Within 30 minutes of departing from Shenzhen railway station in mid-October, Feng Guo-hua had arrived in Hong Kong to check out his new restaurant in the centre of Kowloon.
A veteran of mainland China’s food and beverage industry, Feng decided to venture into the city this year with his brand of Hunan cuisine. He told HKFP that he believed the market for spicy food in the metropolis was not yet saturated, but, more importantly, he aimed to expand into foreign markets.
“In our journey to go overseas, Hong Kong is our first stop. It is very expensive to run a business here. If we can survive in Hong Kong, then we can survive anywhere, ” Feng said in Mandarin. Around him, servers rushed dishes piled high with chillies to diners in the 5,000-square-foot space.
The 44-year-old businessman said he and his partner had invested around HK$8.5 million in the new eatery, including the rental deposit, decoration fees and equipment. It was almost triple the cost of opening a branch in Shenzhen.
“While rent has gone down in Hong Kong, the cost of manpower – especially for decoration, is extremely high, ” Feng said. “But I can set the prices of dishes higher here… I am confident.”
In recent months, a number of chain restaurants and tea shops from mainland China have ventured into Hong Kong. Tony Ng, a Hong Kong businessman who used to run eateries in mainland China, has been among those taking advantage of the trend.
Ng introduced Yao Yao – a chain that specialises in Sichuan-style fish soup with pickled mustard greens – to Hong Kong through a franchise partnership in late 2021. The brand has opened four branches in the city so far.
Ng said he had signed contracts this year with another three mainland Chinese companies to open restaurants in Hong Kong in the coming months through franchises or joint ventures.
Mainland Chinese brands must go through a lot of adaptation before venturing overseas, Ng said. “Hong Kong is a buffer zone for them – it’s still in China, but they have stepped out of the country.”
William Cheng, a banker experienced in fundraising around Asian markets who requested a pseudonym, told HKFP that – recently – mainland Chinese companies needed to show they could operate overseas to raise funds, especially if they want to go public. Cheng calls this, “telling a story.”
“Telling a China story used to be very popular – such as when Tsui Wah Restaurant expanded into China many years ago. Now, it is not – the Chinese economy has slowed down and faces sanctions,” William said in Cantonese. “Now businessmen need to ‘tell an overseas story’. How can a Chinese brand tell an overseas story? They go to Hong Kong as the first overseas pilot for expansion.”
‘Eggs in another basket’
According to Feng, venturing into Hong Kong is like “putting your eggs in another basket” amid a gloomy economic outlook in mainland China and a market saturated with people looking to make a profit from everyday meals.
“There are limited options for investment [in mainland China]. People used to put money in real estate, but now the property and stock markets are poor, ” Feng said. “Investors have turned to eateries as they think, no matter what happens, people need to eat.”
With increasingly more supply, demand is not growing. “After the pandemic, people are tightening their wallets, making it more challenging to earn money,” Feng said.
He launched his Hunan restaurant chain Nong Geng Ji in 2016, and now owns around 70 restaurants under the brand in mainland China, most of them in Shenzhen, the city just across the border from Hong Kong.
While many Hongkongers used to venture north of the border to dine and shop during weekends and on public holidays, Feng said revenue was only around 60 per cent of 2019 levels, as consumption habits had fallen during the Covid-19 pandemic and were yet to pick up.
“The first quarter [of 2023] was good as we saw revenge spending, but it started to decline in April. During the summer holiday, business was better, but it was still weaker compared to pre-pandemic,” Feng said, adding that he planned to close some branches in mainland China.
Candice Yao, who founded the fish-soup chain Yao Yao in 2016, also told HKFP that consumption in mainland China remained relatively weak.
Yao, 38, grew her business quickly, but it took a heavy blow during the pandemic; especially in 2022, when Beijing imposed strict Covid-19 restrictions. Consequently, the number of Yao Yao restaurants in mainland China has dropped from 80 to 50.
“The number of customers is growing, but consumption per consumer is declining,” Yao said in Mandarin by phone.
“Yao Yao don’t have any plans to expand in mainland China… at least for this year,” she continued. “Our target for 2023 was to vigorously develop overseas markets, because the restaurant business overseas has proved to be very good.”
Feng’s expansion into foreign markets has been fast, with Nong Heng Ji taking its Hunan cuisine to Singapore just weeks after opening in Hong Kong.
“If things go smoothly, we will explore other countries in the future – Malaysia, Philippines, US… and Australia, Canada, Japan.” Feng said. He was already planning a trip to New York in December to seek opportunities.
Hong Kong sentiment
Hong Kong is no stranger to mainland Chinese-owned restaurants. There are small family-run eateries and those operated by young entrepreneurs who want to go public, hoping to replicate the success of well-known hotpot chain Haidilao which raised almost HK$8 billion when it listed on the Hong Kong Stock Exchange in 2018.
But the process of adopting to local tastes has proved tumultuous.
The experience of Hey Tea, a tea shop chain known for its cheese tea, can be seen as a cautionary tale. It ventured into Hong Kong in late 2018 and quickly expanded, opening eight shops across the city.
But, during the protests that occurred the following year, Hey Tea was boycotted as many Hongkongers turned away from mainland Chinese brands. By the end of 2022, Hey Tea had managed to survive the pandemic, but it had just two shops left in the city.
Mainland Chinese entrepreneur Wang Jing-yuan, who founded lemon tea brand LinLee, told HKFP he had thought of venturing into Hong Kong before the pandemic, but the 2019 protests and unrest made him worried that business would be affected.
“If we went to Hong Kong at that time, we’d be concerned about how Hong Kong young people perceived Chinese brands, as most of our consumers are young people,” Wang said.
Founded in 2018 in Guangdong province, LinLee quickly grew during the pandemic when take-away drinks rose in popularity. The brand currently has some 1,400 shops in mainland China with direct management and franchise partnerships.
By early 2023, Wang, who also kept an eye on rental trends in Hong Kong, saw that sentiment had changed.
“We saw some mainland eateries go to Hong Kong. And we felt Hong Kong was more stable… the rent was favourable, as well,” Wang said, calling it “good timing.”
In September, the brand opened its first shop in the city, a franchise in Mong Kok, recording HK$800,000 revenue in its first month.
“Hong Kong is a stepping stone to going abroad,” Wang said, adding that the city’s finance system was more aligned with international practice. Money made in Hong Kong could be more easily transferred to other countries, which was good for businesses such as his, which Wang hoped to expand into Southeast Asia.
“We plan to launch around 100 tea shops in Hong Kong in the coming two years and go public in Hong Kong by 2026,” Wang told HKFP.
Hey Tea, too, was expanding again, having recently opened two new shops in Mong Kok and Tsuen Wan.
By 12.30 pm on an October Wednesday, foodies and office workers had already started to line up outside Yao Yao in Harbour City mall in Tsim Sha Tsui.
Ng, who helped the brand enter Hong Kong, moved to the city from mainland China as a teenager in the 1990s and got a job as a cook’s apprentice soon after arriving. By 2008, he had his own restaurant in Beijing and thus developed a network in China’s catering industry.
To do well in Hong Kong and internationally, Ng said Chinese brands had to be “repackaged.” For Yao Yao, he suggested making dishes less spicy upon request and added several items to the menu.
“People here want to try different dishes in one restaurant. In Hong Kong, you can taste the cuisines of Beijing, Sichuan and Shanghai under one roof,” Ng said.
He also introduced single-person portions of Yao Yao’s signature fish soup to cater for office workers, which accounted for a large proportion of revenue when the government banned evening dine-in services during the pandemic.
“Hong Kong is a good reference in terms of packaging brands in a more international way to cater for foreign markets. It’s also a process of ‘gold gilding’,” Ng said, adding that it elevated a brand.
Since opening in Hong Kong, Yao Yao now has franchises in Los Angeles and Chicago in the US, and also Singapore.
Earning the money of overseas Chinese
Hong Kong has been undergoing a population shift. While many local families, expats and the headquarters of foreign companies left the city in recent years, talent and capital from mainland China have been entering.
In the first nine months of the year, Hong Kong issued some 100,000 work visas under various types of talent schemes. According to statistics from Immigration Department, at least 78.7 per cent are from mainland China, while most enterprises attracted under government schemes are mainland Chinese companies.
For businessman Feng, his expansion plan coincided with “runology,” a term that refers to the study of how to emigrate or run away from China, went viral during the lengthy Covid lockdown in Shanghai last year.
“Many people have left Hong Kong, and that happened in mainland China as well, ” Feng said. “Overseas, [mainland Chinese-run] catering businesses still focus on Chinese clientele, and most of the Chinese who went overseas were the wealthy ones.”
Indeed, HKFP observed that most diners at Feng’s newly opened Hunan eatery in Jordan were speaking Mandarin.
To keep his customers happy, however, Feng needed manpower, something that was proving tough to manage. “Hiring local staff is very difficult,” Feng said. Despite offering HK$17,000 to HK$19,000 per month for service staff, he still had trouble finding employees.
The government has sought to tackle a widespread labour crunch by “enhancing” a supplementary scheme, which came into effect in September and allows employers to hire non-local staff for 26 positions, including chefs, waitresses, cashiers, and salesmen without restrictions on how many.
Ng said his company was in the process of hiring nearly 30 non-local staff. Considering language and cultural similarities, they would all be from mainland China. He said he expected thousands of mainland Chinese staff to be entering the Hong Kong food and beverage industry by early next year.
Hong Kong has long been known as a culinary destination, catering for diverse populations and international tourists with dishes from across the globe.
However, Winston Yeung, chair of the Hong Kong Federation of Restaurants & Related Trades, said there had been a decline in foreign investment in eateries since the pandemic. Several such ventures had left the city, he said, and new investors were turning instead to Japan and Southeast Asia.
“Everyone thought that business would go up again after the pandemic. It hasn’t. There are fewer people due to emigration and outbound travel, and there are fewer foreign tourists, especially those from the US and Europe,” Yeung told HKFP in Cantonese.
Liu Yong-zhong, chair of the Shenzhen Culinary Association, told HKFP that many restaurant groups from mainland China hoped to seize the moment while Hong Kong’s catering sector was experiencing “a generational change. “
“Now there are more and more interactions between Hong Kong and the mainland. Plus, with many restaurants closing during the pandemic, there is a gap in the market now, and that means opportunity,” Liu said.
Hong Kong businessman Ng said he thought that some Hongkongers still had negative feelings towards Chinese brands, but, unlike during the 2019 protests, they did not show them explicitly.
“And some radical ones have left the city,” Ng said. “From a business perspective, the most important thing is that, as some people leave, other people come.”
He was busy preparing to open new restaurants, with one coming soon in Shatin New Town Plaza and another one launching in Mong Kok.
Feng, meanwhile, is doing the maths and becoming more acquainted with Hong Kong’s regulations and financial system. He said that, if things went well with his first eatery in Hong Kong, he planned to launch around 20 in the city over the next two years, while also expanding overseas.
“China’s economy will take several years to recover. But it’s not just China, the global economic environment is unfavourable. And we must ensure there is no war. Who cares about doing business if there is a world war raging?” Feng said. “That’s what we’re thinking, to spread the risks and not put all our eggs in one basket. ”
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