This is an English adaptation of a FoodBud historical article originally published on November 16, 2021.
This 2021 analysis, attributed in the original article to Sanwan Capital, maps China’s bakery market across demand, supply, channel structure, and startup or investment opportunities. For international chain operators, the key read is that China’s bakery category was already large, fragmented, and shifting from gift-led and dessert-led consumption toward breakfast, snack, and healthier daily-use occasions.
Bakery products are defined as convenient foods made from flour, yeast, salt, sugar, water, and added fats, dairy, eggs, or additives through baking processes.
By product type, the article groups bakery into four categories:
By shelf life, it groups products into:
China’s modern bakery industry began in the 1980s, after a long history of traditional pastries such as mooncakes and peach cakes. Its development is described in four phases:
According to Frost & Sullivan data cited in the article, China’s snack-food market reached RMB 1,029.7 billion in 2018, with a 2012-2018 CAGR of 12%. Bakery was the largest snack subcategory, accounting for 24% of the market. Candy and chocolate ranked second at 12%.
Bakery posted a 2013-2019 CAGR of 11.2%, the second-fastest growth rate among snack categories. Its CR5 was only 11%, making it the least concentrated major snack subcategory in the article’s comparison.
According to Euromonitor data cited in the article, China’s bakery retail sales reached RMB 231.7 billion in 2019, with a 2013-2019 CAGR of 11.2%. The global bakery market exceeded RMB 2.5 trillion, and China ranked second globally after the United States.
Per-capita consumption remained low by international standards:
Per-capita bakery spending in 2019 was also low:
Using Hong Kong, Taiwan, and Japan as benchmarks, and adjusting by Chinese city tier and population, the article estimated China’s conservative potential bakery retail market at about RMB 470 billion. Against the then-current retail value of about RMB 230 billion, it argued that the market still had room to roughly double.
By category in 2019:
The article argues that cakes and pastries could gain frequency as they move from birthdays, festivals, and gifting into afternoon tea and everyday snack occasions. Bread, while smaller, was viewed as attractive because of its portability, storage convenience, and meal-replacement role.
The top five bakery companies cited were Dali Foods, Toly Bread, Panpan, Oreo, and Hsu Fu Chi. Euromonitor data showed Dali Foods’ share falling from nearly 6% in 2015 to 3.7% in 2019. Toly Bread, focused on short-shelf-life bread, rose to 3.3% share in 2019.
Compared with candy and savory snacks, and compared with bakery markets in Japan, the United Kingdom, Mexico, and the United States, China’s bakery market was much less concentrated. No leading domestic bakery company had annual revenue above RMB 10 billion at the time, and no player had a dominant position.
Cost structure was described as follows:
Short-shelf-life packaged products such as Toly Bread require strong logistics and high turnover, so logistics costs are relatively important. Freshly made cakes and pastries sold through bakery stores usually have higher gross margins than packaged bread.
Bakery companies’ net margins were generally 8-15%, versus a 7.7% median for A-share listed food companies. The article argues that this margin profile gave early-stage companies relatively more room for marketing.
R&D intensity differed sharply across the value chain. The median R&D expense ratio for A-share food companies was 1.06%. Among listed bakery-related downstream companies, Toly Bread was at 0.19% and Ganso at 0.74%. Upstream ingredient companies were higher: Namchow Food at 3.72%, Ligao Foods at 2.91%, and Hi-Road Food at 3.87%.
The article identifies four main bakery consumption occasions:
In Western markets, bakery is often a staple food. In China, it historically developed as dessert or festival gifting. The article argues that younger post-1990 consumers, higher-tier-city work patterns, single-person households, and aging-driven solo living all supported demand for convenient breakfast and storable meal-replacement bakery products.
Mintel’s June 2019 Breakfast China report was cited as showing that most Western breakfast items had reached nearly 50% penetration in China, approaching traditional breakfast items such as congee, wontons, and noodles. Bread and toast had reached 62% penetration.
Compared with six-month long-shelf-life bakery products, short-shelf-life products were seen as fresher, lower in additives, and aligned with consumer preferences for freshness and health.
Reports from Mondelez International and Harris Poll were cited as showing that Chinese consumers considered freshness, natural ingredients, gut health, low sugar, and low fat when buying snacks.
McKinsey’s 2020 China consumer survey was cited with the following figures:
Online pastry data cited in the article showed that healthy pastry consumer counts and sales grew faster than the pastry category overall, while healthy pastries’ penetration and sales share rose year by year.
Among online snack gift-box subcategories, pastries and dim sum ranked third after nuts and puffed snacks, but had the fastest share increase. Gift-box occasions were expanding from festival gifting into afternoon tea, late-night snacking, and casual souvenir or social-gift occasions.
The article notes that girlfriends, children or babies, and boyfriends were key gift recipients in the category.
Chinese-style gift boxes grew rapidly: 2020 consumption was 7.9 times the 2018 level. Search terms such as time-honored brand and old-style stood out, while health, nutrition, premium positioning, and taste were also important.
The article links this to post-1990 consumers’ cultural confidence and acceptance of domestic brands. It argues that China’s large base of traditional and regional pastries gives operators scope to modernize formats, flavors, packaging, and brand storytelling.
Cakes were expanding from birthdays into festivals, celebrations, weddings, and afternoon tea. This raised frequency and increased consumer expectations.
Consumers wanted cakes to be tasty and healthy, but also visually appealing and emotionally expressive. Ingredients and flavors were diversifying beyond cream, fruit, and sponge cake into items such as red bean paste, red velvet, and durian.
The article groups bakery companies into three channel-led types, while noting that many brands were already omnichannel:
Bakery chains typically operate in dense commercial and residential districts, supported by central factories producing finished or semi-finished goods, or by front-shop-back-factory models with on-site baking. Product ranges include cakes, Chinese and Western pastries, bread, and other bakery goods.
The article divides chain formats into Chinese-style and Western-style bakery stores.
Chinese-style stores include:
Western-style stores include:
According to Meituan-Dianping data cited in the article, China had nearly 500,000 bakery stores by the first half of 2019. Lower-tier cities were growing fastest: store count in third-tier and below cities rose 26.2%. First-tier cities’ share of total bakery stores declined from 9.9% in 2016 to 8.2% in 2018. Third-tier and below cities rose from 48.8% to 51.8% over the same period.
By store type, bread-and-cake shops remained dominant but declined from 84.6% of bakery stores in 2016 to 80.9% in 2018. Chinese pastry stores rose from 6.2% to 10.4%.
Consumer profile data showed:
In the first half of 2019, average spend per bakery-store visit in first-tier cities was RMB 45, twice the level in third-tier cities. In third-tier and below cities, 87% of bakery stores had average spend below RMB 30, with an average ticket of RMB 20.
Broad-line Western bakery chains are typically in dense commercial and community locations, with street-front or mall stores, visible finishing or decoration, seating, bakery products, and drinks. Players cited include Christine, BreadTalk, Paris Baguette, Holiland, and Wedome.
The article describes this model as having 50-70% product gross margins but high rent and labor costs, producing net margins around 5% or lower.
Several chains were under pressure. Christine, described as the first listed bakery stock, saw revenue shrink after its 2012 listing, posted losses for eight consecutive years, and reduced its store count. BreadTalk had repeated store closures from 2017 and exited multiple cities. In 2020, Ichido closed more than 70 stores in Shanghai.
The article’s diagnosis: broad-line Western bakery chains were weaker than new tea beverage brands on product differentiation and service experience, weaker than convenience stores and packaged bakery on value, and not differentiated enough to command a premium. Internet cake brands also pressured their cake business.
Traditional Chinese bakery chains, often China Time-honored Brands, focus on Spring Festival, Dragon Boat Festival, Mid-Autumn Festival, and local-specialty gifting. Listed examples were Guangzhou Restaurant, founded in 1935, and Ganso, founded in Taiwan in 1981.
Guangzhou Restaurant’s food gross margin was about 50%, with net margin of 13-15%. Ganso’s gross margin was 62-65%, with net margin of 11-13%. Mooncakes accounted for around 40% of revenue and showed double-digit sales growth.
Compared with broad-line Western bakery stores, Chinese bakery chains had better profitability because traditional festival gifting had strong consumer recognition, fewer substitutes, and stable demand.
Beyond mooncakes, many Chinese pastry categories remained category-rich but brand-poor, including peach cakes, mung bean cakes, chestnut cakes, flower cakes, and osmanthus cakes. The article argues that regional pastries could be modernized into everyday snacks through new flavors, packaging, and healthier positioning.
As broad-line Western chains struggled, newer Western-style bakery stores focused on single products such as toast, dorayaki, or egg tarts. These stores were usually small street stalls or mall food-court units, with takeaway-led operations.
The model benefits from a narrow product range, easier standardization, smaller store area, fewer employees, and lower rent and labor costs. While prices can be higher than ordinary bakery products, the proposition relies on better ingredients, stronger quality, and a specialized product image.
New Chinese-style bakery stores apply guochao aesthetics to traditional pastries through store design, packaging, copywriting, and modern flavor development. They generally use small or medium stores, have few or no seats, and focus on takeaway.
Brands often promote one hero pastry while selling other products. Examples cited include Bainian Tonghe, focused on lotus pastries and queen egg tarts, and Momo Dim Sum Bureau, focused on mochi. Unit prices are usually below RMB 10, lowering trial barriers.
The article warns that bakery has low entry barriers and heavy product homogeneity. Trend-led packaging and hero SKUs can attract attention, but repeat purchase, R&D speed, and brand strength determine durability.
The article compares bakery with tea beverages. China’s tea-drink sector had produced high-end, natural-positioned brands such as Heytea and Nayuki, as well as value and lower-tier-market brands such as Mixue Bingcheng and Guming. Bakery chains, it argues, need clear positioning, product R&D, new-product iteration, brand-building, and category ownership.
Meituan University’s catering data was cited to show that beverage stores had the highest chain-store penetration. Once a single-store model worked, capital-backed leading brands expanded quickly. Chains with more than 1,000 stores had maintained around 30% share of chain stores for three consecutive years. In 2020, Mixue Bingcheng entered the 10,000-store club, while Shuyi Tealicious and Guming exceeded 5,000 and 4,000 stores respectively.
Bread and dessert stores ranked among the top three catering formats by chain penetration, reaching 24% in 2020, above China’s overall catering chain penetration of 15%. Even so, no leading bakery chain in China had more than 1,000 stores at the time, and older leaders were slowing or shrinking. The market remained regional and fragmented.
Offline channels include supermarkets and hypermarkets, convenience stores, and home-delivery retail formats such as fresh-food e-commerce and community group buying.
Products are mainly long-, medium-, and short-shelf-life packaged goods, especially bread and toast, serving meal-replacement and afternoon-tea occasions.
Players include large traditional food companies and startups. Long-shelf-life packaged bakery brands include Orion and Daliyuan. Short-shelf-life bread players include Toly, Mankattan, and Dali Foods’ Meibeichen, launched in 2018. The article notes that long-shelf-life food sales were declining as health concepts gained traction.
Short-shelf-life products require fast turnover. Large snack-food companies can reuse established offline distribution systems. Dali Foods launched Meibeichen at the end of 2018; by 2020, it had exceeded RMB 1 billion in revenue, grown 40%, and become a national operating brand.
For startups, supermarket entry fees were high. However, fresh-food e-commerce, community group buying, and rising convenience-store penetration created new local-life channels and opportunities to use emerging offline traffic.
Online bakery consumers resembled offline bakery-chain consumers: mainly women and post-1990 consumers.
According to Magic Mirror market intelligence data cited in the article, Tmall’s snack category reached RMB 70.7 billion in 2020 sales, up 19.5% year on year, with volume of 2.26 billion units, up 18.5%. Pastries and dim sum reached RMB 17.44 billion, up 39%, far above the overall snack category growth rate.
Demand for premium online pastries was rising. Tmall premium snack sales reached RMB 12.91 billion in 2020, up 46%, representing 18.5% of snack sales. Quarterly premium snack sales growth exceeded 15% throughout 2020 and outpaced the total snack category. For bakery pastries, high-price-band products had faster year-on-year growth in GMV, search exposure, and transaction conversion than mid- and low-price bands.
Among the top 10 online premium snack brands, bakery occupied three spots: Maxim’s, Holiland, and Oabella. Their sales were still smaller than pastry and nut leaders, leaving room for growth as premium online pastry acceptance increased.
In the overall online snack brand ranking, the top five were Three Squirrels, Be & Cheery, Bestore, Laiyifen, and Oabella. Their 2020 online sales were:
Among the top 15 online snack brands, five were mainly pastry businesses: Oabella, Daoxiangcun, Maxim’s, Bibizan, and Oreo. Oabella’s pastry and dim sum revenue was RMB 518 million, or only 3% of online pastry and dim sum sales.
Three Squirrels, whose main business was nuts, had already reached RMB 940 million in pastry revenue, or 5.4% of online pastry sales. Bestore’s pastry revenue was RMB 420 million, or 2.4% of online pastry sales. The article concludes that online bakery was fragmented, with no clearly dominant brand, but bakery specialists faced competition from broader snack leaders.
Tmall online bakery and pastry sales accounted for 7.5% of total bakery and pastry retail sales, suggesting room for online penetration growth.
The article identifies two main online bakery models:
Search terms showed that staple-food, healthy meal replacement, and light-meal functions were key. Guochao snacks grew more than fourfold in MAT2019. Among snack categories, pastries ranked first among leading new domestic goods and maintained high growth.
Ipsos data was cited showing that in 2020 Q3, bakery-related products occupied six of the top 10 Taobao and Tmall reduced-sugar or sugar-free concept sales rankings.
The article summarizes online bakery demand as domestic-brand and guochao-oriented, meal-replacement-oriented, reduced-sugar, and fresh. It also notes a structural challenge: freshness and fewer additives imply short shelf lives, often seven or 15 days or less, which pressures production and logistics and limits stock-up behavior and average order value. Extending shelf life modestly while maintaining freshness and low-additive positioning was presented as a key operating challenge.
A separate online model is online ordering plus front-warehouse delivery. After 2010, mobile internet and logistics infrastructure enabled internet cake brands using online ordering, centralized kitchens, and delivery. This avoided store rent. Products were mainly cakes and afternoon-tea pastries. Cake gross margins were said to be around 80%, with high average ticket helping cover delivery costs. Examples include Bliss Cake, 21cake, and Le Cake. The article notes that while this improved the traditional cake-store model, lack of offline visibility and product homogeneity weakened awareness and loyalty.
The article argues that bakery has low entry barriers, many players, and serious product homogeneity. Durable innovation and brand power are therefore critical.
At the time, neither new offline bakery chains nor packaged bakery products had produced an absolute leader in consumer mindshare and market share. The article sees room for startups to define subcategories through hero products, iterate through R&D, drive repeat purchase, and build competitive barriers.
The five opportunity areas highlighted were:
1. Fresh, healthy, low-sugar, low-oil short- and medium-shelf-life bakery products. Rising health awareness and meal-replacement behavior favor fresher, lower-additive products. Sheng Lai You Qu, focused on oat bakery products, is cited as an example.
2. Modernized Chinese pastries. China has many traditional bakery subcategories, but outside mooncakes and zongzi, few have clear leaders. Modern aesthetics, new flavors, portability, storage convenience, and healthier recipes could revive Chinese pastries. Examples cited include Bainian Tonghe for lotus pastries, Luxihe for peach cakes, and Zhanji for peach cakes.
3. Small-format Chinese and Western bakery chains. Small stores improve the legacy bakery-chain model through lower investment, higher sales per square meter, fewer SKUs, stronger standardization, and easier scaling.
4. Healthy bakery products for children. Younger consumers’ health awareness was expected to influence children’s food purchases. Children’s snacks were growing much faster than the overall snack category, but no absolute leader in healthy children’s snacks had emerged.
5. Bakery ingredient and auxiliary-material companies with R&D capability. Downstream bakery growth was expected to support upstream ingredient companies. In the preceding half year, three bakery ingredient manufacturers had listed on A-shares: Hi-Road Food, Ligao Foods, and Namchow Food. The article also expected household baking appliances, tools, and consumables to benefit as bakery consumption habits formed.
Note: market-size estimates, IPO/listing references, growth forecasts, and opportunity assessments above are historical views from the original 2021 article.