+1(978)310-4246 credencewriters@gmail.com
  

Description

just do 2B. Export plan:

Export and Product Regulations

Temple University, Fox School of Business
Bachelor’s in Business Administration, International Business Major
IB Consulting Project – Spring 2021
Classic Cakes
China
Saloni Panyda- tuh05635@temple.edu
Madelyn Iannucci- tuh12118@temple.edu
Trad Beatty- tuj47149@temple.edu
Mengyi Huang- tuk04518@temple.edu
Yan Zhao- tul59497@temple.edu
EXECUTIVE SUMMARY (max 1 page)
TABLE OF CONTENTS
INTRODUCTION
The purpose of this report is to articulate the research our team has conducted and outline
our goals and recommendations for Classic Cake’s expansion into the Chinese market. The
International Business Student Research team will provide a market debrief and relative
information to help in entry and market strategy development. We have broken down the
demographics, trends, and preferences that dictate the Chinese market, and we have also
identified specific markets that have the most potential for Classic Cake’s success.
Our research indicates promising growth in the bakery industry across China for years to
come, with an upward trend in the demand for Western-style goods. We are emphasizing a focus
on cakes, pastries, and breads, especially in breakfast form, to Classic Cake as that is what the
markets have proven to be most popular. Color, flavor, and advertising preferences that are
tailored to the Chinese consumers’ palette are also outlined throughout this report.
Main competitors of the industry, such as 85 Degrees C, Paris Baguette, and Hoiland, are
also identified along with descriptions of their success and efforts in China. It is crucial to
recognize competitors, especially when entering a new market, in order to understand how to
make Classic Cake better stand out, mitigate threats early on, learn of similar challenges, and
how to best compete in the market share.
Our research team has also analyzed the average Chinese consumer’s spending and
purchasing behaviors. This analysis has allowed us to develop a holistic understanding of the
preferences, dislikes, consumption patterns, and exactly what type of consumer is purchasing
which types of products at a specific time. The International Business research team values
understanding the market from Classic Cake’s client’s perspective. In doing so, Classic Cake can
better navigate the market, know which improvements or innovations to prioritize, identify
opportunities and threats, and build brand loyalty. A key factor that we have found is that the
Chinese market puts great confidence in price being an indicator of product quality.
Please reach out to the team at tuh05635@temple.edu for any further questions or concerns.
Thank you.
PART 1: COUNTRY SELECTION AND EVALUATION
1.A. Country Selection
In our country selection matrix pictured below, we chose to analyze China, South Korea,
Japan, Singapore, and Thailand. Our client, Classic Cakes has tasked our group and another
group from our class to analyze both the Chinese and Japanese markets so we wanted to include
both countries in our analysis. Our group is specifically focused on entering the Chinese market.
Classic Cakes also recently opened in South Korea and saw a lot of success despite the
consequences of the pandemic. We thought it would be helpful to analyze what factors made
Classic Cakes so successful in South Korea and see if any other countries, specifically China,
had similar factors to assess if it was the right market to enter. We also considered Singapore and
Thailand, countries that are in the same geographic area and share similar cultural values, but are
less popular for consideration than China, Japan, and South Korea.
We chose to analyze 4 major categories: political, economic, social, and transportation
trends. We gave each category, and subcategory, a weight out of 100% for how much we thought
the category would influence Classic Cake’s decision for country of entry. We then gave each
country a score out of 10 with 1 being the worst and 10 being the greatest about how we felt that
country rated in terms of the category. We figured out this rating by assessing what we thought
the overall rating of the country in that category was and also comparing it to the other countries
to determine if it was truly favorable. This score was multiplied by the percentage weight. Then,
the total scores were calculated by adding all the weighted scores and the countries with the
highest scores would be considered to have more favorable markets for Classic Cakes.
The first graph is our overall scoring sheet. These numbers are based on the opinions of
our team members, but are backed by raw data. Some of this data is included in the second graph
and the qualitative data used for this analysis is from the sources which are listed at the end of
this report. Overall, we found that South Korea has the best market for Classic Cakes. Classic
Cakes has already seen a lot of success in South Korea so our main focus was China which
scored relatively high, just like Japan. China and South Korea scored similarly so we consider it
a good market to enter. Japan scored the same as China so that would be a good market to
consider as well. Surprisingly, Singapore scored relatively high as well, higher than China and
Japan, so if Classic Cakes if looking to enter another country, we highly suggest it considers
Singapore. Thailand is still a developing country and although it scored well for ease of doing
business, we do not recommend that Classic Cake enters this market just yet.
While researching, we noticed that baked goods consumption is influenced by age
demographics so we wanted to be able to consider each age population per country. We are
focusing on the younger generation specifically so a country with a large population under 24
would be greatly favored. Our third graph shows the ease of business scoring and we also
included a graphic for how China was rated. We also needed to consider disposable income and
how much cakes were priced in these countries so we could get a sense of how big the baked
goods market would be and how Classic Cakes would be able to price their products. We
considered the market worth and growth and analyzed potential channels for Classic Cakes. Due
to COVID-19, there is a lot of outdated information or information is simply not available. The
blank cells in our sheet represent that lack of information.
Country Selection Excel Matrix Figure 1
Country Selection Excel Matrix Figure 2
Country Selection Raw Data Excel Sheet Figure 1.
Country Selection Raw Data Excel Sheet Figure 2.
China Ranking on Doing Business (2021)
1.B. Country Evaluation
Geography
China is located in east Asia along the coastline of the Pacific Ocean, China is the world’s
third largest country, after Russia and Canada. With an area of 9.6 million square kilometers and
a coastline of 18,000 kilometers, its shape on the map is like a rooster. Capital is Beijing. China
has 97.2% of land and 2.8% of water.
The 18,000 km coastline has been used extensively for export-oriented trade, causing the
coastal provinces to become the leading economic center. The climate in China is characterized
by the enormous size of the country. In the north, the climate is temperate with summer
temperatures around 25 C and very cold winters. In the south, it is subtropical with very hot
summers and mild winters. The vast land expanses of China include plateaus, plains, basins,
foothills, and mountains. Defining rugged plateaus, foothills and mountains as mountainous, they
occupy nearly two-thirds of the land, higher in the West and lower in the East like a three-step
ladder.China is bordered by 14 countries — Korea, Vietnam, Laos, Burma, India, Bhutan, Nepal,
Pakistan, Afghanistan, Tajikistan, Kyrgyzstan, Kazakhstan, Mongolia, and Russia. Marine-side
neighbors include eight countries — North Korea, Korea, Japan, Philippines, Brunei, Indonesia,
Malaysia and Vietnam.
(ThoughtCo, 2019)
Demography
China has the largest population in the world with about 1.44 billion, and the annual
growth rate is 0.39%. The positive yearly percentage change indicates the Chinese population is
increasing gradually and the future market is stable. The fertility rate is 1.69 and median age is
38.4 (Worldometer, 2020). There are 153 people per square kilometer in China, which provide a
large market scale for our client. 60.8% of the population is urban and the urbanization increases
by 2.42% from 2015 to 2020 (Index Mundi, 2020). The chart from CIA below shows the largest
age segment is between the age of 25 to 54, which occupies 46.81% (CIA, 2021). The most
important thing is that people from 25 to 54 years old are the Classic Cake’s target consumers,
and the large potential consumers is of significance for entering the Chinese market.
(CIA, 2021)
91.6% of the population are Han Chinese and 8.4% are minorities. According to the
information from UNESCO, compulsory education lasts 9 years from age 6 to age 14 and the
literacy rate among the population aged 15 and older is about 96.8% (UNESCO). The gross
enrolment ratio of primary education and secondary in 2019 are 101.93% and 89.2%, however,
only 53.8% of the population have tertiary education (UNESCO). The high literacy ratio and
education level make more consumers get the information of Classic Cake through the media,
meanwhile, it is easier to promote the products in China. There is a large market opportunity in
China from the perspective of demographic situations, which includes large population, high
urbanization and high literacy ratio.
Society & Culture
In China, the common language is Mandarin, which is spoken both in China and Taiwan.
The language is preferred by the government, media, and education system. China is very large
and has many different dialects of Mandarin. The main religion in China is Taoism. If not a
follower of Taoism then citizens will most like follow Buddhism, Christianity, or Islam. In
China, family relationships are important and the country places a strong emphasis on hierarchy.
A large amount of the social values in China stem from Confucianism which emphasizes ideas
such as loyalty, duty, and honor. Today the family framework in China tends to remain formal
and strict in hierarchical dominance with the elders afforded the greatest reverence. It is not
unusual for large communities of extended family to live together under the same roof (Hofstede
Insights, 2020). The country currently has a strong gap between the rich and the poor. This
comes as a result of the changing economic and socio-political climates over recent decades.
Looking at the Geert Hofstede country analysis tools, China scores in at 66 on the
masculinity scale. This places China as a masculine society, meaning that many will sacrifice
commitments and prioritize work. The Chinese people do not put an emphasis on the importance
of leisure time.
In China the uncertainty avoidance scores at 30. In the country truth is relative and the
obedience of laws are circumstantial to each situation. The Chinese are comfortable with
ambiguity; the Chinese language is full of ambiguous meanings that can be difficult for Western
people to follow.
In terms of indulgence, China is a restrained society. This means that citizens tend to
control the gratification of their desires. People with this orientation have the perception that
their actions are Restrained by social norms and feel that indulging themselves is somewhat
wrong. (Hofstede Insights, 2020).
Do’s and Don’ts in China
● It’s important for Westerners to understand that Guan Xi, or relationships, can make a
huge difference in doing business in China. The Chinese prefer doing business with
people they are familiar with. This is why most foreign companies have local
representatives (Fang, 2016).
● There are communication differences when it comes to Chin and the U.S. For example,
Should a disagreement occur, instead of saying “No” to face, they may say, “Yes. That is
a good point, but I need to think about it.” This is a strong “No.” (Fang, 2016).
● In the west business people are very strict with times. Arriving too early could be rude
and definitely arriving late. In China, the people usually say “call me when you arrive.”
● In China, Mian Zi, or face, refers to social reputation and prestige. Face is a big thing in
China. Losing face is far more serious than being embarrassed (Fang, 2016).
● The Chinese need time to build up relationships and trust prior to business decisions.
Westerners will have a specific agenda in mind before business meetings, while the
Chinese tend to negotiate the terms of the deal, which may prolong the process of closing
deals (Fang, 2016).
(Hofstede Insights, 2020).
Economic Situation
China has been on track to become the largest economy in the world. It is currently the
second largest economy behind the United States, but due to COVID-19 and the unprecedented
times the two countries are facing, it will ultimately come down to which economy can recover
quicker and better. As of 2021, China’s GDP was greater than 100-trillion-yuan ($15.5 trillion).
There was a 2.3% increase in 2020 despite dealing with COVID-19 (Global Times, 2021).
China’s economy was the only economy to record growth in 2020. Sheng Laiyun, deputy
director of the NBS, stated that China’s average annual nominal increase in GDP was 6.5 trillion
yuan, 1 trillion yuan more than the previous five-year period (Global Times 2021). The gross
national income was 100.9 trillion yuan, an increase of 1.9% from the previous year.
One of China’s main economic issues before COVID-19 was the increasing levels of
corporate and government debt. There have been serious government measures implemented to
reduce debt at a federal level, however recovery from the pandemic required large government
investment in pandemic related things such as health care products, technology that allows
virtual work and education, and unemployment and other social benefits. Although this required
more debt, it allowed China to become the first major country to return to economic growth
especially because of how it handled the pandemic. China has a centralized epidemic response
system which sprung into action very quickly and the 7-day average is now roughly 20 cases as
of February 2021 (Burki, 2021). Although China is finally seeing growth after the pandemic,
China faces other economic constraints.
Due to the rising labor costs, US tariffs, and technology restraints, companies have been
considering moving China-based supply chains to other countries, such as Vietnam and Mexico,
especially since COVID-19 has highlighted why it was so dangerous to have concentrated
production in China. Firms and countries are asking for secure supply chains and technology
alliances among like-minded countries in high-value areas like China, which could affect the
global supply chain. In late 2020, China reached a preliminary investment agreement with the
European Union and was among 15 Asian countries to sign the Regional Comprehensive
Economic Partnership. China is actively trying to counter major restraints on the Chinese
economy, while encouraging “self-reliance and indigenous innovation” which are long standing
themes in Chinese policies (Congressional Research Service, 2021).
According to the Congressional Research Service, “Early details suggest that China is
seeking to leverage the global economy to advance its goals in some ways that could challenge
or reshape global rules and counter U.S. interests and policies,” (Congressional Research
Service, 2021). China essentially plans to further develop domestic capacity while pursuing
global markets. This is called a dual circulation policy, a policy that was used during the 2009
financial crisis for economic revivement. President Xi is a big advocate for Chinese leadership in
global standard-setting. According to the Congressional Research Service, “A digital campaign
calls for $1.4 trillion over five years in 5G, smart cities, and other technology infrastructure, and
a push to adopt this approach globally,” (Congressional Research Service, 2021). The CPC
Central Committee has called to “build a backbone of private economic actors that are reliable
and useful at critical moments,” for example, a pandemic. The government is also advancing
cryptocurrency to influence the global market and diversify from U.S. dollar financing
(Congressional Research Service, 2021).
Despite the push to become more independent, China still relies on foriegn collaboration.
In 2020, China received more foriegn investment than the U.S during the COVID-19 pandemic
(Higgins, 2021). China was ranked 31st out of 190 countries in the World Bank’s 2020 Doing
Business report, a major improvement from 2019, when it was ranked 46th out of 190 (The
World Bank, 2019). Although China has issued an export control law and rules to review foreign
investment on national security grounds, it is still heavily reliant on other countries so its power
to influence global policy and standard is still limited. While this could potentially cause global
conflict, the new US administration seems more willing to negotiate than the previous
administration and the relationship between the two countries has seemed to improve, despite a
decrease in public perception of the opposing countries.
China is trying to become more technologically advanced and become more selfsufficient which could help curb the negative consequences that have followed its growth, but
the country’s labor issues stand center to a lot of serious social issues. While increasing labor
costs might be unattractive to foreign firms, many people expect the Chinese government to step
up and support its workers. The Chinese government has been accused of serious workers’ rights
violations and is facing increasing pressure to ensure workers are being paid and treated fairly.
The Biden administration recently said that, “Under the Biden administration, workers will have
a seat at the table in the development of trade policies…Trading partners will not be allowed to
gain a competitive advantage by violating workers’ rights and pursuing unfair trade practices,”
(Hayashi, 2021). Although this will probably increase labor costs anymore, it will make doing
business in China much more ethical and also help the Chinese economy in the long run because
people will be able to be more self sufficient and it will reduce the country’s increasingly high
income inequality. Chinese President Xi Jinping says China has lifted 100 million people out of
poverty, a goal that was set when he assumed office in 2012 (Goodman, 2021). According to the
World Bank, China is now an upper-middle income country so the poverty line is set at $5.50 a
day (The World Bank, 2021). Using this metric, it is estimated that roughly ¼ of China’s
population is in poverty, but this number is reducing as the government helps relocate people in
rural areas to urban areas with more access to opportunity.
China will most likely overtake the US and become the largest economy in the world as
long as it is not overshadowed by its economic constraints. Although China saw high growth in
the past, the drivers of that growth have been exhausted and have caused many social problems
which China will have to address, especially in relation to its workers’ rights. Although China’s
economic recovery has a head start compared to the rest of the world, the recovery will need
continued government assistance in order to fully recover in 2021. China is looking for more
global influence which will most likely conflict with US interests, but a compromise seems more
plausible under the Biden administration than in previous years. China’s economy continues to
be a magnet for foriegn investment, despite the fallout of COVID-19.
Political/Global Situation
Between the Covid-19 pandemic, changes in world powers, globally declining
economies, new trade relations, and a strong push towards technological innovation, the political
and global situation in China has been understandably dicey. However, the country has worked
to maintain and preserve its global presence and reputation. The Ministry of Foreign Affairs of
the People’s Republic of China, most commonly known as China, works to uphold the following
mantra: “China unswervingly pursues an independent foreign policy of peace. The fundamental
goals of this policy are to preserve China’s independence, sovereignty and territorial integrity,
create a favorable international environment for China’s reform and opening up and
modernization construction, maintain world peace and propel common development” (Ministry
of Foreign Affairs of PRC, 2021).
In working to preserve these values, China has imposed strict regulations working to
combat the Covid-19 pandemic, strengthen their economy, and constructively work with allies.
However, certain allies began realizing complex relationships with China. For example, the
United States and China have been close trade partners and world leaders for decades. Both
countries have built strong economic partnerships with each other, but in recent years, they have
developed wary attitudes of the other country’s intentions.
The United States and China’s relationship and global perspectives focus on three main
competencies: economic cooperation, international affairs, and hegemonic rivalry versus a
powerful bi-lateral relationship. In terms of hegemonic rivalry, both the United States and China
have strong global economies, the United States being number one and China following directly
behind. For this reason, both countries are working to strengthen their positions both
domestically and internationally. At times, this competition can interfere with the powerful bilateral relationship that they have developed with each other. This is why sentiments of wariness
towards the other country’s intentions have led to certain disputes.
Such disputes include China feeling that the United States is slowing down progression
and because of this, the United States is hoping to stymie China through different tariffs and bans
imposed by President Trump and the blame put on China for the Covid-19 pandemic.
Meanwhile, the United States unfavorably views China for their handling of Covid-19, there are
sentiments that China poses a major threat to data security, and the United States is wary of
certain Chinese government censorship.
Due to such increasing negative sentiments, a trade war has uproared between the United
States and China. During the beginning of the Trump Administration, President Trump began
posing tariffs on different Chinese goods which equaled approximately $550 billion dollars,
along with many technology bans (Dorcas Wong, 2020). Currently, the Biden Administration
has decided to uphold such impositions for the time being. For the United States, this trade war
has increased tension amongst other United States allies, increased prices for consumers,
worsened financial burdens for farmers, and many large companies have shifted their supply
chains to other Asian countries. In China, there was a decrease in the rate of economic output
and growth in response to such tariffs and obstacles.
The levels of anxiety surrounding China are at historic highs across many advanced
economies. The Pew Research center conducted a series of tests that revealed such statements.
For example, Pew research found that 73% of surveyed Americans have negative attitudes
toward China in July. Of course these sentiments were largely driven from the blame posed on
China for the Covid-19 pandemic. These opinions extend to the business sector as well with a
fear that China poses a threat to America’s technology and innovation. Recipients mentioned that
they were concerned of Chinese companies operating social media apps, with 77% of said
recipients expressing uncertainty towards Chinese companies protecting, or at times respecting,
data security. Other countries show similar sentiments which are displayed in the following
graph:
(Silver, Devlin, & Huang, 2021).
PART 2: MARKET ANALYSIS, EXPORT PLAN, & MARKETING PLAN (mention
Shanghai)
2.A: Market Analysis:
Because China is a very large country, we chose to focus on 4 main cities as potential
entry points into the Chinese market by Classic Cake: Shanghai, Beijing, Shenzhen, and
Guangzhou.
Shanghai
In a major city like Shanghai, there is a population of 24.28 million people. The city is a
major import export city for the country as it sits on the coastline. It is both a river port and a sea
port (Boxer, 2019). Port cities are important for entering a new market since transportation
bureaucratics are well established and easier to navigate for foreign firms looking to enter the
market.
The city currently has a little under 1,000 bakeries scattered throughout its metropolitan
area. According to Dauxe Consulting, “to eat bakery is considered trendy and Western,” (Dauxe
Consulting, 2019). This trend is beneficial to Classic Cakes as there is demand for Western style
goods. There are two types of bakery consumers in China, those that enjoy branded baked goods,
and those that prefer local versions of Western bakeries (Dauxe Consulting, 2019). These
customers would be addressed by incorporating Chinese flavors into Classic Cake desserts.
Despite having all of these bakeries, the people of Shanghai prefer purchasing their baked
goods through e-commerce. Because of COVID-19, many consumers prefer to not go in person,
but as China recovers, the new market is expected to be a hybrid of retail and e-commerce
purchases. The market is mostly saturated with Asian brands, but there is continued interest in
the market in baked goods from the west. Bakery China 2019 was held in Shanghai and the event
was put on by the China Association of Bakery and Confectionery. The festival was known as
the one-stop and premier platform for the bakery and confectionery industry (Bakery China,
2019). This festival is expected to return post COVID-19 and provide a great opportunity for
Classic Cake to market its products to the Shanghai market.
Beijing
Beijing is the capital city of China, and it is the most populated national capital city in the
world. Located in Northern China, Beijing serves the world as a leader in culture, diplomacy and
politics, business, economics, language, and technology. It is also renowned for its transportation
services and convenience with the national highway system, expressway, high speed rail
network, large supply chain system, subway network, and the Beijing Capital International
Airport. In addition, the Beijing Daxing International Airport is the largest single-structure
airport terminal in the world, also located in Beijing.
Most of China’s largest state-owned enterprises and many of the world’s most infamous
Fortune Global 500 companies are located in Beijing, which has granted the capital with the
name “billionaire capital of the world”. Beijing is home to the highest number of billionaires
living in one city. Li Yang with Z&H Investment in Beijing has reported that he is quite
confident and positive about the future of the domestic baking sector, regardless of minor
setbacks due to Covid-19. Yang further expressed his optimism in a comment to China Daily,
“In terms of market demand and development, China’s bakery sector is a burgeoning business,
which is expected to hit billions of yuan,” (郭蓉Qian, 2020). With all of these characteristics,
Beijing is a very forward thinking city, which is promising for Classic Cake’s entrance into this
market.
Shenzhen
As a large city in South China, Shenzhen’s demand for higher end products is
opportunistic for bakery growth in this city. In recent years, industry sources have reported twodigit percentage annual growth, which can also be attributed to increasing income levels, faster
pace of life encouraging prepared foods, and faster thinking lifestyle values.
Demographics in Shenzhen are majorly wealthy, young consumers. Baked products are
popular amongst this crowd, especially for breakfast, lunch, coffee break, gifts, occasions, and
snacks. Similar to Western culture, bakery chains remain open for long hours each day to better
serve customers who eat such goods throughout the day. More recently, café type bakeries that
offer both baked goods and beverages like coffee and tea have become very popular in
Shenzhen. Such bakeries, like 85 Degrees Celsius, have been able to generate greater sales and
profit margins by cross-selling more expensive baked goods and diversifying the product mix.
There are also specialty stores like Bo Di Jia primarily for cheesecakes. Large industrial
bakeries have also gained market share in recent years. Commercial manufacturing has made
packaged goods and distribution much more convenient and efficient. Most consumers recognize
the brand as well, and these items can be sold through large retailers like supermarkets or
convenience stores. Guangdong For Seas Group and Angel Food Co. Ltd. in Shenzhen are two
successful examples.
High-end bakery chains have also been on the rise, especially in specific target markets
where there is higher disposable income. The goal of these chains is to increase the number of
individual shops and new products in a specific area. Most products are sold through their own
bakeries, but can be integrated with outside vendors especially when in a large city like
Shenzhen. A current high-end bakery chain in Shenzhen is Croissants de France that specializes
in French styled croissants and desserts (USDA Foreign Agricultural Service, 2009).
With these trends in mind, Western- style baked goods, especially breads, cakes, pastries
and other desserts, are increasing in demand. These items are becoming more popular amongst
the urban middle class population, and they are becoming daily staples. For these reasons, we are
confident in Classic Cake’s ability to perform successfully in Shenzhen.
Guangzhou
Guangzhou is the capital of Gaungdong shen (providence), located in Southern China. It
is located at the head of the Pearl River Delta making it one of China’s main commercial and
trading centres (Gong-fu, 2018). It is China’s largest port and will probably be the main point of
entry. It is one of the most densely populated cities in China, especially because most residents
live in the central part of the city. The locals normally speak the Cantonese language, but with
modernization, Mandarin is also commonly found in this area.
Western style items like breads and cakes are very common in daily consumption, but
traditional Chinese items are usually seasonal during traditional Chinese festivals or special
occasions (USDA Foreign Agricultural Service, 2009). Consumers buy baked goods at all times
of the day for different meals so bakeries usually stay open longer, from 7am to 10pm (USDA
Foreign Agricultural Service, 2009). The baked goods industry is more developed in Guangzhou
than other south Chinese cities. The demand for Western baked goods is pumped due to the
influence of Starbucks; It has become a very popular brand for the middle and upper class
(USDA Foreign Agricultural Service, 2009). Overall, Guangzhou is an “engine” for higher end
bakery growth. Because Classic Cakes features Amrican ingredients and products, it will likely
be priced higher and be marketed as a quality product, fitting in with the main market for baked
goods in Guangzhou.
(USDA Foreign Agricultural Service, 2009)
There is an event called Bakery China for the bakery and confectionery industry. It is
recommended that Classic Cakes attends to put its name out and get a better grasp of the bakery
industry in China.
2.A.1: Market Size, Trends, & Growth
Through a culmination of factors, the Chinese market is on the rise in the baked goods
sector. As a result of a rising middle class, the baked good sector of the country has been
expanding rapidly since 2000. Many of the people in China have been Westernizing their diets
and lifestyles which fits the profile for the desire for U.S. baked goods. Combine these factors
with consumers’ wants for convenient food options trending in China, and you are left with a
rising market. Euromonitor International estimates retail sales of baked goods (packaged and
unpackaged) in China at $34 billion in 2020, comprising 9 percent of global retail sales. This
makes China the world’s second-largest baked goods retail market after the United States (at $67
billion) (Euromonitor, 2020). Despite the size of China’s population the retail sales of baked
goods in the country is 33kg lower than the United States. The U.S. per capita consumption of
baked goods per year is 40.2 kilograms (kg) whereas in China the consumption sits around
7.2kg.
Disruptions to production and distribution have been the recent trend in the baked goods
industry in China as a result of the COVID-19 pandemic. Cakes sales have been negatively
trending in China due to the lack of gatherings and the social distancing measures in the country.
Packaged baked goods have been able to do better for businesses rather than unpackaged as of
late because of the longer shelf life that these products offer. The pandemic has also given way to
even further trends for e-commerce baked good purchasing on top of a market that was already
dominated by this preference. Having largely maintained double-digit annual growth in the
preceding decade, the baked goods retail sector is expected to grow just 3 percent in 2020
according to Euromonitor, 2020. This comes as a result of the COVID-19 pandemic. Although
the growth is not drastic, it is very optimistic that growth is still occurring in the sector.
2.A.2: Market Forecast
Even though the sale of baked goods is less in China than the U.S. Euromonitor
International found that retail sales of cake saw a compound annual growth rate (CAGR) of 8.3
percent from 2015-2020 and are expected to remain at a similar level over the next five years
(Euromonitor, 2020). Of the overall baked goods industry, cakes currently account for about
41% of sales in China. The chart below shows the trends of the baked good industry in China
from 2015 to future projections in 2025. As the market for baked goods in China is projected to
continue to grow based off the charts, another strong explanation for this comes from the
population size of the country and a low current consumption base. The country has a large
population with consumption looking upward to continue to grow. Sales of baked goods have
slowly been moving towards local grocery and retail outlets as a result of the pandemic and
consumers lack of desire to travel far distances. Cakes in China are mostly preferred by younger
consumers born after the 1980’s and 1990’s. Women have statistically proven to purchase these
products more than men. In 2017 women accounted for 65% of sales in the baked goods
industry. The Chinese cake brands have been selling more frequently than foregin brands in the
Shanghai market. The domestic cakes are closer to the consumer so the products are known to be
fresher than foregin brands.
(United States Department of Agriculture, 2021).
2.A.3: Consumer Spending
According to Dauxe Consulting, bread and cakes are the most popular baked goods in
China (Dauxe Consulting, 2019). The consumer demographics skew female and young: about 65
percent of Chinese consumers of baked products are women, and more than 80 percent are born
after 1980. This does not mean that elderly people or men do not consume baked goods, but
rather that the woman is usually the one buying the baked goods, maybe during groceries, and
kids like to eat them more often as a snack. Elderly people tend to have to watch their diets more
and might be less inclined to buying baked goods.
(Dauxe Consulting, 2019)
Although China’s GDP grew by 2.3%, retail sales contracted 3.9% (Cheng, 2021).
According to Ning Jizhe, commissioner of the National Bureau of Statistics, consumption in
2020 accounted for 54.3% of GDP. in 2019 it was roughly 57.8% of the GDP (Cheng, 2021).
Chinese consumers are still reluctant to spend money due to the COVID-19 pandemic and global
economic downturn, however this trend is expected to turn around once the Chinese economy
begins to rebound steadily.
2.A.4: Consumer Habits/Purchasing Behaviors
Chinese consumers valued price over quality in the past, however, consumer habits have
changed dramatically and become more complex as the economy has developed rapidly. Chinese
consumers are considering growing criteria and focus more on products with high quality and
taste when purchasing goods. Brand awareness is increasingly important and marketing plays an
important role in attracting consumers through advertising and innovation. Chinese consumers
are curious about foreign products and search information before purchasing, moreover, most of
them trust the foreign products especially for food and cosmetic goods. Chinese consumers also
care about the quality, they believe that the price is the indicator of the product quality. For
instance, they are increasingly conscious of their health and concern about food safety issues.
There are complaints about baked goods having a high amount of trans-fatty acids which has
been linked to cardiovascular diseases. There are also complaints about baked goods having too
much sugar, artificial coloring, and preservatives (Dauxe Consulting, 2019).
Online shopping has become a popular trend and lifestyle in China, there are more than
700 million monthly active users on social media and 300 million consumers shopping online
using sites such as Taobao, Tmall, JD and Xiao Hong Shu (Chozan). The comments of other
consumers influence the purchasing decisions since word of mouth has a high impact and
persuasion in China. Consumers access the online reviews and comments easier than physical
stores, and online shopping is more safe, convenient, accessible and affordable at the same time.
Chinese consumers are worried about their personal health and seeking reassurance and
guarantee on hygiene. It is not a surprise that hygiene has now joined health, freshness and taste
as key criteria when purchasing bakery items (Taste Tomorrow, 2020). What’s more, consumers
are looking for healthy ingredients such as grains and fruits and prefer cakes with less sugar and
fat. In the grand scheme of things, Chinese consumers of baked goods consider price, attractive
packaging, nutritional value, and fast delivery (Dauxe Consulting, 2019). Classic Cakes will
need to consider all these factors when planning its market entry strategy into the Chinese
market.
2.A.5: Gross National Income per Capita
China is currently ranked 66 out of 216 countries in regards to Gross National Income per
Capita (World Bank, 2019). The graph shown shoes China’s GNI per capita compared from
2000-2019. The Gross National Income per Capita for China in 2019 was $10,410 (Macrotrends,
2021). This was an 8.44% increase from 2018. There is no current information about the GNI per
capita for China for 2020 and 2021 due to COVID-19. Our assumption is that GNI per capita
decreased substantially since 2019, however is slowly starting to increase as the economy
rebounds.
(Macrotrends, 2019)
2.A.6: Competitors
85 Degrees C is a Taiwanese international chain of retailers selling coffee, tea, and cakes, as
well as desserts, smoothies, fruit juices, souvenirs, and bakery products. It has 1000 retail shops
worldwide. 85°C Bakery Cafe was founded with the philosophy of 5-star quality at affordable
prices. Over 13 billion dollars annual revenue. In 2016, 67% of the chain’s revenue came from
China, while 18% came from Taiwan.
Paris Baguette is an international bakery founded in 1988, specializing in French-inspired
goods. In addition to chef-inspired cakes, pastries, sandwiches, salads, and signature coffee and
tea. Today they have over 4,000 locations worldwide. According to a market analysis of Pairs
Baguette in China, the company has more than 50 locations in four cities in China, which are
Beijing, Shanghai, Tianjin and Hangzhou. Currently, Paris Baguette predominantly focuses on
tier-1 cities in China, especially in Beijing and Shanghai, which occupy almost 85% Paris
Baguette’s market in China . (2013)
Holiland was a domestic bakery brand in China which was founded in 1992 by a famous
photographer Luo Hong. The company is the 1st Chinese bakery franchise. Nowadays, Holiland
produces and sells not only cakes and breads, but also zongzi, mooncakes, rice dumplings and
coffee drinks. It has nearly 1000 chain stores in over 80 cities in China.
2.A.7: Products
Dessert Name
Peanut Butter Bun
Cream Bun
Longevity Peach
Nuomici
Dessert Image
Pineapple Bun
Egg Tart
Mooncake
Images: (Tasteatlas, 2021)
The products shown in the table are the most popular dessert products in China. The
dessert offerings in China both look and taste very different than the traditional desserts here in
the west. Chinese products tend to not be as sweet as the desserts in the U.S. and also are varying
in portion sizes compared to the west. These desserts can be ordered at dinner, found in stores,
bakeries, or shops. Many of these products are also available to be purchased online or made in
home. The products vary as well in the category of packaged and unpackaged.
2.A.8: Distribution Channels & Promotional Methods
Chinese retail industry provides great opportunities for foreign food exporters. Although
China has a wide range of retail models including hypermarkets, supermarkets, convenience
stores, mom and pop and online stores, the most common retailer is convenience stores. There
are convenience stores on almost every street corner in Chinese first-tier cities, and the number
of convenience stores are increasing rapidly to satisfy the need of consumers to save time and
money. Meanwhile, convenience stores are expanding significantly in second-tier cities to
capture more market share. For example, Japan’s FamilyMart Co., Ltd. has announced plans to
move from Shanghai to other first- and second-tier cities—such as Chengdu, Sichuan, and
Hangzhou, Zhejiang—this year. The retailer aims to operate 8,000 stores in China by February
2021, up from 600 stores currently (China Business Review, 2011). Supermarkets are
widespread and popular with Chinese consumers because of the various goods. Premium
supermarkets are also expanding in large cities with the rising number of affluent consumers.
Rich consumers pursue high quality life and prefer the imported products because they believe
that imported products are safe and quality.
China is the largest e-commerce market in the world, which has more than 400 million
users. According to eMarketer, e-commerce sales in China are estimated to have passed
US$ 1.13 trillion in 2017, accounting for nearly half of the worldwide retail e-commerce sales
and 23.1% of all retail sales in China (Santander Trade, 2021). Young people enjoy the
convenience of delivery since they have less time for groceries. Alibaba is the largest ecommerce platform with more than 190 million users in China, which includes Taobao, Tmall,
Alipay and other businesses. Tmall – a Chinese-language website for B2C online retail operated
by Alibaba Group and one of the world’s top 20 most visited websites – is a platform for local
Chinese and international businesses to sell brand name goods to Chinese consumers (Santander
Trade, 2021). JD is one of the largest online retailers and sells various kinds of goods directly,
including electronic products, food and other products. Other Chinese online platforms include
Vipshop Holdings, Suning, Gome, Dangdang and Amazon.cn.
Promotional Methods
● Membership : join our membership program, after you spend 400 Yuan, you can have 5%
off every time you purchase.
● Integrating system: spend 200 Yuan, you can have a free small size coffee.
● Delivery service: first time delivery, 5 Yuan off when you spend 30 Yuan.
● Seasonal promotion: each season we can prompt for a product, buy two get one free.
These promotional methods are often used in the China market. We can modify the variable in
conjunction with the actual price.
——————————————————————————————————————–2.B: Export Plan:
2.B.1: Export and Product Regulations
2.B.2: Labeling & Packaging Requirements- saloni
2.B.3: Entry Mode Methods
2.C Marketing Plan:
3.A.1: Market Segmentation
3.A.2: 4 Ps
Product
Place
Price
Promotion
PART 3: RISK/OPPORTUNITIES & PRACTICAL IMPLICATIONS
3.A: Risks & Opportunities (max 3 pages)
3.B: Practical Implications (min 2 pages; max 5 pages)
PART 4: CONCLUSIONS & RECOMMENDATIONS (max 1 page)
References
https://www.travelchinaguide.com/intro/geography/
Baked goods in China. (n.d.). Retrieved March 07, 2021, from
https://www.euromonitor.com/baked-goods-in-china/report
Boxer, B. (2019, February 13). Shanghai. Encyclopedia Britannica.
https://www.britannica.com/place/Shanghai
Briney, A. (2019, July 29). Learn about the 23 provinces in the country of China.
Retrieved March 07, 2021, from https://www.thoughtco.com/china-provinces-4158617
Burki, T. (2020). China’s successful control of covid-19. The Lancet Infectious Diseases,
20(11), 1240-1241. doi:10.1016/s1473-3099(20)30800-8
China says its economy grew 2.3% in 2020, but consumer spending fell. Retrieved March
05, 2021, from https://www.cnbc.com/2021/01/18/china-economy-release-of-fourthquarter-full-year-2020-gdp.html
Cheng, E. (2021, January 18). China: Baked goods stores number in SHANGHAI 2019.
Ma, P., & 4, M. (2021, March 04).Retrieved March 07, 2021, from
https://www.statista.com/statistics/1068474/china-shanghai-baked-goods-stores-numberbytype/#:~:text=As%20of%20April%202019%2C%20there,%2C%20cakes%2C%20and%20
biscuits%20online
China Business Review. (2011, July 1). Understanding Chinese Consumers. Retrieved
March 6, 2021 from https://www.chinabusinessreview.com/understanding-chineseconsumers/
China Population. (2020). Retrieved March 6, 2021 from
https://www.worldometers.info/world-population/china-population/
China’s rising BAKERY SECTOR. (January 11, 2021). Retrieved March 07, 2021, from
https://www.fas.usda.gov/data/china-s-rising-bakery-sector
Chozan. Chinese Consumer Behavior Overview. Retrieved March 6, 2021 from
https://chozan.co/chinese-consumer-behavior-overview/
CIA. (2021, March 2). The World Factbook. Retrieved March 6, 2021 from
https://www.cia.gov/the-world-factbook/countries/china/
Commisceo Global – China. (n.d.). Retrieved March 07, 2021, from
https://www.commisceo-global.com/resources/country-guides/china-guide
Congressional Research Service. (2021, January 12). China’s economy: Current trends and
issues. Retrieved March 5, 2021, from https://fas.org/sgp/crs/row/IF11667.pdf
Country Comparison. (2020, August 12). Retrieved March 07, 2021, from

Country Comparison

Dauxe Consulting. (2019, August 19). The baked goods market in China: Daxue
consulting. Retrieved March 05, 2021, from https://daxueconsulting.com/baked-goodsmarket-china/
Diplomatic agenda. (n.d.). Retrieved March 01, 2021, from
https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/wsrc_665395/default_3.shtml
Explore Economies. (n.d.). Retrieved March 07, 2021, from
https://www.doingbusiness.org/en/data/exploreeconomies/china
Global Times. (2021, February 28). China’s GDP makes up over 17% of the world
economy in 2020: NBS. Retrieved March 05, 2021, from
https://www.globaltimes.cn/page/202102/1216746.shtml
Gong-fu, Z. and Kuo, . Ping-chia (2018, October 9). Guangzhou. Encyclopedia
Britannica. https://www.britannica.com/place/Guangzhou
Goodman, J. (2021, February 28). Has China lifted 100 million people out of poverty?
Retrieved March 05, 2021, from https://www.bbc.com/news/56213271
Hayashi, Y. (2021, March 01). U.S. to take hard line on Chinese trade Practices,
administration says. Retrieved March 05, 2021, from https://www.wsj.com/articles/u-s-totake-hard-line-on-chinese-trade-practices-administration-says-11614625200
Higgins, T. (2021, January 24). China surpasses U.S. as largest recipient of foreign direct
investment during covid pandemic. Retrieved March 05, 2021, from
https://www.cnbc.com/2021/01/24/china-received-more-foreign-investment-last-year-thanus-un-says.html
Index Mundi. (2020, November 27). China Demographics Profile. Retrieved March 6,
2021 from https://www.indexmundi.com/china/demographics_profile.html
January 11, 2. (n.d.). China’s rising BAKERY SECTOR. Retrieved March 01, 2021, from
https://www.fas.usda.gov/data/china-s-rising-bakery-sector
郭蓉Qian, W. (2020, June 12). Home bakers rise to fresh challenges. Retrieved March 07,
2021, from
http://www.chinadaily.com.cn/a/202006/12/WS5ee2bdb1a3108348172527a6_3.html
Sanmax. (2019, January). See You Soon at Bakery China 2019. Retrieved March 08, 2021,
from https://foodbeverageasia.com/en/news-archive/see-you-soon-at-bakery-china2019/1832#:~:text=Bakery%20China%202019%20(the%2022,6%20to%20May%209%2C
%202019.
Santander Trade. (2021, March). China: Distribute a product. Retrieved March 6, 2021
from https://santandertrade.com/en/portal/analyse-markets/china/distributing-a-product
Silver, L., Devlin, K., & Huang, C. (2021, January 13). Unfavorable views of china reach
historic highs in many countries. Retrieved March 01, 2021, from
https://www.pewresearch.org/global/2020/10/06/unfavorable-views-of-china-reachhistoric-highs-in-many-countries/
Taste Tomorrow. (2020, August 3). China: Consumers expectations for Bakery in the ‘new
normal’. Retrieved March 6, 2021 from https://www.tastetomorrow.com/inspiration/chinaconsumers-expectations-for-bakery-in-the-new-normal/465/
Tech in Asia – connecting Asia’s startup ecosystem. (2016). Retrieved March 07, 2021,
from https://www.techinasia.com/talk/8-business-china
The Baked Goods Market in China: Daxue consulting. (n.d.). Retrieved March 07, 2021,
from https://daxueconsulting.com/baked-goods-market-china/
The US-China Trade War: A timeline. (2020, September 14). Retrieved March 02, 2021,
from https://www.china-briefing.com/news/the-us-china-trade-war-a-timeline/
The World Bank. (2019, October 24). Doing business 2020. Retrieved March 05, 2021,
from https://www.doingbusiness.org/en/reports/global-reports/doing-business-2020
The World Bank. (2021). China Overview. Retrieved March 05, 2021, from
https://www.worldbank.org/en/country/china/overview
Macrotrends. (n.d.). China GNI per Capita 1962-2021. Retrieved March 05, 2021, from
https://www.macrotrends.net/countries/CHN/china/gni-per-capita
UNESCO. China. Retrieved March 6, 2021 from http://uis.unesco.org/en/country/cn
Diplomatic agenda. (n.d.). Retrieved March 01, 2021, from
https://www.fmprc.gov.cn/mfa_eng/wjdt_665385/wsrc_665395/default_3.shtml
January 11, 2. (n.d.). China’s rising BAKERY SECTOR. Retrieved March 01, 2021, from
https://www.fas.usda.gov/data/china-s-rising-bakery-sector
Silver, L., Devlin, K., & Huang, C. (2021, January 13). Unfavorable views of china reach historic highs in many
countries. Retrieved March 01, 2021, from https://www.pewresearch.org/global/2020/10/06/unfavorable-views-ofchina-reach-historic-highs-in-many-countries/
The US-China Trade War: A timeline. (2020, September 14). Retrieved March 02, 2021, from https://www.chinabriefing.com/news/the-us-china-trade-war-a-timeline/
郭蓉Qian, W. (2020, June 12). Home bakers rise to fresh challenges. Retrieved March 07, 2021, from
http://www.chinadaily.com.cn/a/202006/12/WS5ee2bdb1a3108348172527a6_3.html

Purchase answer to see full
attachment

  
error: Content is protected !!