Learning Key Lessons from a Danish Bakery Master
Even when you start out with a high-quality product, a strong Chinese partner, and the benefit of being a Nordic brand, there are things you should keep in mind that are essential to success.
Dong Zhu, China Business and Investment expert at Innovation House China-Denmark, was working closely with a successful Danish brand that launched in China, established their presence, and later withdrew their bid to sell to Chinese consumers. Zhu came to his own conclusions about launching a brand and will let you in on his best lessons here.
6 minute read
Summary: A Danish Bakery brand entered the Chinese market with the help of a Chinese partner, experiencing success despite difficulties in introducing Danish products to Chinese palates. For a variety of reasons, some outlined here, the owner decided to return to Denmark rather than pursue the Chinese market at the time.
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with a history of five generations within the same family, Dong Zhu begins. “The fifth generation, the master of the bakery at the time, had a real interest in entering the Chinese market. He was pursuing that interest for a couple of years before we helped him introduce the entire concept to a very successful bakery chain in Beijing”.
An agreement was reached quickly, and Zhu says it was helped by the fact that “because Danish baked goods are famous globally, basically all Chinese know that if it is from Denmark, the products are of a high quality and very delicious”.
They searched for a good location in Beijing, and ended up in not only a good, but “the number one, golden location” according to Zhu: a shopping mall area in Beijing, close to the embassy neighborhood. They decorated the entire 180 m2 shop in a Danish style, with the help of a Danish designer, and it looked perfect.
Dong Zhu continues, “We introduced all the traditional Danish products, very western styles of bread, even including the dark rye bread. That was how we did it at first, we copied and pasted the product line from the bakery in Denmark and made it the same in Beijing.”
Of course, all those products were loved by Westerners living in Beijing. The Danish, in particular, enjoyed being able to buy dark bread locally. Dong Zhu cautions that it was not as perfect as it may have seemed, “the thing was that the Chinese customers, the main target group, were new to Danish bakery products because,
in China, products like bread are not a staple food. Bread is a kind of dessert, something that is eaten before or after meals."
The dark Danish bread especially has a sour taste, which most of the Chinese customers could not accept at the time. The reception by the Chinese consumers meant that the market did not live up to expectations.
On top of that, the rent in the “golden” location was high: “The shopping mall rents out the place not only for the fixed rent but also for a percentage of any revenue beyond a certain level. That was why, after just two years, we were not reaching the sales required by the shopping mall and we had to move out”.
Dong Zhu (DZ): Firstly, when you introduce a product or a business into the Chinese
market, it can never be a copy-paste operation, it can never be that simple. You have to start by learning from the local market in China and identifying the differences when comparing to your market here in Denmark.
Secondly, our Chinese partner actually introduced us to a very good opportunity: Alibaba was opening its first Hema Fresh concept supermarkets in Beijing in the Chaoyang district. Hema Fresh is a huge, aggregate supermarket with many different sections. Alibaba invited the Chinese partner to open a bakery in the supermarket, and the partner tried to pass that opportunity on to the Danish bakery.
That basically would have meant that when Alibaba was opening more supermarkets in Beijing, the Danish bakery could naturally follow.
However, when we visited the new supermarket, it was still under construction. It was in a basement, and there was a clear rule that if you set up a bakery there, you could not sell coffee. If you sell bread, only bread and other bakery products are allowed, not anything else, because they have other suppliers or shops especially selling that.
I don’t think that the people behind the Danish brand understood that at the time. They could not imagine a Danish bakery that only sold bread, not coffee, and they refused the chance. If we had entered that supermarket with Alibaba, it is my guess that the chain would have naturally grown with Alibaba’s supermarkets in Beijing, which are currently more than 30. That story shows, I think, that
(...) when you want to know a local market, you need to consider suggestions from your local partner.
Thirdly, the local laws and regulations are quite different from the Western world. When we opened the Danish bakery shop in Beijing, there were so many detailed regulations and different departments of the local government did examinations, random checks of the food quality and raw materials, and checks to see the staff and the operational procedures. All of that will not go through without the help of local partners.
DZ: After trying for two years, even though the revenue kept rising and the shop had reached the break-even point, we lost that location where we started out, and it was very difficult for the Beijing partner to find a new location. On top of that, the Danish head of the bakery also found it hard to continue. He was alone in China, he missed Denmark and he missed his family. So, it ended naturally when we did not have the shop any longer.
DZ: That is very important, actually. You need to find a good Chinese partner to help you when you try to enter the Chinese market. For example, that opportunity from Alibaba only came about because the Chinese partner was already a very, very successful bakery chain in Beijing. They had a unique concept and were able to grow quickly from 2015 to 2018, making bread that was a little different from what else was on the market at the time.
Before that, Chinese consumers only had bread available in small rolls, that were all soft, like a desert. The Chinese partner was the first to change the shape of the bread to look exactly like European bread, in big loaves. On the outside, they have a European look, but on the inside, the bread is soft and has flavors or contents that are favored by Chinese customers.
DZ: Actually, at the time, we discussed that a lot. On the one hand, you have to stick to what you are good at. Which, for the Danish brand, meant their long experience in making purely Danish bakery products. The products showed early signs of success because all the Westerners staying or living in Beijing gave them a really high evaluation, and after only one year, the brand was given an award as the best bakery brand in Beijing.
On the other hand, many of the Chinese customers, which were the main target group, were quite new to Danish products like dark bread. They had no idea how to eat it with its original taste.
You need to find a balance between doing what you're good at and adjusting the product to the local palate.
I think there was a lot we could have done better in terms of introducing how to use the dark bread the open sandwich way, or introducing toppings for the bread, either traditional Danish toppings, or perhaps toppings that are familiar or favored by Chinese consumers. You may want to start out with something that is favored by the local customers, and gradually introduce something purely local or original.
Connect with Dong Zhu on LinkedIn.
Do you have questions about YOUR journey to China? Send your comments, questions or feedback or book a meeting at service@china-denmark.com.
