Bakery ingredients development status and trends

（1）Development status of bakery ingredients

Bakery ingredients refer to a variety of raw materials and accessories used in the manufacture of bakery products, of which the main raw materials include flour, fats, oils, sugars, cream, fruit products, sauces, chocolates and so on.

The development of bakery ingredients complements the overall development of the bakery industry. On the one hand, the continuous growth of the baking industry demand to promote the steady development of bakery ingredients, consumer tastes and preferences change, but also requires bakery ingredients manufacturers to constantly adapt to new changes. On the other hand, the abundance of bakery ingredients and the improvement of application technology has lowered the threshold of bakery food production, and the development of bakery food ingredients continues to lead the new trend and enrich the bakery food category.

Different bakery products have different ingredients depending on the recipe. The main bakery ingredients handled by the Company are cream, fruit products and sauces, etc., which are mainly used for surface decoration and filling of cakes and pastry. The main bakery ingredients handled by the Company are as follows:

①Cream

Cream according to the different raw materials and processes, is divided into milk fat-containing phytolactic cream, phytolactic cream and thin cream. Thin cream made from milk centrifugal dehydration, subject to the lack of milk sources, China's thin cream is mainly dependent on imports. Plant fat cream is not subject to the constraints of milk sources, lower cost, and easy to use, stable performance, and then in China to promote and develop rapidly. With the upgrading of consumption, a small number of manufacturers, represented by our company, add milk fat components in the vegetable cream, the development of milk fat-containing vegetable cream, both thin cream cream with rich milk flavor, delicate taste and vegetable cream whipping good, stable advantages, rapid growth in recent years, has occupied a certain market share. In addition to the traditional cake, pastry surface decoration and filling, but also with the popularity of tea, coffee and other leisure drinks, continue to expand its scope of application. Taking its production of cake products as an example, Euromonitor International data shows that China's cake market sales in 2020 will be 97.3 billion yuan.

According to the empirical data of cake production in bakery, the cost of raw materials for cake accounts for 25% to 35% of the selling price, and among the cost of raw materials, the cake embryo, buttercream, fruit products and others account for about 40%, 35%, 10% and 15% respectively, so the cost of cream accounts for about 9% to 12% of the selling price of the cake, and according to the calculation of this data, the market scale of China's buttercream market has reached 8.757 billion yuan to 11.676 billion yuan. According to Euromonitor International's forecast, China's cake retail sales are expected to exceed 160 billion yuan in 2024, and China's cream market size is expected to exceed 14 billion yuan in 2024.

②Fruit products

Fruit products are products made from fruit, fruit juice or fruit pulp and sugar as the main raw materials. Bakery fruit products include fruit filling, fruit soluble, etc., beverage fruit products include fruit puree, beverage thick syrup, etc. Generally, in addition to bakery and beverage fruit products, there are other uses of fruit products such as making yogurt and accompanying meals. Fruit products as raw materials for bakery products are mainly used for the surface decoration and sandwich filling of cakes and pastry, which can provide more diversified tastes and flavors to the bakery products and increase the attractiveness of the bakery products. Fruit products as raw materials for beverages can significantly affect the fruit aroma, texture and flavor of fruit juice and other beverages. With the continuous advancement of consumption upgrading, the fruit products industry is also increasingly pursuing the freshness and taste of fruits.

China's rich fruit resources, fruit products production process is more mature, has formed a certain scale, according to the cost of fruit products accounted for about 2.5% to 3.5% of the selling price of the cake for the calculation, 2020 baked fruit products market size reached 2.433 billion yuan to 3.406 billion yuan, according to the increase in China's retail sales of cakes in 2024, China's baked fruit products market demand is expected to in 2024 will exceed 4 billion yuan.

③Bakery sauces

Baking sauce as a Western-style condiment, introduced into China after the initial mainly for Western-style food and beverage, and then with the increase in the degree of integration of Western and Chinese catering industry, all kinds of Chinese and Western-style food products are also used in the sauce products. Currently, baking sauces are commonly used in the preparation of Chinese and Western coleslaw and other dishes, and can also be applied to the surface of other staple foods such as bread or as fillings.

Sauces as bakery ingredients, including salad dressings, Costa sauce, etc., are generally used to coat the surface of bakery products or as a bakery sandwich, and can also be added to the dough mixing process, which can improve the richness of the texture of the bread, pastries and other baked goods, and bring a unique flavor to the baked goods. As consumers' requirements for baked goods continue to improve, the flavor of baked goods is constantly enriched, and even need to have a certain sense of hierarchy, baking sauces can help baked goods break through the limitations of the flavor of the main raw materials such as flour, sugar, etc., and contribute to the innovation of the flavor of the baked goods, and therefore in recent years have been attached importance to, and have been rapid development.

According to Wisdom Research Consulting, the market size of salad dressings, the most widely used among sauces, grew from 1.188 billion yuan in 2011 to 4.385 billion yuan in 2017, with a CAGR of 24.32%. While the market size of sauce products is growing rapidly, it is also developing in the direction of diversification, compound convenience, nutrition and health.

（2）Development trend of bakery ingredients

①Rapid development of domestic brands

The modern bakery industry originated from Europe and America, and gradually emerged in China in the 1980s, so the supply of bakery products and raw materials in China was basically monopolized by foreign brands in the early stage. 2000 onwards, with the rapid development of China's economy and the rapid expansion of the consumer market, domestic bakery enterprises and corresponding raw material suppliers have also rapidly emerged. At present, although foreign brands still have strong brand and technology advantages in the short term, domestic brands are also continuously strengthening international experience exchange, introducing advanced technology and personnel, improving marketing and service capabilities, etc., to narrow the gap with foreign brands, and combining the consumption habits and tastes of domestic consumers to make independent adjustments to make the products more adaptable to provide a richer, quicker and lower-cost supply of raw materials. The supply of raw materials is more abundant, fast and low-cost. With the deepening of the domestic brand image and the continuous improvement of product technology, the market share has more room for improvement.

②Diversification of consumer demand and increasing variety of products

As the quality of life continues to improve, consumer demand for bakery ingredients is becoming more and more specific, such as taste, aroma, smoothness and aftertaste. In recent years, major manufacturers have been actively developing and promoting a variety of new flavors and new styles of bakery ingredients products to meet the diverse needs of consumers and at the same time promote consumer desire to buy. Taking cream as an example, as consumers pay more and more attention to taste and aroma, there is a new product containing dairy cream, which combines the advantages of vegetable cream and thin cream, with good taste, rich nutrition, strong milky flavor, easy to whip, easy to shape, etc., and has a certain price advantage, favored by bakery stores and consumers, and the sales volume is growing rapidly. The diversification of consumer demand makes the bakery ingredients products change rapidly, and some SMEs are difficult to adapt to the rapidly changing market environment, and are gradually eliminated by the industry. A few enterprises with market sensitivity, strong R&D capability and wide channel coverage, represented by Ligao Foods, follow the market changes closely and gradually increase their market share through continuous product innovation.

③Safety, health and nutritional balance become the direction of product development

As baked goods continue to develop in the direction of safety, nutrition and health, they also require the continuous upgrading of baked goods ingredients. On the one hand, healthy and nutritionally balanced bakery ingredients are more and more recognized. For example, when bakeries make cakes, they will choose fruit products with higher fruit content and fresher and better quality. On the other hand, in order to protect the safety and quality of baked goods, bakery enterprises will strictly control the raw materials, and bakery ingredients enterprises with brand awareness are more likely to gain the trust of downstream customers.

④The building of marketing networks and channels is an important means of acquiring a competitive position.

With the increasing acceptance of baked goods by consumers, grassroots bakery stores are rapidly expanding from Tier 1 and Tier 2 cities to Tier 3 and Tier 4 cities and even townships, which in turn has resulted in a widely distributed baked goods market with huge demand. According to Meituan Dianping's China Bakery Stores Market Report 2021, the proportion of bakery stores in third-tier and lower cities will rise from 48.8% in 2016 to 51.6% in 2020.

Changes in the bakery market pattern to promote and force the bakery ingredients manufacturers to continuously adjust the mode of operation, must continue to increase the construction of marketing networks and channels. The scale and operational capability of marketing networks and channels have become more and more important means for bakery ingredients manufacturers to gain competitive position in the future. At present, a large number of grass-roots markets are in the stage of market cultivation, market prospects, advance the layout of the market network, on the one hand, can provide customers with close technical application services, establish brand image, on the other hand, is conducive to improving product quality and delivery time.