The impact of China’s economic downturn has led to a wave of closures for popular baking brands this year, signaling tough times for the baking industry as a whole. Even established companies like the leading baking company “Kristin” are facing the possibility of delisting from the Hong Kong Stock Exchange, marking a period of intense competition and consolidation within the baking sector.
According to Liang Wei, Deputy Secretary-General of the China Bakery Industry Association, the entire baking industry is under immense pressure, with the prevailing issue being excessive competition, often referred to as “internal competition.”
Guangzhou’s popular chain bakery “Wuling Tang” began shutting down its stores in October due to financial struggles, with owner Huang Zhuohua lamenting the need to bid farewell in order to address mounting debts. The closure notices posted at Wuling Tang outlets cited a broken funding chain and the initiation of bankruptcy and liquidation proceedings.
Specializing in traditional Cantonese bread, Wuling Tang was founded in 2021 but unfortunately could not sustain its business for more than three years, highlighting the challenges faced by baking enterprises in the current market environment.
In addition to Wuling Tang, several baking brands have recently downsized their operations or exited multiple markets, reflecting the broader trend of closures within the industry.
In a recent report by Red Meal Network titled “Another Well-Known Brand Closes All Guangzhou Stores! Baking Industry Navigates Through Challenges,” the closures of various popular baking brands in the past year were highlighted.
On October 18, “Kristin International Holdings Limited,” known as the “first share of the baking sector,” announced its delisting from the Hong Kong Stock Exchange due to delays in financial reporting, with its stock value reported at a nominal 0.00001 Hong Kong dollar.
Earlier this year in March, it was reported that Kristin owed debts amounting to 57 million yuan, with all its outlets already closed.
The closures are not limited to bakery stores; even baking education outlets are struggling to survive. In July, the popular baking studio ABC Cooking Studio closed all 12 of its outlets in the Chinese market.
In August, “Dole Day,” which entered the Chinese market in 2005, saw several stores in Zhengzhou close down successively. The closures left thousands of consumers seeking resolution for disrupted services.
Looking back to March of this year, the viral cake shop “Panda Won’t Leave” faced a crisis of shutdowns and unpaid wages. Founder Yang Zhenhua attributed the financial troubles to a downturn in business performance and cash flow disruptions due to misjudgments in market conditions.
“Panda Won’t Leave” was established in 2017 as an online baking brand, boasting over 20 million users and an annual revenue exceeding 800 million yuan.
In January, the parent company of the new Chinese-style baking brand “Hutouju Zhada Biscuit House,” Shanghai Everything Has Food and Beverage Management Co., Ltd., filed for bankruptcy liquidation.
With the closure of popular baking brands and the struggling state of regular baking enterprises, the industry has transitioned into a phase of consolidation, marked by intense competition and price pressure.
Zhao Bing, CEO of Lejinji New Retail Channel, commented on the challenging industry landscape, noting the prevalence of intense competition in the saturated market. Basic baked goods are predominantly priced at 9.9 yuan or 19.9 yuan, making it difficult to sell items priced above 20 yuan.
Zhou Weiping, Chairman and CEO of A1 Snack Research Institute, emphasized that the industry has entered a period of contraction, necessitating a balancing of supply and demand. Lack of innovation, price wars, low quality, and high operational losses are the primary characteristics of the market.
Faced with these challenges, companies like Zhangzhou’s Liang Kousizi Foods and Haoyunlai Foods have introduced low-cost packaging strategies.
Liang Kousizi Foods offers products in the 3-5 yuan price range, highlighting small and affordable packaging options. Meanwhile, Haoyunlai Foods’ Guo Jinqian mentioned their packaging options priced around 5 yuan for small quantities and approximately 9.9 yuan for larger packages.
Since 2023, keywords like “closure,” “business shrinking,” “losses,” “bankruptcy,” and “liquidation” have been synonymous with the development of the online baking industry.
The fervor of the baking industry in 2021 attracted significant capital investments and the rapid emergence of online baking brands. However, the sector started witnessing multiple closures and shutdowns in 2023 following a period of prosperity in 2022.
Data from Meituan indicates that the average survival time for baking stores nationwide is 32 months, less than three years. Sixty percent of baking establishments close within two years of operation, with only 32% surviving beyond the third year. Less than a quarter manage to stay afloat for more than four years.
According to Red Meal’s extensive data analysis, in 2023, 120,000 baking establishments closed across the country, intensifying the restructuring of the entire industry.