China Panel: Growing Internationally

Transcript

1. Growing Internationally –
   Doing Business in China
   

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2. Brianna Peterson
   EUROMONITOR
   

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3. BAKED GOODS TRENDS AND MARKET OPPORTUNITIES IN
   CHINA
   February, 2018
   

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4. © Euromonitor International
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   Who is Euromonitor International?
   

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5. © Euromonitor International
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   Consumer trends and
   lifestyles.
   Companies and
   brands.
   Product categories
   and distribution
   channels.
   Production and
   supply chains.
   Economics and
   forecasting.
   Comparable data
   across markets.
   Experts at analyzing global markets, categories and trends
   

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6. © Euromonitor International
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   Market Definitions
   Baked goods
   Baked goods is the aggregation of bread, cakes, pastries, dessert mixes and frozen baked goods. It includes packaged
   and unpackaged/ artisanal products for each of these categories. Baked goods from in-store bakeries are classified
   under unpackaged/artisanal products.
   Pastries
   Includes packaged croissants,
   buns, scones, viennoiserie,
   brioche, doughnuts, sweet
   waffles, “crèpes”, and baklava.
   Also includes fresh and ambient,
   single and multi-portion pastries
   that are produced artisanally
   and typically sold on the site of
   production (eg bakeries,
   patisseries).
   Bread
   This is the aggregation of flat
   bread like pita, naan, and
   tortillas and leavened bread
   made by adding gas to a
   dough before or during baking
   to produce a lighter bread.
   This includes packaged and
   unpackaged bread.
   Cakes
   This is the aggregation of
   packaged cakes and
   unpackaged cakes. Includes
   multi and single service cakes.
   Included in cakes are any
   flavored cakes, cheesecakes,
   rice cakes, sponge cakes,
   madeleines, etc.
   Dessert Mixes
   Dehydrated/powder/concentrat
   ed desserts to which hot water
   or hot (or cold) milk is added,
   with no other preparation
   required.
   Frozen baked goods
   Morning goods/breakfast items
   (croissants, rolls, waffles, buns,
   pastries), pizza crusts, pie crusts,
   pastry shells, etc. all sold frozen.
   

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7. THE CHINA MARKET OPPORTUNITY
   THE OPERATING ENVIRONMENT
   FUTURE GROWTH
   

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   The baked goods market in China
   has surged with over 13% growth
   in the last five years, reaching
   $28.5bn in 2017.
   

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9. 13.3%
   Historic CAGR % of baked goods in China 2012-2017.
   © Euromonitor International 9
   7.5%
   Absolute Volume Growth for the period.
   $28.5bn
   $15.7bn
   2012 2017
   CHINA BAKED GOODS SALES RSP 2012- 2017 (USD)
   The baked goods market in China has grown
   USD$12.8bn in absolute terms in the last five years.
   Which baked goods drive growth?
   

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10. Greater snacking for time-strapped
    consumers
    What macro trends have driven these historic gains?
    Since foreign-funded bakeries began entering China in the 1990s, the Chinese market, traditionally used to
    “sweet buns”, has continued to become more Westernized.
    Experimentation with Western-style
    baked goods
    Modern grocery growth with in store
    bakeries
    

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11. 72%
    16lb
    Of market sales come from artisanal
    products.
    Per Capita average annual consumption of
    baked goods.
    83%
    Of total sales fall into sweet baked goods.
    45%
    Of total cake sales are results of the popular
    gifting tradition among Chinese consumers.
    $12.4bn
    $10.8bn
    $4.9bn
    $0.4bn
    Cakes Pastries Bread Dessert Mixes
    CHINA BAKED GOODS SALES RSP 2017 (USD)
    New Western favorites including fresh baguettes, croissants and macaroons
    drive baked goods sales.
    Which categories account for the largest share?
    

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    Hsu Fu Chi is a top Sachima
    brand in China.
    Hui Tou Ke waffles brings a Western
    favorite product through a familiar
    local brand.
    Kong Weng puff pastries remain a
    favorite product.
    Cake – 44%
    Sachima $725mn
    Mochi $508mn
    Donuts $541mn
    Pastries – 38%
    Puff Pastries $1,860mn
    Pineapple Pastries $606mn
    Tants $519mn
    Croissants $335mn
    Bread – 17%
    Buns $843mn
    Waffles $768mn
    Rou Song Bing $465mn
    CHINA BAKED GOODS SALES RSP 2017 (USD)
    Despite new Western product availability, local favorites still are extremely popular in Chinese cakes and pastries
    that can be deep-fried, baked and stewed.
    What type of products are driving this growth?
    

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13. McDonald’s will almost double its number of
    restaurants in China over the next five years.
    restaurants in over 1,100 cities.
    10,000
    hours.
    Starbucks is opening a store in China every
    Hua Lai Shi, a burger franchise, aims to open
    +2,000
    outlets in 100 cities across China.
    15
    KFC has more than
    NUMBER OF CHAINED FAST FOOD OULETS IN CHINA
    5,000
    As Western style fast food outlets move into China, the demand for baked
    goods continues to grow.
    What outlets are driving this growth?
    2,075
    1,754
    1,143
    3,879
    4,596
    1,565
    4,668
    6,193
    1,819
    Chained Burger Fast Food Chained Coffee Shops Chained Bkaery Product
    Fast Food
    2012 2017 2021
    

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14. How does China compare to the
    US?
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15. $15.7bn
    $53bn
    $28.5bn
    $58.6bn
    China USA
    2012 2017
    Despite contradictory health trends, the
    baked good markets in China and the US are
    still growing overall.
    China is the second-largest baked goods
    market in the world, with retail sales valued
    at US$28.5bn in 2017, just behind the US.
    In 2017 cake sales in China were USD$12.4bn
    representing 43% of the market whereas
    bread sales in the US (USD$23.4bn) have the
    are the largest category in baked goods.
    BAKED GOODS SALES RSP 2012- 2017 (USD)
    China is growing at a rate almost double the US baked
    goods market.
    China vs. the US historic growth
    

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16. 2.0%
    13.0%
    US baked goods market historic CAGR
    (2012-2017)
    Chinese baked goods market historic CAGR
    (2012-2017)
    $81mn
    Absolute growth of Chinese baked goods
    market 2012-2017 USD
    $5.6bn
    Absolute growth of US baked goods market
    2012-2017 USD
    .
    CHINA BAKED GOODS SALES RSP 2017 (USD)
    Despite small market dips in 2015-2016, the Chinese baked goods market
    has continued to outpace the US market historically.
    China vs. US historic growth
    -1%
    1%
    3%
    5%
    7%
    9%
    11%
    13%
    15%
    17%
    2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
    Y-O-Y Growth in China and the US Baked Goods Market 2012-2017
    China US
    

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17. Chinese Market
    US Market
     2,800 commercial bakeries in operation.
     Bread is the largest category.
     Highly fragmented market with lots of competitors.
     Artisanal brands make up 45% of the market.
     39% of baked goods sold in grocery markets, 26% in
    traditional bakeries.
     1,450 commercial bakeries in operation.
     Cake is the largest category.
     Highly fragmented market with lots of competitors.
     Artisanal brands make up 72% of the market.
     53% of baked goods are sold in bakeries.
     Local bakeries offer traditional treats like puff
    pastries and buns (25% of pastry market sales).
     92 holidays where baked goods are given as gifts.
    

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18. Operating Environment
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    The baked goods market in China is highly
    fragmented
    The top brands account for less than 15% of total retail value share.
    4.6%
    2.9%
    2.1%
    1.2%
    1.0%
    0.8% 0.7% 0.7% 0.6% 0.5% 0.4% 0.3%
    2017 Retail Value Share of Baked Goods
    Artisanal goods mostly sold through
    bakeries make up 72% of retail sales, with
    private label making up 4.7% of retail
    sales in 2017.
    Most players have a strong regional
    presence, like Bakery Christine with a
    high retail sales in Yangtze-river Delta
    area including Shanghai but has only one
    store in Beijing.
    

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20. Dali Food
    Co Ltd
    Toly Bread
    Co Ltd
    Orion
    Group
    Panpan
    Foodstuff
    Co Ltd
    Nestlé SA
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     In 2017, domestic players counted for four of the top
    five players of baked goods in China.
     Domestic manufacturers dominate, largely because of
    their noticeable distribution competency, especially
    in lower-tier cities and rural areas, as well as their
    ability to quickly respond to shifts in consumer
    trends.
     Local manufacturers also benefit from established
    sales networks, in particular in low-tier cities and
    rural areas are able to gain the largest share of sales
    in baked goods.
     Unlike other food products that can be kept longer,
    bread and cakes have short preservation time and
    need strict storage conditions to stay fresh. Bakeries
    must be able to offer fresh products in a country
    where food safety is a highly important factor for the
    Chinese after many food scandals.
    BAKED GOODS SALES IN RSP 2017 (USD)
    The Chinese baked goods market is dominated by
    local players.
    $1.3bn
    $0.8bn
    $0.6bn
    $0.33bn
    $0.28bn
    Top baked goods brands in China
    

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21.  The company has a biscuit
    processing plant with eight
    production lines.
     Operates in 2 segments:
    manufacturing and sale of
    food and beverages.
     Produces items that are
    particularly popular in the
    northeast of China, they offer
    bread, cakes, pastries,
    croissants, biscuits and
    cookies.
    Dali Food
    Co. Ltd.
    Toly Bread
    Co. Ltd.
     “Central factory + wholesale”
    production and distribution
    mode.
     Short-term shelf-stable
    packaged bread products,
    featured much less
    preservative and short storage
    life within one or two weeks
    to deliver freshness.
     15 production bases across
    various regions of China,
    ensures its supply of products
    and maximize its consumer
    access.
     Despite being an international
    company, they have
    developed new products to
    suit Chinese consumer’s
    habits and needs with a closer
    look on their traditions and
    eating habits.
     The company has 3
    production bases and 4
    headquarters in China and
    runs over 69 services offices.
     Its main products include
    tarts, pies, chocolate cakes
    and tiramisu. Among these
    products, the Orion Pie is sold
    in more than 60 countries and
    regions, accounting for about
    70% of the international
    chocolate pie market.
    Orion Group
    Panpan Foodstuff Co. Ltd.
     Helping to grow their market
    share, Panpan continues to
    introduce new, innovative
    baked goods.
     They introduced Panpan Hand
    Stick, a shredded bread.
     Featuring high quality
    ingredients, this product
    answers consumer demands
    for healthier and more
    premium baked goods.
     It allows for more DIY potential
    for consumers to pair it with
    vegetables to make a salad
    dish, or pair it for a sandwich.
    Top Five Competitors in China Baked Good Market Snapshots
    

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22. 27th
    28th
    29%
    Rank in Logistics Performance Index out
    of 160 countries in 2016
    Ease of doing business ranking out of
    138 countries in 2016
    Of the Chinese population employed in
    manufacturing in 2017
     As China tries to improve the country’s manufacturing industry, US products,
    known for being innovative and producing high quality products are highly
    sought after. The government and industries alike are trying to improve
    conditions to attract US investments.
     The Chinese government has worked diligently in recent years to ease
    regulatory pressure, address corruption and narrow the skills gap add to
    improve the overall appeal for American manufacturers.
     Despite these improvements, the main challenges for US firms remain in pricing,
    protecting intellectual property rights and logistics/ transportation.
     Addressing logistic issues, in May 2016, the Chinese government announced
    plans to invest US$720 billion on 303 transport infrastructure projects
    between 2017 and 2020 through Public Private Partnerships (PPP).
    © Euromonitor International 22
    Despite a strong local market, China is encouraging foreign investment and new business from US manufacturers.
    US manufacturer opportunities in China
    

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23. LARGE DISTRIBUTION
    REQUIRED
    Entering the Chinese market often relies heavily upon
    personal relationships developed and maintained at all
    levels of distribution. Many companies utilize multiple
    sales channels to overcome the sheer size and cultural
    diversity of the country.
    DISTINCT REGION
    PREFERENCES
    Regional tastes and styles dictate baked good products,
    prices and manufacturing. These different types of
    preferences make production challenging to
    streamline across regions. Examples include:
    Cantonese bakeries (Guangdong province), Sichuan
    bakeries (Sichuan province, Suzhou bakeries (Jiangsu
    province), Qin bakeries (Shaanxi province), and Jin
    bakeries (Shanxi province).
    23
    Labor costs have continued to increase in recent years.
    While the cost of maintaining service plans is often
    factored into machinery sales, it is important for exporters
    to consider this as they determine pricing. Some regions
    and municipalities have different requirements to provide
    localized after-sales service, which would require on-site
    training or local manufacturer representatives to be
    present.
    INTELLECTUAL PROPERTY
    RIGHTS (IPR)
    While the Chinese government is working to improve IPR
    protection, it is recommended that US companies establish
    a clear strategy to handle the challenges of protecting their
    IPR in a complex legal environment.
    LABOR COST
    

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24. © Euromonitor International 24
    China is set to become one of the most
    attractive baked goods markets
    worldwide.
    

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25. © Euromonitor International 25
    The baked goods market in China will continue to grow.
    BAKED GOODS MARKET SALES RSP 2017- 2022 (USD)
    12.7%
    Forecast CAGR % of baked goods in China 2012-2017.
    2017 2018 2019 2020 2021 2022
    $28.5bn
    $32.2bn
    $36.5bn
    $41.4bn
    $47bn
    $53.3bn
    $24bn
    Absolute growth by 2022 (USD).
    Future market growth
    

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26. What product characteristics and trends will drive future growth?
    As more consumers in China become health conscious, trends around ingredients and naturals will continue to
    impact the market for baked goods.
    Gut Health: The rise of bread
    products like sourdough
    Plant-based foods
    Natural sweeteners: Like Inulin
    (prebiotic fiber) as sugar and/or
    flour replacement
    

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27. 44%
    The pastry market will double to reach
    of absolute baked good gains will
    come from cakes.
    XXXX
    The average price of pastries in
    72%
    Share of artisanal, non packed baked goods in 2017
    0.0
    2.0
    4.0
    6.0
    8.0
    10.0
    12.0
    14.0
    16.0
    2017-2018 2018-2019 2019-2020 2020-2021 2021-2022
    Y-O-Y Growth
    BAKED GOODS CATEGORY Y-O-Y GROWTH 2017-2022
    Pastries
    Cakes
    Bread
    Dessert Mixes
    $22bn
    by 2022 in China.
    Pastries and cakes in China will continue to grow as premium treats and gift
    favorite with healthier options expected to boost growth.
    Which baked goods will drive future growth?
    

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28. 12.7%
    CAGR % (2012-2017)
     The Chinese market
    for baked goods has
    grown $12.8bn
    absolute gains in the
    last five years.
     China has had the
    largest baked goods
    market growth in Asia
    Pacific historically.
    $53.5bn
    Market size 2022
     The Chinese market
    will grow at a 13.3%
    CAGR from 2017-
    2022.
     This will lead to
    $24.7bn in absolute
    gains.
     China is projected to
    be come the second
    largest market in the
    world for baked
    goods.
    © Euromonitor International 28
    Pastries/Cakes
     Pastries are set to
    grow the fastest in
    the next five years.
     Sweet baked goods in
    cakes and pastries are
    worth almost three
    times more than
    bread products in
    China.
     These sweet treats
    are popular for gifts
    and holidays, leading
    to higher priced,
    premium products.
    Healthy
    Eating
     In the next five years,
    health conscious
    trends will continue
    to influence baked
    good categories.
     More consumers will
    be looking for
    functional, better for
    you baked good
    products.
    Pro-US
    Business
     China has made
    substantial
    improvements in
    recent years to
    encourage foreign
    investment.
     Distribution and
    logistics remain the
    largest challenge for
    international
    companies looking to
    work in China.
    Key Takeaways for Baked Goods in China
    

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29. Thank you!
    © Euromonitor International 29
    

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30. Helen Xi
    INTRALOX
    Sergio Caballero
    FOODTOOLS
    Colin Powell
    AMF BAKERY SYSTEMS
    

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31. intralox.com
    Intralox China
    BEAM
    Feb 27th 2018
    Helen Xi
    

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32. intralox.com
    Helen Xi Introduction
    Intralox US
    Relocated to New Orleans 2016
    Global Business Development
    Manager
    Mainly focus on America and
    Europe market
    Intralox China
    Started in Shanghai 2011
    APAC Business Development
    Analyst
    Focus on Bakery business in
    China, Japan, Australia, SEA.
    

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33. intralox.com
    New Orleans
    Amsterdam
    Shanghai
    Sao Paulo Melbourne
    Tokyo
    Bangalore
    Birmingham
    Grand Rapids
    Maryland
    Intralox Global Footprint
    

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34. intralox.com
    Shanghai
    • APAC Headquarter
    • Established in Shanghai 2006
    • Employee: +200 from China, US, Japan,
    Thailand, etc.
    • Market Coverage：China, Japan, Korea,
    Australia, New Zealand, South East Asia
    countries, etc.
    • Footprint in China: a sales office, a warehouse
    and an equipment workshop
    • Sales model: direct
    英特乐中国
    Intralox China
    Located in the Yangtze River Delta
    Area: 2,448 mi²
    Population: 24M in 2017
    

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36. The Company
    • Founded in 1983 in Santa Barbara, California
    • All manufacturing is done in the USA.
    • Sales and Service offices located
    • California
    • Michigan
    • United Kingdom
    • China
    

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37. China Office
    • Opened August, 2008
    • Location: Zhuhai, Guangdong
    Province, China
    • Currently have 7 employees
    • Sales and Service
    

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38. • Sales
    • 15% of our business
    comes from China and
    India
    China Office
    • China Trade Shows (Bakery
    China)
    • Customers Served
    • Rich Products
    • Holliland
    • Maxims
    

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39. China Office
    

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40. Main Office
    

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41. Warehouse
    

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42. Testing Area / Board Room
    

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43. Bakery China
    

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44. www.foodtools.com
    

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45. Your bakery is our world.
    

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46. 46
    Your bakery is our world.
    Markel Food Group
    

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47. Worldwide Presence
    

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48. • 2006 Sourced conveyor system locally for China project
    • 2009 “JV” with US company to manufacture conveyor system
    • 2010 Officially Registered as a ‘WOFE’, separated from JV
    • 2011 Moved to larger location, increased product offering
    • 2013 Added 2nd building to extend capacity
    • 2016 Created additional engineering resource for RBS
    • 2018 Moving to larger location. Capacity increase 300%
    Markel Tianjin, China
    Major Milestones
    

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49. 5,000 sq mtr manufacturing facility
    • 1,800 sq mtr Assembly
    • 1,500 sq mtr Administration
    • 1,700 sq mtr Machining Centre
    Full Machine Shop Capability
    • Laser, Water Jet, CNC, Welding, etc
    Full Service and Installation Support
    • Dedicated team plus use of factory
    technicians
    Dough Technologist -Support
    • Malaysia – Based
    Markel Tianjin, China – Capabilities Review
    Full Engineering Team
    • Dedicated to AMF
    • Dedicated to RBS
    Project Management
    • Complete whole line systems
    installed.
    • (Manufacturing independently
    after 1 week)
    Sales Office, Beijing
    • Machine Sales
    • Customer Service
    

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50. 50
    Your bakery is our world.
    Beijing, Sales Office
    

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51. Tianjin, Operations
    

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52. Tianjin Plant
    

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53. Tianjin Plant
    

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54. 54
    Your bakery is our world.
    

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55. Recent Customer Installation
    

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56. 56
    Your bakery is our world.
    Bakery China Show
    Exhibiting since 2012
    

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57. Typical AMF Bun & Roll Layout with full line provided by Markel Tianjin
    

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58. Access the Survey
    In the
    “Growing Internationally”
    session
    

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