Changzhou’s CI3 Brings Cake-baking to China byIncubating an Israeli-Chinese JV

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Four years ago, Israeli Ronen Mechanik, 41, sent his Chinese friend Piu Piu a photo of an elaborate birthday cake he had baked for his son’s sixth birthday.

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Piu, impressed, asked Mechanik to send her the recipe. But because the Chinese don’t generally bake cakes at home, Piu had a hard time finding the necessary ingredients, and it took a while to order them online. When, finally, she was ready to go, she and Mechanik realized there was one more critical missing component: an oven. Piu didn’t have one, and none of her friends or neighbors had one either.

Trying to help, Mechanik asked Piu to list all the appliances she had in her kitchen. The first one on the list was the rice cooker. So Mechanik, a former sous-chef at a restaurant in Tel Aviv, bought one locally and experimented baking a Western cake in it. It took him several trials to produce something good. He then prepared a mix of all the dry ingredients necessary for the cake and sent it to Piu by post, along with baking instructions.

The result was obviously a success because a few days later Mechanik’s WhatsApp feed was flooded with compliments and pictures of the cake baked by Piu, with requests for more of the same. That was when Piu and Mechanik realized they may be onto something with a huge commercial potential.

So nine weeks ago they launched their website, UgaUga, from which Chinese users can order cake-baking kits for use in their rice cookers. Four thousand kits have been sold since the website’s launch, said Mechanik, just through word of mouth. The company is planning to launch a marketing campaign later this month.

The venture was made possible through UgaUga’s use of the CI3 Industrial Incubator, set up in China by Israeli entrepreneurs Tzvika Shalgo and Ilan Mimon, which aims to help Western firms, including medical equipment suppliers, automotive and industrial equipment makers, set up and promote their businesses in China. Located in Changzhou, 180 kilometers from Shanghai, CI3 helped UgaUga apply for its food license and helped overcome regulatory and red-tape difficulties; CI3 helped establish a local production line within the incubator to support managerial and operational aspects of the business and also obtained a grant from the local government for UgaUga.

“The accelerator was an umbrella for us. Having them help us cut about six months in bureaucracy and cut our expenses,” said Mechanik.

Singapore, Indonesia, Hong Kong and Korea — whose citizens use rice cookers — are all potential markets as well, along with student dorms in the US and Europe, where rice cookers are used due to dorm regulatory constraints. The key is to show what you can do with rice cookers, Mechanik said. But for now, UgaUga is focusing on China.

The cost of each cake kit is around $7 or 42 Renminbi. “It is not cheap but not expensive either, for the local market,” Mechanik said. In China, a slice of cake at a local Starbucks can cost $3 to $5 and ready-made party cakes bought in stores can cost up to $200-$300, he said.

The company has raised a few hundred thousand dollars from private investors to date, he said.

UgaUga has no patent on the cooking method, though the company’s name and its products are protected.

“But there is so much room” in China, he said. If other manufacturing companies jump in and help spread the message that rice cookers are not just for rice, “it will be better for us” as they will create even more awareness among potential consumers. “The best protection is to be the best and to keep innovating and talk to customers about what they want.”

 

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