---
title: "Dali, Panpan's Real Competitor: Taoli Bread?"
description: "Taoli Bread, with a CAGR of over 22% in revenue and profit, far exceeds the industry average of 12%, solidifying its leading position. Its 'central factory + wholesale' model and strong channel control have driven successful expansion beyond its traditional northeastern and northern China strongholds."
author: "王梦溪"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2018-09-18"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/dali-panpan-s-real-competitor-taoli-bread-eb94e07a/"
markdown: "https://xinjignxiao.com/en/articles/dali-panpan-s-real-competitor-taoli-bread-eb94e07a.md"
original_source: "https://mp.weixin.qq.com/s/p_NRJXgYOzfv3PbpqhZsPw"
translation: "https://xinjignxiao.com/zh/articles/%E8%BE%BE%E5%88%A9-%E7%9B%BC%E7%9B%BC%E7%9A%84%E7%9C%9F%E6%AD%A3%E5%AF%B9%E6%89%8B-%E6%A1%83%E6%9D%8E%E9%9D%A2%E5%8C%85-eb94e07a.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/dali-panpan-s-real-competitor-taoli-bread-eb94e07a/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Dali, Panpan's Real Competitor: Taoli Bread?

> Taoli Bread, with a CAGR of over 22% in revenue and profit, far exceeds the industry average of 12%, solidifying its leading position. Its 'central factory + wholesale' model and strong channel control have driven successful expansion beyond its traditional northeastern and northern China strongholds.

Click to read the original text for details
**01 Company Basic Situation**
**From a revenue perspective, the company's products are mainly bread**. The proportion of bread products has increased year by year, making the company's business more "pure." As of the 2016 annual report, the company's main bread revenue accounted for nearly 97%. The company's bread products have 3 major series with more than 30 varieties, including soft bread, puff pastry bread, and prepared bread.
**From an organizational structure perspective, the company is mainly family-held, with a stable team structure**. The company is a typical family business, with **actual controllers** being natural persons Wu Xuequn, Wu Xueliang, Wu Zhigang, Wu Xuedong, and Sheng Yali, **holding 77.86% of the total share capital after issuance**.
The company's controlling shareholder, Wu Xuequn, has served as chairman and general manager since the establishment of the joint-stock company, fully presiding over the company's operations and management; Wu Zhigang (chairman's father) has served as a director since the establishment of the joint-stock company; Wu Xueliang (chairman's brother) has served as director and deputy general manager since May 2009; Sheng Yali (chairman's mother) does not hold a position in the company but has significant influence on production, operations, and corporate development; Wu Xuedong (chairman's brother) currently serves as the legal representative of subsidiary Jinan Taoli and is responsible for its operations and management.
In addition, the company's sales director, HR director, board secretary, and other senior managers have all been with the company for a long time, and the management team is quite stable.
**From financial data, the company's revenue and profit growth CAGR is over 22%, far exceeding the bread industry's 12% growth rate, and its industry leadership is unshakable**. From 2011 to 2017, the company's revenue grew from 1.197 billion yuan to 4.08 billion yuan, with a CAGR of 22.68%; net profit grew from 146 million yuan to 514 million yuan, with a CAGR of 23.36%, with profit growth outpacing revenue growth. Revenue and net profit growth rates are far higher than the bread industry's CAGR of 12%.
**The revenue share of the traditional Northeast and North China regions has declined year by year, and the company's strategy for expansion to other regions is clear; previously, there were concerns about the success of expansion to other regions, but in practice, the company has successfully proven the success of expansion, with Northeast revenue share remaining below 40% in 2017 but still maintaining a high growth rate of over 18%**;
**According to the latest 2017 annual report, the company's main revenue and profit by region are shown in the table below: revenue in new regions is growing rapidly, and the main reason for low growth in some regions is capacity bottlenecks**.
**The company's existing production bases have product production and sales rates close to 100%**. In 2015, the company established production bases in 14 regions nationwide. From 2012 to 2015, the production of main bread products accelerated, with production-sales ratios consistently above 99.9% and capacity utilization rates consistently above 95.8%, reaching 98.5% in 2014, close to saturation. On the other hand, because the company has not further developed the mooncake market and plans to reduce production and sales of zongzi, the capacity utilization rates for mooncakes and zongzi have declined year by year, but production-sales ratios have remained at 100%. As of December 31, 2017, the company had established production bases in 16 regions nationwide.
**In terms of capacity, the company is continuously investing to expand capacity to solve bottleneck issues**. Since 2015, the raised funds have been used to increase capacity by a total of 79,000 tons. In November 2017, the listed company again raised 740 million yuan through a private placement, adding a total of 51,000 tons of capacity. With a construction period of 1.5 years, the capacity from the 2017 private placement is expected to be fully operational before 2019. At that time, the increase in capacity in Central China and Southwest China is expected to rapidly drive growth in the Southwest.
**02 Company Business Model: "Central Factory + Wholesale Model"**
**The bread industry is mainly divided into three business models based on scale and sales channels**:
**The comparison of net profit margins for the three business models is as follows: factory bread has lower selling expense ratios and administrative expense ratios, resulting in net profit margins far higher than other models and relatively stable; chain stores, facing C-end consumers, require high-quality service and store management, while large-scale central factory bread pursues production standardization, cost control, and economies of scale**.
So which is better between the factory and chain store models?
• Both models have their strengths, but they require different management and operational styles;
• From international experience, Japan's Yamazaki Baking (mixed business model) has also been significantly reducing the number of chain store brand outlets in recent years, instead increasing sales channels in supermarkets and convenience stores, with excellent performance;
• Listed company Taoli Bread is purely factory bread and has not entered the chain store segment.
**03 Bread Industry Analysis**
**1. The bread industry continues to grow**
China's baking industry achieved a compound growth rate of 25% from 2003 to 2014; in 2014, the operating revenue of China's baking industry reached 242.7 billion yuan, a year-on-year increase of 10.28%, of which the pastry and bread sub-industry achieved revenue of 89.9 billion yuan, and biscuits and other baked foods achieved revenue of 152.7 billion yuan. It is estimated that in 2015, the baking industry achieved annual revenue of 267 billion yuan, a year-on-year increase of 10%. In 2015, China's bread industry achieved revenue of 27.1 billion yuan, a year-on-year increase of 10%. In the future, the growth rate is expected to continue at around 10%, and the bread industry has huge market space.
In 2014, the growth rate of the bread and pastry industry slowed, but after 2015, it returned to growth, with growth rates once exceeding 15%. Sales volume growth was weaker than market size growth; the difference after excluding inflation can be explained by product structure upgrades and corresponding consumption upgrades.
Image source: Taoli Bread prospectus
**2. Looking at overseas markets to gauge the ceiling of the bread market**
**In terms of volume**: Other East Asian countries with similar diets to China have per capita bread consumption far higher than China. There is still 4 to 10 times the room for market capacity growth; in terms of growth rate, with a 10% growth rate, a growth cycle of more than 15 years can be expected;
**From general to specific: Looking at the evolution of Japan's bread industry**
**Changes in consumption habits drove high growth in the bread industry before stabilizing**. After World War II, with U.S. support and government regulation, Japan gradually adopted bread as a staple food, and this change in dietary habits drove the Japanese bread industry's high growth for over a decade. From the 1960s to the 1980s, Japanese lifestyles and dietary habits gradually changed, coupled with rapid economic growth accelerating the pace of life, making bread more convenient as a staple food, meeting consumers' time-saving needs. The bread industry grew further rapidly. From the early 1990s, as Japanese residents' consumption levels rose, people's food consumption tended toward diversity, and bread gradually became a leisure food; growth in staple bread nearly stagnated, the bread industry became more mature, and the market gradually stabilized.
**Market concentration in Japan's bread industry**: Japan's baking market is relatively mature with high market concentration. In 2016, Yamazaki Baking held a 25% market share, the largest in Japan, followed by Shikishima at 15.7%, with CR3 near 50%. **In the future, as industry concentration increases, Taoli Bread will benefit from its brand effect**.
**3. Other trends in the bread industry: Rising barriers, benefiting leaders**
**Concentration is gradually increasing**: The bread manufacturing industry has low concentration, with significant gaps among producers. Currently, China's bread market has low industry concentration, with many and scattered enterprises. Among them, there are few well-known bread manufacturers operating across regions; such enterprises have large production equipment investments and high professional technical levels;
**In manufacturing, production and processing are becoming more specialized and standardized, raising barriers**: With increased emphasis on food safety, national and industry standards have set stricter requirements for raw materials, production processes, products, and testing. Bread manufacturers have strengthened cooperation with raw material suppliers and industry associations, enhancing professional collaboration in raw material and food additive selection, production process and packaging design, providing strong support for product innovation and quality improvement.
**In consumption, brand awareness is increasing, and consumer demand is becoming layered and diversified**: In recent years, foreign bread brands and manufacturers from Hong Kong and Taiwan have entered the mainland market in large numbers, setting positive examples for domestic bread brands in product quality, marketing, and service, driving the development of the entire bread industry. With increased awareness and improved product quality, the bread industry is showing a trend toward brand consumption and high-end consumption.
Consumers' demand for brands represents trust in the food quality and hygiene safety of brand enterprises on one hand, and on the other hand, brand enterprises can better integrate product characteristics and culture into consumer preferences, creating brand loyalty effects.
**04 Taoli Bread's Core Competitive Advantages**
**1. Procurement Model**
The company mainly adopts an independent procurement model. The company has established a comprehensive supplier evaluation system to assess and select suppliers. After determining suppliers, the company negotiates with suppliers to determine main procurement terms such as purchase prices and supply cycles, and signs procurement contracts. Procurement specialists in each subsidiary are responsible for executing specific procurement tasks.
The company determines raw material purchase prices mainly through market inquiry to ensure lower procurement costs. Based on sales and production needs, the procurement department conducts monthly inventory checks of raw materials at the end of each month, determines the next month's procurement plan, and for different raw materials, conducts centralized or batch procurement monthly.
**2. Production Model: Production Based on Sales**
Bread, as a fast-moving consumer good, has characteristics of short shelf life and high consumer demand for freshness. The company mainly adopts a "production based on sales" model, flexibly formulating production plans based on market demand. The company uses central factories for unified production, with factories organizing two shifts. During the day, production is based on estimated order volumes; after work hours, customer orders for the next day are tallied, and supplementary production is carried out at night.
Mooncakes and zongzi, as festive consumer goods, have concentrated consumption periods. The company adopts a phased centralized production model. The annual production cycle for mooncakes is about 45-60 days, mainly concentrated 1-2 months before the Mid-Autumn Festival. The annual production cycle for zongzi is about 50-60 days, mainly concentrated 2 months before the Dragon Boat Festival. For mooncakes and zongzi, the company arranges the next year's production plan based on current year sales, combined with sales plans and distributor orders. After the production cycle starts, based on increases in subsequent orders from the sales department, the production department adjusts production plans and completes scheduling and preliminary preparations.
**3. Marketing Model**
**The direct sales + distribution channel model has obvious advantages and strong channel control**.
Currently, the company mainly sells through two models: direct sales and distribution. First, for large chain supermarkets (KA customers) and small and medium supermarkets and convenience store terminals in central cities, the company directly signs agreements to sell products; second, for convenience stores, county and township stores, and small shops in external markets, the company uses a distribution model through distributors.
Through years of marketing practice, the company has adopted a combined direct sales and distribution model for channel development. As of December 31, 2017, the company had established more than 190,000 retail terminals nationwide.
**Channel sinking, with room for growth in southern second- and third-tier cities**.
From a distribution channel perspective, the company basically follows the order of large supermarkets - traditional shops - convenience stores - e-commerce for gradual penetration; from a city expansion perspective, some provinces in the Northeast can penetrate to the town level, while in the South, it can penetrate to central cities;
**05 Future Profit Growth Points and Growth Potential**
**From both input and output perspectives: gross margin improvement and cost reduction lead to net margin improvement, and continued efforts in new markets bring capacity utilization improvements; revenue-side continuous expansion has achieved significant results**.
**On October 23-24, during the Autumn Sugar and Wine Fair, the "2018 FMCG City Distribution Logistics Conference" hosted by New Distribution will be held**. At that time, we will invite industry experts, FMCG warehousing and distribution specialists, and distributors transitioning to unified warehousing and distribution platforms to discuss and answer questions about future trends in FMCG city distribution logistics and practical cases of distributor transformation to unified warehousing and distribution, hoping to bring you different inspiration and thinking!
-END-


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671