Cafe de Coral to launch chain of Italian-style coffee bars

PUBLISHED : Saturday, 07 July, 2007, 12:00am
UPDATED : Saturday, 07 July, 2007, 12:00am

Cafe de Coral Holdings has expanded into the high-margin coffee business by forming a joint venture to open 28 Italian-style coffee bars in Hong Kong and Macau over the next five years.

The venture, in which Cafe de Coral has a 70 per cent stake and Italian coffee group illycaffe 30 per cent, will develop the high-end espressamente illy chain in Hong Kong and Macau. The first shop is likely to open in September.

Cafe de Coral chairman Michael Chan Yue-kwong expects the venture to generate annual turnover of HK$150 million.

Net profit margins for selling coffee would be 20 per cent, double those in the fast-food trade, he said.

Development of the chain would cost about HK$30 million over the next five years, with an initial investment of HK$12 million.

'Each shop should bring in profit in about two to three years,' he said at the joint-venture agreement signing ceremony yesterday.

The lucrative cafe market has already attracted locally listed computer firm Chevalier iTech Holdings, which in 2005 spent HK$205 million to acquire Pacific Coffee from Thomas Neir, who founded the chain in 1992. The rival Starbucks franchise is operated by a 50-50 joint venture between Dairy Farm and Maxim's group.

Andrea Illy, chief executive of illycaffe, said there was room for development in Hong Kong despite the fierce competition.

The new concept coffee bars will also sell alcohol, quick meals, snacks, desserts and espresso machines. Without identifying the locations, Mr Illy said outlets could be opened at 'places such as the airport, department stores, malls, shops-in-shops and stand-alone shops'.

The chain's coffee shop sizes would range from a corner shop to 300 square metres, he said.