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PARIS BAGUETTE: QUINTESSENTIALLY FRENCH WITH LOVE
FROM KOREA
I’ll do my utmost to help Korea earn a reputation as the ‘mecca’ for bread and pastries.
–Young-In Hur, CEO of the SPC Group 1
The results had been announced, and Kyung-Il-Lee, global business head of the SPC Group—with
Paris Baguette as one of its major brands, was delighted! Paris Baguette had just been declared the
winner at the Coupe du Monde de Boulangerie, touted as the most prestigious baking competition in
the world held each year in Paris. It certainly didn’t get bigger than this—the ‘French inspired’
Korean franchise bakery chain, subsidiary of the SPC group, had taken on its toughest challenge by
entering the French market in early 2014, and now, just two years later, its baguettes had been
officially declared as the best in the world. The bakery chain had proved that it could compete against
a host of truly French boulangeries to win favour with the locals, the world’s most discerning
consumers of baguettes.
Paris Baguette had started operations in 1945 with a small bakery in North Korea. From those modest
beginnings, the chain had grown steadily, and by 2014, it boasted of more than 3200 outlets in South
Korea and another 200 plus outlets across China, USA and Southeast Asia to become a truly global
premium bakery brand.
Buoyed by its international appeal, the company felt ready to enter France, opening its first store in
2014 and the second store in 2015. Positioned as a ‘premium health conscious brand’, Paris Baguette
quickly found resonance with the French by diligently following traditional baking standards and
suitably localising the menu. Additionally, its café-style service and innovative product mix that
included international flavours helped differentiate it from other brands.
The stores in Paris were doing exceedingly well, and winning the competition was clearly a boost to
Paris Baguette’s endeavours, paving the way for further expansion into France as well as other
European markets. This was significant given that the Korean domestic market was saturated with
intense competition and also heavily regulated against corporate bakeries, so future growth would in
all likelihood only come from the international operations.
The question now was to decide the appropriate strategy for the bakery brand when entering other
European markets. Which country or countries should it go to after France? Also, should it leverage
on Paris Baguette’s French success by emphasising on the selling proposition of ‘French-ness’, or
1
Koon Boon Kee, “Baking up a Korean Unification: The Globalization of Wide-Moat Compounder Samlip”, March, 2014, Beyond
Proxy, http://www.beyondproxy.com/wide-moat-compounder-samlip/, accessed February 2017.
This case was written by Professor Jin K. Han, Dr Sheetal Mittal and Havovi Joshi of the Singapore Management University
and Professor Yong Seok Sohn of Kyung Hee University. The case was prepared solely to provide material for class
discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors
may have disguised certain names and other identifying information to protect confidentiality. This case was developed with the
support of Retail Centre of Excellence (RCoE).
Copyright © 2017, Singapore Management University
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Paris Baguette: Quintessentially French with Love from Korea
should it find a staple bread specific to each European country and replicate the strategy followed in
France?
The Origins
Paris Baguette was the premium bakery café franchise brand owned by SPC Group, a leading food
and confectionary conglomerate in South Korea with sales of US$4.4 billion for the year 2015. 2 It
essentially comprised three main subsidiaries:
•
Samlip General Food: the food biotechnology company consisting of brands such as Shany,
Bizeun, Samlip, Tapiau, and Le Pommier;
•
Paris Croissant: the bakery company consisting of brands that included Paris Baguette
(premium bakery café franchise), Paris Croissant Café (premium bakery café), Pascucci
(Italian espresso café), LINA’s and Tamati (sandwich), Passion5 (upscale dessert gallery),
L’atelier (café restaurant), and Jamba Juice (smoothie); and
•
BR Korea: a joint venture established by the SPC Group and Dunkin’ Brands, Inc. that
included the Baskin Robbins and Dunkin’ Donuts brands.
The SPC Group had very humble beginnings. Initially established as a small bakery called
Sangmidang (the hall of beautiful rewards), in 1945 in Ongjin-gun, Hwanghae-do, North Korea, the
founder, Chang-Sung Hur, moved the bakery to Seoul, the national capital of South Korea, three
years later to enjoy better manufacturing and logistics facilities.
At the time, the key challenge faced by the baking industry was the high fuel costs as the white
charcoal used in the ovens was very expensive. This limited the ability to expand operations and
resulted in higher product costs. To overcome this bottleneck, in 1949, Chang-Sung Hur invented a
smokeless coal oven that used powdered coal, a much cheaper fuel, providing the company a
significant competitive advantage by bringing down the fuel costs substantially and enabling largescale baking. The savings generated were ploughed back into improving the quality and also
introducing new products such as the cream-filled bread pastry in 1962 and the cream-filled sponge
cake called “Cream bbang” in 1964—both of which were runaway successes. 3 With business
expanding, the company transitioned to being a general food company and was renamed Samlip Food
Corporation.
The focus on product development and innovation continued, and in 1964, the company installed
automated facilities using Japanese advanced technologies for baking. 1971 was another milestone
year in the firm’s operations; after a yearlong dedicated research and experimentation, it launched a
breakthrough product—steamed white buns filled with red bean paste called ‘Hobbang’. Despite
being premium priced, it had a huge demand and Samlip’s daily shipments crossed the one million
mark for the first time, catapulting the company to number one position in the Korean market. 4
2
Seo Jin-woo, “Korean Food Giant SPC Group Lays Out Aggressive Global Expansion Plan”, Pulse by Maeil Business News Korea, 2
November, 2015, http://pulsenews.co.kr/view.php?year=2015&no=1041389, accessed February 2017
3
Koon Boon Kee, “Baking Up a Korean Unification: The Globalization of Wide-Moat Compounder Samlip”, March, 2014, Beyond
Proxy, http://www.beyondproxy.com/wide-moat-compounder-samlip/, accessed February 2017.
4
Ibid.
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Paris Baguette: Quintessentially French with Love from Korea
In 1972, Chang-Sung Hur established another arm, Shany Inc., which was a high-end bakery about
a tenth of the size of Samlip. And in 1981, his second son, Young-In Hur, was asked to head it. But
Hur resigned within few months to join the American Institute of Baking and acquired a deeper
understanding of the role of technology and research for new product development and innovation
in baking. On his return to Shany, Hur focused on diversifying the product range. He also set up a
food technology research centre, the first in the Korean market.
In 1986, Shany introduced a new brand, Paris Croissant, to differentiate its ‘European-style’ bakery
from the ‘American-style’ food of its competitors such as Koryo Dang Bakery, Tae Geuk Dang and
New York Bakery. 5 Paris Croissant focused on French-style high-end bakery products that sold
freshly-baked items, where the dough was made fresh in each store. Initially, it opened directlymanaged stores, but Hur was keen to make fresh bread more readily available and at lower prices by
pursuing a franchise system like that of McDonald’s. And thus, Paris Croissant’s offspring—Paris
Baguette, a bakery franchise business, was born in 1988.
Paris Baguette: Providing ‘Freshness’ Efficiently
To reflect its strong association with French style, the Paris Baguette (PB) brand was replete with
French themes: from its name, an Eiffel tower logo, to the staff dressed in Breton-style striped tops.
To ensure that the quality of the baguettes and other breads was consistent, the dough was made
centrally and delivered frozen to all the franchise outlets. The stores then thawed the dough and baked
the bread themselves, providing it fresh to the consumers. To achieve the precise levels of crispiness
on the outside and chewiness inside a loaf, the right temperature and humidity levels for freezing and
thawing the dough were determined through experiments carried out over a year. This ‘freshness’
that was delivered in a cost-efficient manner helped PB grow rapidly into a top bakery café franchise
brand in Korea, offering authentic French bread, fresh sandwiches, cakes and coffee.
In 1992, just four years after it had been established, PB opened its 100th store in Korea; and by 1997
at US$101 million in sales, it was Korea’s largest bakery chain, opening an average of 120 stores a
year. 6 Keeping its thrust on operational innovation, the company also introduced a ‘par-baking’
system that supplied products in a half-baked state. The franchises had to then just bake them a bit
more, and they were ready to be served. This added considerably to the product assortment that the
outlets could carry and saved labour time and costs substantially. Additionally, in 1999, PB
introduced a ‘cool pack’ system for delivery that better preserved the freshness of its products and
reduced the delivery costs by doing away with the need for dry ice. The dough was delivered two to
three times a day to ensure maximum freshness.
In 2002, Shany formed the Paris Croissant consortium and bought Samlip, which had declared
bankruptcy in 1997. In 2004, the SPC group was launched.
PB’s focus on operational innovation, quality control, new product development and brand
5
Kyunghee Kim, 2015. “What Made a Bakery Franchise No. 1 in Korea? The Story of Paris Baguette and Its Success Factors”, Journal
of Marketing Thought, 2(1): 14-26.
6
Paris Baguette Website, Sales, http://eng.paris.co.kr/sales.html, accessed February 2017.
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Paris Baguette: Quintessentially French with Love from Korea
differentiation led to its exponential growth with more than 3400 outlets in the country by 2016 with
annual sales surpassing the $3 billion milestone (refer to Exhibit 1 for sales from 1997 to 2010). 7
With close to 80% market share, it was the undisputed leader in the Korean market. Its closest
competitor, Tous Les Jours, owned by CJ Foodville, was at about 20% share, followed by Crown
Bakery of the Crown group at less than 3%. 8
Recipe for Success
PB’s success was primarily driven by its emphasis to provide an innovative fare with a modern and
wide selection of fresh, clean and healthy products. To that end, it procured more than a thousand
different ingredients on a regular basis to offer a menu consisting of over 600 different types of
breads. It sourced the best raw materials, equipment, technology and service, produced proprietary
dough, and frequently delivered (2-3 times a day) an assortment of frozen dough, par-baked and
ready-made items to the bakeries nationwide to ensure freshness.
Hur had recognised that to deliver on all these parameters consistently demanded a distribution
system that could manage a high degree of operational complexity while being cost efficient. Also,
he knew that it was important to avoid the uncertainties associated with outsourcing in order to
maintain the high quality the brand professed. Thus, he established a vertically integrated supply
chain that gave the SPC group control over key operations such as the supply of raw materials,
processing of dough and semi-baked products, and delivery to the stores.
The main raw material – wheat, supplied by Mildawon (a Korean company acquired by PB in 2008)
was processed by the company-owned four manufacturing plants (known as SPC Logistics) across
Korea. The dormant dough and other products were then sent to 16 distribution centres, which in turn
delivered them to individual stores. 9
Breaking the Mould: Going Global
Shrinking Domestic Pie
The overall South Korean bakery and cereals market at US$3.7 billion had grown at a compound
annual growth rate (CAGR) of 3.9% between 2011 and 2015 (refer to Exhibit 2 for the annual growth
rates). 10 In 2014, the bakery industry was highly fragmented, consisting of more than 16,000 bakeries,
out of which 11,889 were independent entities. The corporate franchise bakeries accounted for about
25% of the total stores, and were predominantly represented by PB and Tous les Jours at 3324 and
1283 outlets respectively. 11
Hyo-sik Lee, “Paris Baguette to open 2,000 stores in US, China”, The Korea Times, 13 October, 2016,
http://www.koreatimes.co.kr/www/news/biz/2016/10/123_216037.html, accessed February 2017.
8
Kevin Kim, “Paris Baguette: The Expansion Question”, Ivey Publishing,
http://www.debateon.ca/uploads/7/8/2/2/7822220/case_study_business_class.pdf, accessed February 2017.
9
Kyunghee Kim, “What Made a Bakery Franchise No. 1 in Korea? The Story of Paris Baguette and Its Success Factors”, Journal of
Marketing Thought, 2015, Vol. 2, Issue 1: 14-26.
10
Marketline Industry Profile, “Bakery and Cereals in South Korea”, September 2016.
11
Young-mi Yoon, “Restrictions on Corporate Bakeries Have Led to Growth for Independents”, The Hankyoreh, 23 February 2016,
http://english.hani.co.kr/arti/english_edition/e_business/731682.html, accessed February 2017.
7
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In 2012, independent bakeries had more than 65% of the stores in the industry, but accounted for
only about 40% of the revenue. 12 Concerned that independent small scale enterprises did not get
enough room to grow under the shadow of franchise bakeries affiliated with major corporations, the
government attempted to create a more level playing field. Moreover, according to Seo-Jung Kim,
the Chairman of Korean Bakers’ Association (KBA) representing independent bakers,
The increase in independent bakeries means more choice for consumers who have to settle for
standardized franchise products. 13
In early 2013, Korean Fair Trade Commission passed a regulation designating the bakery industry
as an “SME-suited” area and restricted the likes of Paris Baguette from opening new stores within
500 meters of existing store locations. Furthermore, it limited the increase in franchise numbers to
only 2% annually. The guidelines also prohibited the replacement of old stores that were closing
down.
Despite strong protests by the franchise businesses, the government was of the firm belief that the
regulation would encourage entrepreneurship in the industry while offering consumers wider choice.
Indeed over the next three years, about 2800 people approached the Korean Bakers’ Association with
plans to open their own independent bakeries. 14 By 2014, just two years after the regulation was
passed, there was a 16% increase in the number of independent bakeries (11,889 in 2014), and a 29%
increase in total sales from US$2.05 billion in 2012 to US$2.65 billion in 2014.
In contrast, store growth for PB remained almost stagnant (3251 in 2012 to 3324 in 2014) and the
sales dipped marginally from US$1.074 billion in 2012 to US$1.068 billion in 2014. 15
With intensified competition, saturated consumer market and limited opportunities to grow, the
domestic business environment had become increasingly unfavourable for PB.
Expansion Overseas
PB was the first Korean bakery to go international. Its international operations started in 2004, when
it opened its first overseas company-owned store in Shanghai, China. By August 2012, it had opened
its 100th outlet abroad and 200th in December 2015, and by 2016 the chain had expanded to more
than 240 stores across China (166), Vietnam (9), USA (57), Singapore (6) and France (3). 16
The focal point of PB’s global strategy across all markets was to upscale, differentiate and localise.
It positioned itself as a premium brand, targeting upper-class consumers. Differentiation was
achieved by providing high quality ingredients, a wide variety in its innovative fare, and a
sophisticated service experience through upscale store interiors and atmosphere. PB also only used
its own proprietary dough, which was lighter, airier and less sweet than traditional dough to create
12
Kevin Kim, “Paris Baguette: The Expansion Question”, Ivey Publishing,
http://www.debateon.ca/uploads/7/8/2/2/7822220/case_study_business_class.pdf, accessed February 2017.
13
Young-mi Yoon, “Restrictions on Corporate Bakeries Have Led to Growth for Independents”, The Hankyoreh, 23 February 2016,
http://english.hani.co.kr/arti/english_edition/e_business/731682.html, accessed February 2017.
14
Ibid.
15
Ibid.
16
SPC Website, Global SPC, http://www.spc.co.kr/globalSPC_eng, accessed February 2017.
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unique offerings. In addition to its French-style offerings, the company placed an emphasis on
presenting a globally informed menu. But at the same time, it ensured that its marketing mix was
well integrated with the local tastes, culture and preferences, and that at least 20 percent of its menu
was tailored to the specific needs of the target market. Lee believed that the most important strategy
was to make delicious products that appealed to locals.
China
The brand’s pursuit of localisation strategy had led to its success in the Chinese market, known for
its complexity, where even the well-known French bakeries Paul or Fauchon had failed.17 Prior to
entering the market in 2004, PB had sent its employees to analyse the appetite and dietary culture of
the region to better understand the preferences of Chinese consumers. Knowledge of their love for
greasy food and preference for chopped meat in sandwiches led the company to develop customized
fare such as the Rousong bun, an immensely popular product in the Chinese market. 18 The brand also
developed strong ties with the community through its socially relevant initiatives such as the “cake
academy of love” (a baking course for the disadvantaged youth) and the sponsoring of a local
orphanage in China. 19 It saw tremendous growth in the market and within eight years, in 2012, had
crossed the 100th store milestone. 20
USA
PB entered the US market in 2005, first targeting the Korean ethnic population and other Asians in
the country before reaching out to the wider market. Hence its first store was opened in Los Angeles’
Koreatown, followed by the second at Palisades Park at New Jersey (popular hangout of Koreans)
and third in the neighbourhood of Korean restaurants at 32nd street in Manhattan. 21 As it was a brand
familiar to the Koreans, PB quickly gained acceptance and captured a viable consumer base.
Thereafter, it went beyond its Korean roots and opened in prime commercial districts such as Times
Square, Midtown and the Upper West Side to penetrate the mainstream Manhattan market. By 2013,
it had opened 30 stores in major US cities including San Francisco, New York, New Jersey and
Philadelphia, and successfully competed with renowned brands such as Panera Bread and Au Bon
Pain. 22
PB’s analysis of the US bakery market had revealed that the existing American bakery chains catered
primarily to morning-time consumers. This prompted it to differentiate itself through a variety of fare
offered round the clock—with espressos and pastries in the morning, sandwiches and salads for lunch,
and breads and cakes in the evening. Like in China, it again set emphasis on localising the menu
while ensuring that a wide selection with high quality ingredients was on offer. It introduced a unique
self-service system whereby consumers could pick up products using a tray and tongs, allowing a
product-consumer interface that reduced waiting time significantly. Additionally, the café’s
sophisticated interior supported the brand’s premium image, which was well received by the
17
Sunmin Ryu, Woojung Jang, and HyeJeong Cho,, “China Market Entry Strategy of Paris Baguette", Journal of Business Case Studies
(Online), 2014, Vol.10, Issue 2:.155.
18
Hyun-Chae Chung, “Paris Baguette Grows into Global Brand”, The Korea Times, 26 November, 2013,
http://www.koreatimes.co.kr/www/news/biz/2016/09/123_146868.html, accessed February 2017.
19
SPC Website, Global SPC, http://www.spc.co.kr/spc/eng/smile/globalSPC_foreign.spc, accessed February 2017.
20
Suk-Yee Jung, “Paris Baguette Going Global”, Business Korea, 6 August 2015,
http://www.businesskorea.co.kr/english/features/focus/11650-global-bread-paris-baguette-going-global, accessed February 2017.
21
Donald Kirk, “Mon Dieu, Korea's Paris Baguette Is Now a Real Parisian Boulangerie”, Forbes, 23 July 2014,
http://www.forbes.com/sites/donaldkirk/2014/07/23/mon-dieu-koreas-paris-baguette-is-now-a-real-french-cafe/#342ab9854246,
accessed February 2017.
22
SPC website, Global SPC, http://www.spc.co.kr/spc/eng/smile/globalSPC_foreign.spc, accessed February 2017.
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American consumers.
Southeast Asia
In 2012, PB expanded into Southeast Asia by opening its first outlet in Ho Chi Minh city, Vietnam.
Vietnam was an important market as bread was a staple food in the country, given its French colonial
legacy. As in the other markets, PB first carried out rigorous research of Vietnamese consumers’
taste for modern bakery and their acceptance of café culture. Based on its findings, it developed a
localised menu with items such as the Bahn Mi Baguette Sandwich.
In September of the same year, PB launched its first outlet in Singapore, followed by another in
2014. 23 Expanding to six stores by 2016, Singaporean’s high standard of living and the prevalent
advanced bakery culture fitted well with the brand’s core values.
Having successfully employed its strategy of glocalisation in different markets across Asia and North
America, Paris Baguette finally decided to expand to Europe with France as its first port of call in
2014. It was the ultimate test for the company as it took its bread to sell in the very market that was
the inspiration behind the brand’s existence.
France: The Spiritual Home of the Baguette
In 2014, Dominique Anract, president of the Chambre Professionnelle des Artisans BoulangersPatissiers, an association that required all members to strictly adhere to the traditional baking
standards, had famously remarked,
Anyone can make a traditional baguette, and companies are opening bakeries here, there and
everywhere in the world. The question that concerns us is not whether it can be done, but whether
what is produced is a good baguette. 24
In France, bread, and particularly a baguette, was the symbol of all that French traditions, culture and
cuisine stood for. It ranked high besides the beret, Eiffel tower and strings of garlic in being
quintessentially French. Understandably, there were strict rules and specifications to be followed in
order to make a traditional French baguette, laid down by decree 93-1074 in September 1993,
Baguette de tradition francaise’ is around 65 cm long, 5cm-6cm wide and 3cm-4cm high with an
average weight of 250 grams. It can only be made using ingredients such as wheat flour, water,
yeast, raising agent or salt, and must not contain any egg, milk products, oil or any preservatives.
Only minute deviations (type of flour) are allowed in the sub-clauses of the decree. 25
French bread shops were categorised as either a high-quality boulangerie, or a regular bakery called
a snack shop. A boulangerie was required to follow the entire process of bread-making with flour
and water at the premises in line with the regulations, while a snack shop could just simply bake
ready-made dough into bread.
Ibid.
Kim Willsher, “Korea's Paris Baguette Chain Expands to ... Paris”, The Guardian, 12 August 2014,
https://www.theguardian.com/world/2014/aug/12/korea-paris-baguette-chain-expands-french-bakery, accessed February 2017.
25
Ibid.
23
24
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In 2014, the French bakery and cereals market had recorded total revenue of US$24 billion, with
baked goods accounting for more than 60% at US$14.9 billion (refer to Exhibit 3 for market
segmentation by products). And within the baked goods category, bread comprised almost 50% at
US$7.9 billion. 26
Paris Baguette enters the Home of the Baguette
PB had been preparing for its entry into the French market for over twenty years. SPC had opened
an office in Paris in 1998 to enable it to import wheat and bread making equipment from Lille, a city
in the north of France, as Hur wanted to make sure that the bread baked by the company was as close
to the French taste as possible. Later, in 2006, it set-up a company in France in order to develop its
menu in line with local market preferences and prepare for the eventual launch of its store. 27
And in April 2014, it opened its first store ‘Paris Baguette Chatelet” as a boulangerie, in the heart of
the French capital, close to the Louvre, Paris City Hall, the Pont Neuf bridge and Notre Dame
cathedral. 28 The 200 square meters, 46 seat store was expected to be the company’s global flagship
store.
PB employed local chefs, and made the bread fresh, adhering rigorously to all the traditional baking
standards and guidelines. According to Hur,
We regard France as the spiritual home of our bakery products. The opening of our Paris store
highlights our commitment to continually improving and perfecting the quality of our European
– style bread and pastries. 29
To show its commitment to French values, PB joined the Chambre Professionnelle des Artisans
Boulangers-Patissiers.
Being ‘glocal’ in its approach, PB started by offering a menu that included baguettes, other French
breads, pastries and sandwiches that catered to the local palette, fast gaining approval from even the
most discerning of French customers. However, Lee knew that competing with other traditional
boulangeries with centuries of heritage was no mean task, and hence it was important for PB to
differentiate itself from the very start.
Baguettes… and the Paris Baguette
With obesity on the rise, French consumers were increasingly concerned about what they ate, and
demanded quality products that provided both taste and health. Thus, right from the outset, PB did
not compromise upon the quality of the ingredients, using only the best. The company also decided
to not sell any snacks such as chocolates and jelly (made by other companies) unlike other
boulangeries. According to the Country Manager - France,
26
Marketline Industry Profile, “Bakery and Cereals in France”, September 2016; Euromonitor International, “Baked Goods in France”,
October 2016.
27
Jin-Kyu Kang, “The Formula of Paris Baguette’s Successful Entry into Paris”, 2 August, 2016,
http://news.hankyung.com/article/2016080106371, accessed January 2017.
28
Kim Willsher, “Korea's Paris Baguette Chain Expands to ... Paris”, The Guardian, 12 August 2014,
https://www.theguardian.com/world/2014/aug/12/korea-paris-baguette-chain-expands-french-bakery, accessed February 2017.
29
Ibid.
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We do not sell processed products as we cannot control sugar level or other ingredients that may
not be healthy. 30
The efforts earned PB a reputation of producing high quality bread and established it as a ‘health
conscious’ brand. Soon it was supplying 60,000 breads each month to 41 local restaurants, including
La Fontaine Gaillon owned by famous actor Gerard Depardieu. PB was also the first boulangerie to
provide outdoor café-style space and indoor seating area that added to its appeal.
Once PB had won the confidence of the local customers, it introduced Korean variants such as
pastries with red bean and chestnuts and cinnamon cake which soon became sell-out items. The
shaved ice dessert from Korea called Bingsu (in mango, strawberry and coffee flavours) too captured
the interest of the French, who found it exotic and refreshingly different. It even got the attention of
the French Presidential Palace pastry chef. He noted Bingsu to be a “very unique dessert not found
in France”, and even inquired about the recipe and the ice-shaving equipment.
In less than a year of its opening, the stores’ customer base had expanded to 850 customers visiting
it each day, and sales grew by 25 percent. The success of its first store encouraged PB to open its
second store in the Opera district near Palais Garnier in Paris, in 2015. 31 In less than two years, the
two shops had served over 700,000 customers in Paris.
In 2016, in a bid to establish its credentials firmly even among the critics, PB decided to enter the
Coupe du Monde de Boulangerie, an annual premier baking competition held in Paris that was
described as the ‘most prestigious bakery contest’. President Hollande himself attended the event. 32
To the surprise of many, the Korean bakery won the competition, with its baguettes officially
declared as the best in the world.
Having proved itself beyond doubt, the company began to look at options for opening its third store.
It also wanted to consider cities outside of Paris and other pan-French cultural communities in the
world.
There was a sense of urgency as Paris Baguette's main rival, Tour Les Jours by the CJ Group of
Korea (another French inspired brand), was also following a global expansion strategy in the US and
Asia, and Lee recognised that it was only a matter of time before turned their eye on the European
market as well.
To be a Baguette or a Ciabatta?
Indeed, PB had gone beyond the chain’s Korean roots and proved that it was truly French. Lee hoped
that its success in France would be a stepping stone for the chain’s entry into the rest of Europe.
However, he wondered whether the French style that was deemed fashionable, sophisticated and
30
Jin-Kyu Kang, “The Formula of Paris Baguette’s Successful Entry into Paris”, 2 August, 2016,
http://news.hankyung.com/article/2016080106371, accessed January 2017.
31
Korea Bizwire, “Paris Baguette to Expand in France”, Inside Retail Asia, 2 July, 2015, https://insideretail.asia/2015/07/02/parisbaguette-opening-second-store-in-france-after-first-stores-success/, accessed February, 2017.
32
Stephen Evans, “The World's Best Bakers - And They Aren't French”, BBC News, 14 February 2016,
http://www.bbc.com/news/magazine-35562251, accessed February 2017.
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SMU Classification: Restricted
SMU-17-0022
Paris Baguette: Quintessentially French with Love from Korea
aspirational in Asia and the US would have as strong an appeal in the other European markets. Was
the value proposition ‘French-inspired’ desired by rest of the Europe?
Bread had significance beyond mere nutrition, and reflected culture and history of the different
regions in Europe. Hence different types of bread were popular across the continent. For example, in
Spain, traditional bread was ‘pan’ a long loaf-like French baguette but wider. A smaller version,
‘bocadillo’, was an iconic piece of the Hispanic cuisine with guilds of bakers for over 750 years. In
Italy, the popular bread was ‘ciabatta’, ‘piadina’, or ‘panettone’ (native to Milan); in Germany it was
‘pumpernickel’ bread or ‘pretzels’ while Belgians preferred ‘kramiek’ or ‘verviers’ among others.
Lee wondered what would be the right approach. Should the company find staple bread specific to
each European country and replicate the similar strategy as in France? Or should it be consistent and
use the baguette everywhere else to leverage on its success in France? With Tous les Jours at its heel,
it was critical to gain the first mover advantage by getting its entry strategy right. And more
importantly, which country should it enter next after France?
10/12
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SMU Classification: Restricted
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Paris Baguette: Quintessentially French with Love from Korea
EXHIBIT 1: SALES OF PARIS BAGUETTE FROM 1997 TO 2010
USD millions
1195
914
720
101
104
138
164
196
245
277
317
377
458
569
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Paris Baguette Website, Sales, http://eng.paris.co.kr/sales.html (accessed 28 February 2017).
EXHIBIT 2: SOUTH KOREA BAKERY & CEREAL MARKET VALUE
Year
2011
USD
Growth
(Billion)
3.2
2012
3.3
3.8%
2013
3.4
3.9%
2014
3.5
4.0%
2015
3.7
4.1%
Source: Marketline Industry Profile, “Bakery and Cereals in South Korea”, September 2016.
11/12
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SMU Classification: Restricted
SMU-17-0022
Paris Baguette: Quintessentially French with Love from Korea
EXHIBIT 3: BAKERY & CEREALS MARKET (FRANCE): % SHARE, BY VALUE
2015
3.6%
2.9%
5.2%
Bread & Rolls
9.9%
36.6%
Cakes, Pasteries & Sweet Pies
Morning Goods
Cookies
11.1%
Breakfast Cereals
Savoury Biscuits
Others
30.7%
Source: Marketline Industry Profile, “Bakery and Cereals in France”, September 2016.
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