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Information, tips and advices on how to open a gelato shop in China.
Origin of Chinese Ice Cream
Chinese ice cream was invented to satisfy the ancient emperors’ desire for refreshment and thus has ancient origins. During the winter, huge blocks of ice would be stored in the cellars of the imperial palaces and then used to make cold foods to serve to the emperor during the heat of the summer. This was the first form of ice cream/gelato in China.
However, as far back as the Tang Dynasty (618-907), the practice of simply storing ice to chill food was supplanted by a technique that was without doubt cutting-edge for its time. The discovery of gunpowder dates back to the Tang Dynasty: the Chinese made it using saltpetre, a substance which the Chinese quickly learned to use for making ice cream/gelato. Indeed, the Chinese were soon to make use of saltpetre’s endothermic properties, realising that as it was able to absorb heat, if dissolved in water it would help to freeze it. From that day forward, therefore, ice production for the manufacture of ice cream was based around saltpetre.
It was during the Song Dynasty (960-1279) that the first chilled drinks appeared, very similar to today’s sorbets, made by mixing ice with fruit or fruit juice, while during the Yuan Dynasty (1271-1368), for the first time, it was decided to add milk to the mixture of ice and fruits, thus making a very similar product to today’s creams. Legend has it that the then Chinese Emperor Kublai Khan, a great admirer of ice cream/gelato, forbade his courtiers from revealing the ingredients and directions for making it, and that it was only when Marco Polo came to China that the secret finally came out. He brought the knowledge (today we would say “know-how”) with him back to Italy, and this may be one reason why Chinese consumers regard hand-made Italian gelato as one of the best in the world.
If we look back over the history of the ice cream/gelato industry in China, it becomes clear that it has experienced slow but steady growth, both in terms of quantities produced and of technical improvements. After 1979, however, the Chinese ice cream industry entered a phase of rapid growth, accompanied by increasing consumer appreciation for ice cream/gelato products. Indeed, 1979 marked the year when Deng Xiaoping began the so-called "open door policy" that ultimately led China – which until that point had been entirely cut off from the dynamics of global trade – back onto the world’s markets. Around the time of this reform, numerous manufacturers of cold drinks and ice cream/gelato, especially from Japan and Hong Kong, were exporting state-of-the-art technologies and machinery for the production of various types of ice cream/gelato, thus making a significant contribution to the development of the sector.
Over the past 30 years, ice cream/gelato has become an extremely popular product in China and over that period, production volumes have increased about 25 fold. Current sales volumes amount to around 3,800,000 tons a year and, so far in 2014, 73% of Chinese people have eaten at least one ice cream/gelato. When you consider that the Chinese population is made up of approximately 1.4 billion people, it is clear that the ice cream/gelato market offers tremendous opportunities for anyone looking to invest in the sector.
Due to its low cost, industrially manufactured ice cream has become the biggest seller, taking a market share of around 72%; soft ice cream has about 21% of the market, while the share for hand-made gelato is around 7%.
Chinese consumers are ever more aware of food quality, so they realise that mass production and packaging require the use of the additives and preservatives found in industrial ice creams and that soft ice creams, because of their elaborate production process, are poorer from a nutritional point of view. The freshness and excellent quality of the products used to make hand-made gelato has therefore led to it gaining an increasing market share, reducing the gap with similar products. Coupled with the consideration that China is the country with the largest number of potential consumers and given the rapid economic growth in whole new areas of the country (the so-called second- or third-tier cities), this makes China an extremely interesting place for anyone thinking of starting up a gelato parlour.
Opening a gelato shop in China: Getting Started
The decision to open a gelato shop in China involves a series of steps: choosing your premises and registering your trademark.
So, first of all, let’s look at where to open your gelato parlour. If you are looking at a first-tier city such as Beijing or Shanghai, these are excellent locations for a foreign investor and can provide spaces in fashionable districts, aiming at a far more mature consumer audience, accustomed to Western tastes and with a bigger bank balance, and yet these cities do have their drawbacks. To start with, rents (or purchase prices) for premises in first-tier cities may be two to three times higher than in other cities. Secondly, the cost of labour: an employee’s salary in Beijing averages twice as much as in a second- or third-tier city. Finally, there is the problem of getting your brand known. In fact, in a very competitive market such as in first-tier cities, already saturated with investments in the food & beverage sector, you will be competing with a number of gelato parlours which have already been up and running for several years. In this writer’s opinion, it is therefore a good idea, all things being equal, to assess whether to open a gelateria in a lesser-known city which offers lower start-up costs and greater growth opportunities.
As for the trademark, it is important to emphasize how it can help your gelato products stand out from those of your competitors and thus grow your business, in direct proportion to the number of consumers who recognize (and like) your brand. It is therefore definitely advisable to register your brand right from the outset, both in western and in Chinese characters, with the local Chinese Trademark Office. Registration is quick and inexpensive and also ensures good protection against all forms of illegal trademark use by a third party.
Read Part II
Written by Att. Giovanni Lovisetti, Associate at Zunarelli & Associates International Law Firm, Milan and Shanghai offices. Email address: firstname.lastname@example.org
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