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    The Rise and Risks of China’s ‘2 Yuan Bakery’ Boom

    Offering high earnings with little investment, bakeries selling bread for just 2 yuan have shot to fame across China. Despite the success, some are now questioning the model’s long-term viability.
    Feb 19, 2024#business

    From small cities and towns in the eastern Shandong province to alleyways in the southwestern metropolis of Chongqing, China’s bakery business is in the midst of a quiet churn — one 2-yuan loaf at a time.

    Beginning last September, several social media posts showcased individuals who claimed to have quit their jobs to open a bakery, earning substantial incomes with low investment.

    Among them, a young mother and a woman in her 20s claim monthly earnings of 130,000 yuan and 180,000 yuan ($18,000–$25,000), respectively, after opening bakeries selling bread for just 2 yuan. Such outlets are often strategically placed in communities close to schools or markets in cities where rental costs are more manageable.

    They draw large crowds with their prominent “2-yuan bread” signage and offer a myriad of fillings, including red bean, chocolate, and durian. With a combination of affordability, convenience, and variety, such bakeries swiftly drew hordes of budget-conscious customers and influencers.

    “I bought one of each flavor at the store for just over 20 yuan, and every one is delicious and well worth it,” declared a food blogger with about 14,000 followers on the lifestyle platform Xiaohongshu after visiting a 2-yuan bread shop in the northwestern city of Xi’an.

    The viral nature of these seemingly lucrative success stories only sparked more widespread interest, leading to a surge in people looking to invest in or open their own 2 yuan bakery, hoping to replicate the model.

    The phenomenon gained further momentum as chains such as Sumei 2-yuan Bread and Tangyi in Shandong, and 3-yuan Bread Supply and Marketing Cooperatives in Chongqing, spread their reach by opening multiple stores and offering franchises across the nation.

    But despite their initial success, the business model of 2-yuan bread shops isn’t without challenges. While the low cost of production and high profit margins may seem promising, sustaining profitability over the long term still remains uncertain.

    Domestic media and experts have since raised concerns about the business model after reports that many dived into the bakery business, only to find that the real profits often lie not in the sale of bread but in recruiting franchisees and the fees collected from teaching the trade.

    Tasting success

    A representative of the popular franchise brand Sumei told Sixth Tone that the company operates over 400 stores across China, a network that has been expanding since it began inviting franchisees in September 2023.

    In Shandong’s provincial capital of Jinan alone, eight Sumei 2-yuan bread shops have begun operations, with three more slated to open soon.

    “The core of our brand is the expertise our R&D team brings to ensuring the consistent taste and texture of our bread, alongside managing costs and maximizing gross profit,” a Sumei representative told Sixth Tone. “We provide the formula, technology, and a selection of raw materials, enabling our franchisees to profit by more than 1 yuan on each 2-yuan bread sold.”

    Store performance and profitability can vary significantly by location, the Sumei representative noted, with average daily revenues for outlets in third- and fourth-tier cities ranging from 1,000 to 2,000 yuan. This requires selling between 500 and 1,000 pieces of bread each day.

    Tangyi, another successful 2 yuan bakery, also opened its first outlet in Jinan. According to its 27-year-old founder’s latest post on Xiaohongshu, she earned a total monthly revenue of around 180,000 yuan in December 2023.

    After deducting expenses such as rent, electricity, raw materials, and labor, which totaled about 84,000 yuan, her net profit for the month surpassed 90,000 yuan.

    Zhao Yiming, who runs a German bakery in Shanghai, explained to Sixth Tone: “Their costs are relatively low. Achieving high sales volume can easily cover these expenses,” but she also warned of the labor-intensive nature of producing hundreds of breads daily.

    But for most successful 2 yuan bakeries, selling bread isn’t the sole revenue stream. Major 2-yuan bread brands and their proprietors augment their income by offering franchise opportunities and training programs, enabling others to replicate their business model.

    For instance, Sumei charges a franchise fee of 29,800 yuan for a single 2 yuan store, which includes three baking machines at no extra charge. Prospective franchisees are invited to visit the company’s headquarters in Jinan to gain insight before launching their businesses.

    Training programs also play a crucial role in the revenue stream. In Chongqing, 3-yuan Bread Supply and Marketing Cooperatives, which opened its doors only last November, offers a training program priced at an additional 19,800 yuan.

    The curriculum covers everything from technical baking knowledge to store design and branding, lasting between seven to 10 days, depending on the learner’s aptitude.

    “Starting is straightforward … follow our guidelines, and you’ll encounter no issues,” a representative from 3-yuan Bread Supply told Sixth Tone.

    Echoing this sentiment, Zhao emphasized the accessibility of making 2-yuan bread, likening its simplicity to that of crafting Chinese steamed buns — both require minimal baking expertise and skills. “The process is nearly fail-proof for this type of yeast-raised sweet bread,” Zhao underscored.

    The surge in 2-yuan bread shops is largely attributed to the current economic climate and a shift in consumer behavior. With the market growing increasingly sensitive to price, Chinese consumers are exercising greater caution in their spending, seeking ways to stretch their budget.

    According to data from Canyin88, a catering industry website, the average per capita expenditure at a bakery in China hovers around 39.73 yuan. This figure has sparked online debate about the affordability of bakery products, with a Weibo hashtag translating to “can't afford bread with a monthly salary of 10,000 yuan” garnering over 300 million views.

    Zhu Danpeng, a food industry analyst, emphasized the shift in consumer preferences. “Cost-effectiveness is currently a mainstream development trend, a mainstream label, and a mainstream price range,” he said. “The 2 yuan shops are in line with the trend as Chinese consumers will become more and more rational and practical in the future.”

    Despite the current popularity of these budget-friendly bakeries, their future remains uncertain. Experts believe the use of low-cost ingredients and a limited assortment of bread could lead to a decrease in customer retention.

    “The novelty of 2-yuan bread might wear off, diminishing foot traffic,” Zhao predicted, suggesting that without sustained interest and innovation, such shops might struggle to maintain their business.

    Chen Yinjiang, the deputy secretary of the Consumer Protection Law Association of China Law Society, also voiced concerns. Speaking to China National Radio, he underscored that the business model of 2 yuan bakeries hasn’t been fully tested by the market.

    “This type of business risk is not only borne by oneself but may also be passed on to the franchise enterprises,” he was quoted as saying.

    Additional reporting: Lü Xiaoxi; editor: Apurva.

    (Header image: A bakery selling 2-yuan bread in Xi’an, Shaanxi province. From @芝栀汁汁 on Xiaohongshu)