Tao Heung cooks up growth plan

PUBLISHED : Thursday, 05 April, 2012, 12:00am
UPDATED : Thursday, 05 April, 2012, 12:00am


Cantonese restaurant group Tao Heung says it is poised to double in size to 200 restaurants and bakeries by 2017, banking on the growth of the mainland's middle class.

The firm, famed for offering a whole chicken at HK$1, plans to expand into mainland provinces outside of Guangdong this year.

It currently operates 69 restaurants in Hong Kong and 17 restaurants in Guangdong.

'Cantonese food is considered an upmarket cuisine in the provinces outside of Guangdong,' said Eric Leung, Tao Heung's chief executive. 'We will cash in on the undeveloped mid-priced market by setting up restaurants in those provinces.'

The upcoming restaurants will be set up in Shenyang, Nanning, Shanghai and Wuhan.

Leung says the introduction of the minimum wage has increased mainlanders' spending power, but it has also led to higher operating costs.

This year, Tao Heung will open five to six restaurants in Hong Kong and up to nine on the mainland, including Zhongshan, Guangzhou and Huizhou.

'This is the first time in 16 years that our expansion on the mainland exceeds that in Hong Kong,' Leung said. The total capital expenditure will amount to HK$240 million.

To offset higher labour costs, the firm has deployed automated queueing machines for customers to place orders while they are still waiting for a table.

The machines will be installed at all of its mainland restaurants by the end of the year.

Leung says the increased use of automation is logical, given the labour shortage in Hong Kong, with some new restaurants - especially on Hong Kong Island - unable to hire enough staff.

The firm is looking at acquiring seafood suppliers to offset surging food costs.

Last year, it bought poultry- and pig-rearing farms.

Tao Heung also has centralised kitchens in Dongguan and Tai Po to prepare dim sum.

Stringent cost control and an integrated supply chain enabled the firm to lift its profit margin to 15.6 per cent last year, up from 15.2 per cent in 2010.

Tao Heung posted a 16.2 per cent rise in full-year net profit for 2011 to HK$254.9 million from 2010.

Its shares closed up 1.5 per cent at HK$4.18 on Tuesday.