This is an English adaptation of a FoodBud historical article originally published on January 29, 2024.
Today, the argument is that every bakery product can be rebuilt for a new generation of consumers.
In 2023, Bao Rujiang raised two rounds of funding for Hesuo, a Beijing bakery brand founded in 2021 and positioned around zero-sucrose baked goods. Its signature products include mille-feuille, cranberry scones, and jasmine tea cookies. The company took investment from Nayuki in its second year, and in 2023 Lingge Venture Capital completed a new exclusive investment round.
Hesuo has five stores, all in Beijing. Bao, born after 1985, says the bakery category can now be “done again.”
In 2023, 650 million yuan went into bakery startups in China. The funded companies included both new brands and older operators. Compared with the financing boom two years earlier, when some restaurant companies could raise several hundred million yuan in a single round, investors had become far more cautious toward new consumer brands.
Reported bakery-related deals included:
Investors disclosed in the category included Sequoia China, GGV Capital, Shuidi Assets, Bailian Zhigao Capital, Longbai Capital, Lingge Venture Capital, and Guohong Capital.
One investor, Lin Qiong, described bakery as a market with a 20% compound annual growth rate and a market stock worth more than 100 billion yuan that is still being reshaped. He estimated China’s domestic bakery market could reach 360 billion yuan in 2025 and 500 billion yuan in 2030.
Hesuo’s core proposition is zero sucrose across its full product range. Bao says the engineering challenge is high: for two consecutive years, he spent about 70% of his time visiting supply-chain partners, traveling as far as Tibet in China and Malaysia overseas, to make sure ingredients contained no sucrose, tasted good, and could be procured directly to stores for fresh production.
Lingge Venture Capital said food health is an irreversible trend and an important criterion in its food-and-beverage investments. Zhang Lin, a director at CMC Capital, also sees health as a required direction for pastry brands. Xianghe Bobo Pu, a century-old brand she invested in, has reduced sugar, oil, and fat across a number of products.
Other funded brands are pursuing similar consumer signals:
Taoxi Manman founder Du Jianfei has said that in three years, low-sugar and even zero-sugar pastry products would sweep the bakery market. Bao says several leading bakery factories approached Hesuo about adding zero-sucrose production lines after the brand proved the model could work.
Product differentiation is no longer only about one blockbuster SKU. Brands are building surrounding products and consumption occasions.
Xianghe Bobo Pu deliberately controls the sales share of its top products to avoid becoming tied to any single item. Fourth-generation successor Yang Ming says the company launches 50 to 60 new products each year, of which 10 to 25 become long-term products. In his view, the category is ultimately a contest of product iteration and supply-chain capability.
Hesuo incorporates Chinese ingredients such as Liubiju peanut butter and Wuyutai jasmine. Its scones and muffins were inspired by employees eating them for breakfast: small, inexpensive, and portable. That helped the brand enter the breakfast occasion. Other differentiated products include Huangtian’e egg cake, sticky-rice boats, thick jasmine tea cookies, and a seasonal Musang King durian mille-crepe cake, with pastry chefs opening durians on site.
Taoxi Manman puts “low sugar” and “probiotics” directly into its brand mark. Sheli expanded from whole-wheat bread into light meal replacements, with more than 100 SKUs covering more consumption scenarios.
Zhang Lin’s summary is that most bakery brands are not creating entirely new categories; they are reshaping consumer insight and making bakery more snack-like. The current generation of funded bakery brands is remaking a proven profitable category to attract younger consumers.
Bao says Nayuki’s investment involved “the fewest conversations and the fastest decision.” Nayuki had been watching the direction and was looking for a healthier dessert category.
Lingge Venture Capital cited Hesuo’s zero-sucrose differentiation, the opportunity in health-focused food, exciting operating data, and chain-store potential.
According to Bao, Hesuo keeps its SKU count below 20, which supports a lower write-off rate, faster consumer decision-making, and higher single-product repurchase. Hesuo’s first Tongzhou store generates more than 10 million yuan in annual sales, within a store area under 62 square meters. Monthly sales per square meter are 24,000 to 30,000 yuan, five to ten times similar merchants in the same trade area.
An investment-bank executive said Sheli’s light operating model and several consecutive years of rising revenue were exactly what the capital market valued.
The investment logic is profitability, strong unit economics, and chain-store scalability.
Meituan Longzhu partner Zhu Yonghua has shared that China has 480,000 bakery stores, only slightly fewer than milk-tea stores. Of these, 430,000 are Western-style bakery stores and 50,000 are Chinese-style. In 2020, the Chinese pastry market was close to 100 billion yuan, and the northern and southern Daoxiangcun brands together generated about 10 billion yuan in revenue.
Zhang Lin says bakery had entered a rational preheating period in terms of data, market size, and consumption potential. CMC Capital invested twice in coffee chain M Stand in 2021, and she compares the Chinese pastry opportunity to that timing.
Hesuo and Xianghe Bobo Pu were pushed into the spotlight by industry heat. Yang Ming has said that after Lunar New Year in 2021, many investors approached him. Bao says financing gives a company the chance to define rules: resources start to tilt toward the company, and later entrants can be held back.
Funding is also used for resources that are scarce over the medium and long term: factories, supply-chain improvements, new product development, and team expansion.
Investor attention has also shifted toward founders with real consumer-sector operating experience. Bao spent 10 years in foodservice, serving as marketing director at hotpot brand Taotailang, Wuyun Ice Cream, and White Rabbit Candy Coffee, before starting breakfast-store brand Mazouri. Yang Ming moved from teaching into e-commerce and applied internet thinking to Xianghe Bobo Pu. Du Jianfei had worked for years in the low-fat salad-meal field.
Many of the rising brands use Chinese-style store design and cultural signaling. The rise of domestic brands has made consumers more willing to buy products with cultural symbols. For century-old brands such as Xianghe Bobo Pu, this has created a favorable growth period.
Hesuo uses fluorescent pink and fluorescent green for stores and packaging. Bao says older government notices used pink paper, making the color traditional and recognizable, while dark green is also a traditional Chinese color. Luxihe uses the classic yellow, green, and white palette of Tang sancai ceramics with modernized, simplified design. Xianghe Bobo Pu continues a palace-style language across products and packaging.
Zhang Lin says Chinese pastry brands have an advantage in reshaping existing demand by combining traditional culture with new consumption occasions. If the purchase environment and communication context are right, young consumers who buy Western bakery products will also buy Chinese pastry.
Brands such as Luxihe, Master Bao, and Zhanji all began with one small shop, earned enough money, then opened the second and third stores before entering more cities.
Investors entering the category in 2023 did not want portfolio brands to open too many stores too quickly, because that would distract founders from company operations. The situations at Hutouju and Momo Dim Sum Bureau prompted caution around founders who had not experienced cycles, expansion strategies that prioritize scale over profit, and weak operating fundamentals.
Chabaidao in tea drinks is another reference point: it was founded 15 years earlier and only entered a rapid development phase in the most recent three years.
For this generation of bakery brands, “1,000 stores” is the beginning of the dream.
Hesuo opened five stores in two years, two of them in the previous month: Tongzhou Wanda, Changying, Haidian Xizhimen CapitaMall, Impression City, and Daxing Huaifang Wanda. Bao says the brand is balancing toward lower-tier or lower-rent markets: China has few Sanlituns, but many places like Tongzhou. Lower rent helps build the single-store model.
Xianghe Bobo Pu, despite its 100-year history, has only a dozen stores in Tianjin. Its Beijing Raffles store was in preparation, and the brand avoided the period of fastest rent increases, saving costs.
The funded bakery brands still active in the market share several advantages: zero-sugar or health propositions, core products, lighter stores, and stronger attention to sales per square meter.
Older brands have additional opportunities through traditional craft, culture, and e-commerce. Xianghe Bobo Pu gets 70% to 80% of sales from e-commerce, with monthly volume between 5,000 and 10,000 units. Offline channels include Hema, Lawson, and 7-Eleven, raising the sales ceiling.
Investment institutions have also been reshuffled. One bakery founder said that on the day Hutouju ran into trouble, all the previously engaged investors stopped contacting him; institutions that were not focused on consumer investing pulled back.
Zhang Lin says many investors had not fallen in foodservice before and did not understand how difficult the business is at a cyclical low. In her view, the cooling of the consumer-investment track has created some opportunities for both institutions and startups.
Investors cited in the article remain optimistic about the broader bakery category. Shunwei Capital, Capital Today, GGV Capital, and Sequoia Capital have all expressed positive views on the sector.
Some bakery brands that raised funding in 2022 were also described as performing well:
These founders also generally had years of foodservice and retail operating or entrepreneurial experience, including both large wins and store closures. The founders of KUMO KUMO and Huanniu Cake House were born after 1990. KUMO KUMO’s founder had previously launched coconut-chicken brand 23 Degrees Not Too Cold in 2019.
Lin Qiong and Yang Ming both treat Holiland as a benchmark: long accumulation, continuous iteration, deep supply chain, strong product innovation and brand operation, and scaled chain capability.
Bao says that outside bakery, Hesuo wants to become like Din Tai Fung: accessible to all age groups. Within bakery, it wants to become like Master Bao, growing slowly from one small shop. Master Bao took 20 years to open more than 100 stores. Bao’s conclusion is that only solid fundamentals allow a brand to survive cycle after cycle.
Hesuo’s bag shows a crane standing on a turtle. Bao says the crane represents Hesuo, while standing on the turtle means the company wants to grow slowly and asks for patience.
Note: financing amounts, market forecasts, store targets, and expansion plans above are historical figures and guidance from the January 29, 2024 source article.