China Economy

Cafe de Coral expansion stays on track despite rising costs

Rising costs and slowing economy will not slow the fast food chain from opening more outlets

PUBLISHED : Tuesday, 27 November, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:00pm


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Fast food chain Cafe de Coral will not slow the opening of shops despite rising labour, rent and raw materials costs.

The company also said it would offset the impact of inflation by improving productivity and offering new products to customers.

"If we simply transfer the cost pressure to our consumers, nobody will buy," chief executive Sunny Lo Hoi-kwong said.

Lo said the company would fully support the government's plan to increase the minimum hourly salary to HK$30 from HK$28. "We will adjust our employees' salaries according to market conditions," he said.

Chief financial officer Mike Lim Hung-chun said the company would maintain its earlier announced plan for shop openings.

The company opened 14 outlets in Hong Kong and 15 on the mainland in the first half of the financial year. It plans to open 20 outlets in Hong Kong and 30 on the mainland for the whole year.

Lo said short-term economic ups and downs would not affect long-term investment plans on the mainland, where it had 129 operating units by September, including 106 Cafe de Coral outlets. Most of them are in Guangdong province.

"The growth of the mainland economy slowed in the first half, but when development slows, it is also possible to see good investment opportunities as rent and other costs may decrease," he said.

In Hong Kong, the company operated 151 Cafe de Coral fast food outlets - the key contributor to its revenue and profits - by the end of September. It also ran 26 Super Super Congee & Noodles shops and 18 Oliver's Super Sandwiches shops.

In the six months to September, revenue of the Hong Kong operations rose 7 per cent to HK$2.48 billion.

Total revenue in the six months grew 8 per cent to HK$3.14 billion, while profit rose 16 per cent to HK$221 million.

Lim expected the company to maintain its performance in the second half. "Usually the second-half results are better than the first," he said.

Shares of Cafe de Coral yesterday rose 1.2 per cent to close at HK$22.90.