New bakeries eager for a slice of the action

WALK ALONG Hong Kong streets and you will find bakery shops dotting the retail landscape. Be they outlets of big chains or family-owned stores, these ubiquitous shops - not to mention the supermarket stalls with their late-evening clearing discounts - do a brisk trade all day, proving that the bakery industry is rolling in dough.

New bakery chains and outlets, including foreign ones, are sprouting up everywhere, selling bread, pastries, pies and cakes.

Providing one of life's staples, bakeries attract every kind of customer, from housewives and office workers to students and people on the go.

'Bread is a daily food of average people - it's a must,' said Philip Wang Yau-ping, general manager of Cherikoff Bakery & Confections.

Cherikoff began life as a restaurant in the 1950s and is now a busy bakery chain of nine outlets in public housing estates in areas such as Tseung Kwan O, Kwun Tong and Sau Mau Ping. Its business is growing slowly but steadily.

Bread consumption is on the rise. Hong Kong's retail per capita consumption of bread in 2004 was eight kilograms, the second highest in Asia after Singapore, according to market research firm Euromonitor International. Industrially produced and packaged bread dominates the market, accounting for 94 per cent of volume sales in Hong Kong in 2004, according to Euromonitor.

But unpackaged or artisanal bread showed greater growth of 23 per cent between 1998 and 2004, while packaged or industrial bread increased 9 per cent over the same period.

At the retail bakery level, the bigger players include chains such as Maxim's, Panash and Yamazaki.

The industry is labour intensive. Depending on its size, an outlet can have as few as two employees and up to a baker's dozen or more, including salespeople and kitchen hands.

Like any business in fast-moving consumer goods, there are challenges and competitors aplenty.

'The business environment is harsh,' said Ryuzo Tadokoro, managing director of Hong Kong Yamazaki Baking Company, pointing out that any kind of restaurant, fast-food outlet or food business was a competitor.

Japanese group Yamazaki set up its first Hong Kong outlet back in 1981, promising in its motto to 'enrich your life with delicious bread'.

The company has grown into a chain of 24 outlets in Hong Kong, employing about 500.

New players are Hong Kong BreadTalk, a joint venture between Singapore-based BreadTalk and its Hong Kong partner, Derek Liu Kit-man. Since opening in Hong Kong in 2005, BreadTalk has become the talk of the trade with its spick-and-span, boutique-style outlets complete with glass-panelled kitchen.

The new baker on the block knows it will have a battle getting a slice of the pie.

'Hong Kong, like Shanghai, is very important for us as an international brand,' said BreadTalk operations manager Gady Cheung.

Although operating expenses in a bakery are not as high as in other food sectors, costs, especially rent and labour, are a major challenge.

At BreadTalk, a full kitchen puts a squeeze on retail space in the outlet, so rent is of critical concern.

Indeed, soaring rents famously forced the Tai Cheong Bakery, patronised by former governor Chris Patten for its egg tarts, to move from its Lyndhurst Terrace location about a year ago.

The cost of ingredients is rising too.

'Wheat, eggs and butter cost more today than in the 1970s and '80s,' Mr Wang said. 'But we can't increase our prices much, so the margin is small and it's hard to make money.'

But Ms Cheung of BreadTalk said increasing prices could help offset rising costs, even if the difference was only marginal. Consumers may not feel the pinch because they had 'spending power', she said.

To cover expenses and stay in business, the bakery must have 'good products, a clear direction for the business and plans to develop more outlets', said Ali Oli Bakery Cafe partner and executive chef Hazel Cheung.

The Sai Kung shop, which specialises in European breads, is in an enviable niche with no real rivals.

Hoping to replicate its success elsewhere, Ali Oli plans to add two or three more outlets at locations with demographics similar to those of Sai Kung.

Other retail bakeries are expanding too, notwithstanding the challenges facing the industry, and this means more investment and employment. This month will see the opening of Yamazaki's 25th outlet, at the MTR Hong Kong station.

A new BreadTalk outlet may mean hiring about 20 employees, including bakers and salespeople. With four shops selling 250,000 bakery items a month, BreadTalk plans to open two or three more stores this year.

More outlets mean more bread and bakery products sold and consumed. Bread, in whatever variation, style or taste, is the staff of life, feeding the multitudes and sustaining an industry that is expanding like rising dough.