Xiongmao Cake Secures Tens of Millions of Yuan in Pre-Series A

Bakery company Xiongmao Cake (熊猫不走蛋糕, literally‘Panda Never Leaves Cake’) has recently completed its pre-Series A funding round, led by ToutoushidaoFund (头头是道基金), raising tens of millions of Yuan. The money will be used to expand their market coverage and attract talents.

Founded in Huizhou – a third-tier city in Guangdong Province– in 2017, Xiongmao Cake provides a cake baking and delivering service with an ‘online order + warehouse journey’ model. In less than two years, the business quickly spread to 10 second- and third-tier cities across Guangdong, Fujian and Sichuan provinces.

With over 5 million users who, on average, make 4.1 purchases per year, the company has recently reported an average monthly revenue of CNY 30 million (USD 4.29 million). According to Xiongmao, this number has been growing at more than 25% monthly.

China's cake industry has been booming in recent years. According to numbers on Statista, China’s per capita consumption of preserved pastry goods & cakes was at only 0.7kg in 2018, far below the 5.5kg/person world's average, and also beneath the levels in countries where people tend to have similar appetites as Chinese.

On the other hand, Statista expects this number to grow at a Compound Average Growth Rate (CAGR) of 5.8% in 2019-2023, which is considerably higher than the worldwide pace of 4.5%. These numbers shed light on the bright potential of China's sweet baked goods market.

Compared to Bliss Cake (幸福西饼), one of the major players that operate with a similar vision for their customer journey, Xiongmao Cake differentiates itself mainly in the following aspects:

Focus on service

Xiongmao Cake provides customers with a comprehensive service, from preparing mini fireworks ahead of time to offering interactive performance after the delivery.“We find out that usually, the delivery staff leaves directly after the cake is delivered, and there is no follow-up service provided afterward,” says Yang Zhenhua (杨振华), founder and CEO of the company, during an interview with 36Kr.“However, I consider the cake baking industry to be much more than bringing customers satisfaction via their sense of taste – but also advancing the atmosphere and emotions that they would like to express with the cake.”

Start from second- and third-tier cities

Mr. Yang believes that the interpersonal relationship between consumers in the top-tier cities is considerably different from that in the second- and third-tier cities. In the latter case, people have much tighter bonds with their colleagues and families, which significantly advances the effect of the secondary transmission of the brand.

Make a self-built distribution system

Xiongmao Cake has its own factories in every city it operates, delivering the cakes to the surrounding areas. Goods are first distributed to the regional sub-warehouse in advance, during the non-peak hours, before being brought to the customer’s hands. The distribution cost is usually around CNY 14-21 per piece. As customers tend to order cakes with upfront planning, they require much less from bakeries than from catering players when talking about delivery timeliness. This also efficiently reduces delivery difficulty in non-first-tier cities.

“The cake industry is filled with high-growth and a bunch of players, while the market share of the leading brands does not even exceed 1%,” Mr. Yang says.“The ongoing upgrading of people’s living standards is pushing the increase in the total capacity of China’s cake bakery market – a field with rigid demand and the opportunity to be the player to reshape it.”