Featured case:
Bread for the Chinese: ‘If All Chinese Eat Just One
Slice a Year, We’ll Strike it Big'

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The case

Who – the protagonist

Beat MuellerBeat Mueller, CEO and owner of Swiss Bread Beijing Co. Ltd.

What

In 2004, a group of seven business people planned to introduce Swiss bakery products into China. One of the group was a highly experienced manufacturer of semi-finished bread products sold in a frozen state for cooking by convenience stores and hotels.

Why

Beat MuellerThe Swiss investors, who included Beat Mueller, were intrigued by the idea of taking this concept to China with its 1,300,000,000 potential customers. Historically, China had never really had baked goods, and even now, bread is not part of their everyday diet. The closest product to Western bread is steamed dumplings (bao).

When

The Swiss Gastro Bakery was formed in 2006 and licensed in Beijing in 2007. The investors planned to take advantage of the 2008 Beijing Olympic Games to kickstart its business. However, by the end of 2013, their investment had dropped to just 20% of its original value. Eventually, with the departure of the Swiss investors, Swiss Gastro Bakery moved into Chinese ownership.

Undeterred, Beat Mueller, a former co-owner of Swiss Gastro Bakery, set up a new company in 2010 to sell frozen baked goods in China, this time called Swiss Bread Beijing Co. Ltd. It got off to a rocky start and developed slowly. However, innovations such as bespoke packaging and specialised goods for annual festivals and holidays began to have a positive impact on the company’s finances.

Where

The original Swiss Gastro Bakery was set up in the hills north of Beijing, an auspicious location according to the principles of feng shui. The Chinese believe that the winds carry good spirits down the mountain slopes. Beat’s new business was established in the same geographical area.

Key quote

‘Despite their combined business acumen, they honestly thought that if every Chinese ate an average of just one slice of bread a year, they would strike it rich in China by selling baked goods.’ – From the case

What next?

Should the existing bakery business be promoted more heavily, or should the company enter the chocolate market on a larger scale, requiring a serious investment in new specialist equipment? Should Beat take out a bank loan to finance this expansion? And what about the challenge of finding a reliable supplier of high quality chocolate from Switzerland?

The author

René Ruettimann

René discusses working with the case protagonist and the challenges of doing business in China.

Well-trained and experienced

I already knew Beat and had discussed his business with him many times. To write the case, I met up with him three times, including twice at the airport! Beat is a well-trained and experienced baker. He knows his trade. Consequently he had one of the most important things a start-up needs to add value to the new company: he knew that none of his competitors could bake better products!

Potential and financial commitment

In addition, Beat believed very strongly in the potential of the Chinese market. And, of course you have to be a strong personality. However, it’s important to note that Beat, in common with many entrepreneurs I know, put most, if not all, of his personal savings into the venture.

Obstacles

breadThe challenge faced by Beat included two main obstacles. Firstly, from a cultural point of view, Western bread is seen as hard and dry and thus strange for Chinese people (their food is soft and eaten in small pieces with chop sticks). And secondly, he faced a different business structure with distributors in a dominant position – this is also unlike the West.

Patience, relationships and cash

In China, despite recent anti-corruption drives, you need patience, relationships and cash! However, it’s clear that relationships and cash are much more important than patience. Both can speed up any process by more than 80%. Unfortunately, all three are important for any business in China.

Determination and strategy

The case illustrates just how determined entrepreneurs need to be. However, it also demonstrates the importance of strategy and market analysis. For Beat, the dominance of the distributors had to be a key consideration.

In conclusion, the potential market may be huge, and the business idea may be a brilliant one, but before you start spending any money as an entrepreneur, you must know how you’re going to reach and retain customers!

René Ruettimann is Professor for International Business and Innovation Management, Emeritus, Zurich University of Applied Sciences, School of Management and Law.
Synergo@bluewin.ch

 
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Bread for the Chinese: ‘If All Chinese Eat Just One Slice a Year, We’ll Strike it Big'
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Teaching note
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