Hong Kong’s Swire to double down on Chinese bakery investment

Over the next three years, Swire Pacific will increase the number of its bakery shops in Chongqing, Chengdu and Guiyang to 1,000 through its wholly owned Swire Foods subsidiary.

The conglomerate believes the benefits from stable, long-term growth from the food market outweigh the small scale of the business, compared with Swire’s aviation and property businesses.

Last year, Swire Foods took full ownership of Qinyuan, a leading bakery chain, for HK$1.4bn (US$200m). Selling Chinese and Western-style pastries, it added over 500 retail outlets in Southwest China to Swire’s portfolio. The deal also included a 65,000 square-metre factory producing bakery goods in Chongqing.

“Bakery is a very market fragmented market in China. We have not yet seen any player dominating the market [so] there a a big opportunity there,” said Max Lau, managing director of Swire Foods, told SCMP.

He said that the demand was due to rise because Chinese per-capita consumption was currently low, with an average spend on bakery goods of around just 140 yuan (US$20) per person per year.

This is half the amount spent in Singapore, while Hongkongers spend three times as much as the mainland, and Japanese spend close to seven times as much for their baked goods.

“Food still serves a basic need for everyone despite the economic slowdown in China,” Lau added.

“Moreover the retail business is being challenged by the rise of e-commerce in China these days, but food retail cannot be replaced by e-commerce just yet,” he said.