Tai Tung Bakery, founded during one of the darkest periods of Hong Kong's history, is still battling the odds. No one expected the family-owned Yuen Long business, which was started during the Japanese occupation of the city in 1943 - a time when money was so useless that it was used to wrap the bakery's sweets - to survive. But the much-loved company is thriving more than 60 years later, despite the best efforts of food conglomerates to dominate the market. Small, family-run food factories such as Tai Tung are becoming rarer in Hong Kong as rising rents, competition and labour costs force many to close their doors. Most have gone across the border, but some survive in the city. Across town at Kwun Tong, the Fong brothers - fellow small-business survivors - produce batches of candies in a hot kitchen just as their father did 50 years ago. Tai Tung and Smith's Confectionery have survived because of customer loyalty and the fact they own their own factories. They also produce the best products, judging by the long queue at Tai Tung last week to buy mooncakes for the Mid-Autumn Festival. Tai Tung Bakery chose not to follow most of its competitors by moving production across the border to cut costs. Its commitment to 'Made in Hong Kong' means it churns out mooncakes, Chinese wedding cakes, preserved sausages - or lap cheong - and bread from a 4,000 sq ft kitchen on the Tuen Mun industrial estate. Neither can it count on celebrities such as Kelly Chen Wai-lam, who promotes mooncakes for the city's largest food and catering firm, Maxim's Catering, or Eric Tsang Chi-wai for Kee Wah Bakery. 'We won't and can't compete with the deep-pocket chain stores, especially splurging on advertising,' said Tse Ching-yuen, the owner of the business his late father set up in 1943. 'Running a family business is tough, but we survive by trading our profit margins for better quality and reputation.' Tse was 13 when the store opened and remembers not having enough candies for its young customers. The Japanese Occupation Currency depreciated so rapidly that profits were eroded. Wild inflation exacerbated the situation, with 'a catty [600 grams] of sugar costing 1 Japanese yen one day but going up to 1.5 yen in three days', he said. Three years later, when peace was restored, the Japanese currency eventually became candy wrappers, Tse recalled. 'Paper supplies remained so tight that we couldn't find any paper and had to use the currency notes as paper bags.' Tai Tung is among the few traditional Chinese bakery factories still surviving in the city - the others being Hang Heung Cake Shop, founded in 1920, and Kee Wah Bakery, in 1938. The global financial crisis has exacerbated the plight of struggling food manufacturers. Last week, traditional Chinese confectionery maker Luk Kam Kee King of Melon Seeds closed after half a century in business. The shop went bust because of unpaid wages and debts. 'In any boom or bust time, brand reputation and quality are the priority,' Tse said. 'That's why we have no intention to move across the border and always keep our ovens and workers in Hong Kong.' At the Tuen Mun factory, the 80-year-old chef has been with the company for the past 50 years, leading about 10 workers and operating the production line designed in the 1960s. When Tai Tung was founded 66 years ago, its operating licence was issued by Japanese troops and it was written in Japanese. The bakery could only produce peanuts and ginger candies, as peanuts, ginger and sugar were the only ingredients available, Tse recalled. In the 1960s, the store branched into Chinese almond cakes, loaves and Chinese wedding cakes when extra supplies such as green beans, margarine and flour were available, he said. 'Traditional wedding cakes have been the best seller for decades, particularly with indigenous villagers,' he said. However, with greater availability of raw materials came competition, pushing Tai Tung to produce higher-value delicacies such as mooncakes. 'Egg yolks used to be delicacies and expensive,' Tse said, adding that the company had imported 700,000 egg yolks from the mainland this year. 'Now, they are regarded as cheap stuff.' As the Mid-Autumn Festival looms, Tai Tung is rolling out new flavours of mooncakes, including preserved oyster, to fend off competition from chilled mooncakes and ice-cream mooncakes. 'We use quality ingredients, say, the best lotus from Hunan and peanut oil from South Africa,' Tse said, pointing out that a barrel of peanut oil costs HK$7,000 compared with mainland peanut oil priced at HK$1,000 per barrel. 'That's why our mooncakes cost 50 per cent more than our rivals.' However, customers seem undaunted by the price. One regular walked into the shop last week and paid HK$7,700 for 20 boxes of mooncakes. Tse, who has been with the bakery since day one, is preparing to pass the torch on to the third generation - his son, Peter Tse Hing-chi. Despite his training as an architect, Peter Tse will continue the business of the old bakery and expand its distribution outlets. Keeping a business in the family is one problem facing the Fong family, which runs the 49-year-old Smith Confectionery in Kwun Tong. Fong Fu-sing, the youngest of the three brothers working with the company their father took over in 1960, said eating candies was far easier than producing them. 'Hiring is a problem, as young people do not want to get into this industry,' said Fong, wearing a stained apron and cooking rainbow-coloured, clay-like glucose on a stove in a kitchen in a temperature of 45 degrees Celsius. 'We still haven't been able to find chef replacements after the old ones died one after another some years ago.' Working from the ninth floor of a commercial building, Fong and another brother work in the kitchen making moulds of glucose before throwing them into a machine that produces bright-coloured candies ready for packaging. The other Fung brother delivers the group's specialities - Smith nougat, hard boiled candies and soft candies - to traditional confectionery shops such as Chan Yee Jai in Sheung Wan. Some of the candies are exported as far as away as Fiji. 'The more bad news on tainted food in China, the better our sales,' he said of a recent sales rise of at least 20 per cent. 'The 'Made in Hong Kong' trademark gives customers confidence.' That perhaps explains why Fong has rejected several offers since the 1980s to move the factory to the lower-cost Pearl River Delta. But he is facing other challenges. The factories that used to produce machinery for Smith Confectionery vanished with the city's industrial migration. 'We want to make more candies and other types of candies but can't,' said Fong, who was forced to let go an order from one of the city's two largest supermarket chains. 'Completing the order will take us nine months, but the delivery is in four months, or before the Chinese New Year.' However, Fong was confident about future prospects, especially as the Fong brothers own the factory, meaning they can avoid rocketing rents. The Tse family also owns its flagship shop in Yuen Long and the Tuen Mun factory. Fong said: 'The business is certainly unviable if you don't own the properties.'