Chinese bakery thrived as domestic customers pined for Chinese-style products, but the boom could recede
Dim Sum Bureau of Momo (Chinese: 墨茉点心局), a Chinese bakery chain valued at between CNY 2 billion (USD 315.946 million) and CNY 3 billion, rebutted the claim of mass layoffs, saying they were only regular personnel changes.
On February 18, China Entrepreneur, a business magazine, said Momo would shift its focus from branding to operating and had fired up to 40% of the employees in the brand unit. Finance and human resources departments also faced staff changes.
In response, the bakery said employees affected by the adjustment made up only 20% of its "backstage" divisions and accounted for less than 2% of totalheadcounts. The company also posted 200 job openings on February 19, with three in the brand unit, 34 in the operating department, and 152 in the frontstage and kitchen.
Established in 2020 in Changsha, capital of central China's Hunan Province, Momo has closed several rounds of investment, making it the darling of venture funds. Some reportedly were even unable to participate in the funding.
Within a half year of its inception, the company roped in Crystal Stream Capital as its backer, followed by investment from Dayone Capital and Capital Today, with Meituan Dragonball Capital being the newest investor. Its single store is valued at over CNY 100 million.
Other Chinese bakery brands have also attracted investors' attention. For example, Tiger Attitude Chartered Pastry Bank (Chinese: 虎头局渣打饼行), Luxihe Taosu (Chinese: 泸溪河桃酥), Xuanma (Chinese: 轩妈) have been riding on the wave of a popular frenzy over Chinese-style (Chinese: 国潮) consumer goods. Tiger Attitude has bagged USD 50 million from its Series A round, led by GGV Capital and Tiger Global Management.
The tide of popular interest in traditional Chinese culture has spurred the growth of domestic brands, and the price of homegrown dim sum also appears to be an advantage that drives sales.
Wang Yuxiao, founder of Momo, said the company aims for low gross profit, which would help it expand to lower-tier markets in counties and smaller cities. For this reason, it prices some of its pastries at CNY 3 to CNY 5 apiece, far lower than peers in first-tier cities.
Customers flock to these establishments. Since Tiger Attitude opened its first store in Beijing, some customers have chosen to wait for hours to get in and purchase its products. When Momo set up shop in Beijing, sales in the first two days exceeded CNY 100,000. Other Chinese bakers such as Luxihe Taosu also saw customers swamp its store in Beijing's Chaoyang District all day long.
"The bakery market in China was expected to reach CNY 260.08 billion in 2021, up 19.9% year on year," said Zhang Yi, CEO at iiMedia Research, a business intelligence firm.
Nonetheless, comments on Dazhong Dianping, the Chinese version of Yelp, showed that other than Momo's most-frequented store in Beijing's Xicheng District, many shops reported occasional queues, which might be the reason behind the rumored layoff, Jiemian, a business media outlet, reported.