founder of Momo, mentioned that Momo kept the price of a single piece between 15-20 yuan, which is similar to the price of a cup of tea Yanyue color milk tea. In addition, according to the data of Zhaimen Restaurant, the per customer unit prices of Hutouju and Momo are 32.17 and 32.68 yuan respectively.
If consumers want to raise their consumption expectations and buy higher-priced products, “tiger players” still need to continue to carry out market education. For now, the new “high quality and low price” brands will bring considerable competitive pressure to the “tiger players”.
Source: Hutou Bureau Standard Chartered Cake Official WeChat
At the same time, old brands such as Luxihe, Zhanji, and Master Bao are still expanding steadily. For example, Luxihe will open more than 100 directly-operated stores from January to October 2022.
Bao Caisheng, the founder of Master Bao, once mentioned, “The baking industry will usher in a reshuffle every five years.” There is also a view that the reshuffle period of the baking track is 1-3 years. At the moment when old players are falling down one after another, the development of star brands is hindered, and new brands are emerging in an endless stream, the reshuffle of the baking market is already in progress.
The baking track has become increasingly homogeneous. When the market supply far exceeds the demand, the industry will have “surplus”, and there will be eliminated ones.
Star players who have risen in recent years, such as Hutouju and Momo, either choose the brand positioning of “national tide” and “folk custom”, or attract young people by improving the product direction of traditional pastries. The marketing strategies are also very similar, focusing on star recommendations, shop visits and food tasting, live e-commerce and other methods.
Emerging players are also keen to follow the path of “predecessors”. The Cranesuo invested by Nayuki’s tea has adopted the “national trend” style in store design and product packaging, and its main sugar-free pastry category has already appeared in the menus of other players.
The problem of homogeneity is mainly due to the relatively low threshold for brands to become popular in the baking market. First of all, hot-selling products such as meat floss shellfish, mochi, and peach cakes have low production thresholds, and the products are easy to be quickly copied by other brands.
Secondly, the novelty of “popular products” will quickly disappear, and the most popular products such as cheesecake and dirty buns have been forgotten now. Consumers’ attention has turned to products such as mochi and peach cakes, but the freshness is difficult to maintain for too long.
Source: Hutou Bureau Standard Chartered Cake Official WeChat
In order to compete for market share, players will also bear greater financial pressure while expanding.
At present, new Chinese-style bakery brands are generally gathered in first-tier and second-tier cities. On the one hand, the consumption level of local residents is relatively high; However, the expansion of the high-end market requires more investment in store rent and employees.
After the financing is not smooth, players have to strengthen their own hematopoietic capabilities in order to ease cash flow.
Momo Dessert Bureau decided to take the battle back to Hunan, build an extreme model in the base camp, optimize the production process, use the factory to solve the efficiency problem, weaken the current system, simplify the store decoration, so as to save costs.
Only when the regional expansion model runs smoothly, can players quickly expand and replicate. Only by solving supply chain problems can we bid farewell to disorderly expansion and improve scale effect.
Tiger Head Bureau began to emphasize the role of developing online channels. In September 2021, Hutouju began to sell non-freshly baked and sold pastries in its Tmall store. Recently, Hutouju emphasized in its official public account that it will “intensify the development of online e-commerce business and new retail in the same city” .
Today, the number of fans of Hutouju’s official store is close to 100,000, and the monthly sales volume of hot-selling products is as high as more than 70,000. In online channels, players such as Luxihe and Master Bao have also achieved good sales, which are comparable to Tiger Head Game.
Now that the dividends of the baking track have been exhausted, in terms of industry concentration, new and old players will continue to fight.
China’s bakery market is still at an early stage of development, and the market is highly fragmented. According to data from Meituan Catering, the annual revenue of head bakery companies is less than 10 billion yuan, and Dali Foods, which has the highest market share, only has a share of about 3.7%.
In addition, although the chain level of the industry has gradually increased in the past two years, the number of leading brand stores has not exceeded 1,000.
Before large-scale expansion, there are still many tasks waiting for players to complete, from breaking through the homogenization trap of the industry, building core competitiveness, to exploring a single store profit model. Only hard power can enable players to survive the cold winter and survive.
(The header picture of this article comes from the official WeChat account of Standard Chartered Cake of Tiger Head Bureau.)
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