Tao Heung boosts China appetite

Cantonese restaurant chain plans to open more outlets to focus on the growing middle class

PUBLISHED : Wednesday, 10 April, 2013, 12:00am
UPDATED : Wednesday, 10 April, 2013, 3:57am

Cantonese restaurant chain Tao Heung is stepping up its expansion on the mainland in an effort to capitalise on the growing middle class.

Its target is for the mainland to contribute 40 per cent of the company's revenue within the next five years.

Tao Heung plans to open 12 restaurants this year, of which six or seven will be on the mainland and the rest in Hong Kong, chief executive Eric Leung said.

Leung said the chain was seeking to expand beyond Guangdong.

"We have confirmed we'll be opening an outlet in Shanghai and one in Zhengzhou [in Henan province]," he said.

Tao Heung opened eight restaurants on the mainland last year, bringing the total to 25. Three are located outside Guangdong - in Shenyang in Liaoning, Wuhan in Hubei, and Nanning in Guangxi.

The firm had 75 restaurants in Hong Kong at the end of last year after opening six outlets in the city.

Revenue from mainland operations jumped 23.2 per cent from a year earlier to 1.07 billion yuan (HK$1.33 billion) last year, accounting for 26.3 per cent of total revenue. Revenue from Hong Kong operations grew 10.3 per cent to 2.99 billion yuan, contributing 73.7 per cent of the total.

"We aim to increase the revenue contribution from our mainland business to 35 to 40 per cent in the next five years," Leung said.

The central government's crackdown on extravagance would slow down consumption at high-end restaurants, he said, but Tao Heung's target market was mid-range customers.

Average spending per head was 71.40 yuan, representing single-digit growth, while average spending at Hong Kong outlets was HK$67.20, said Veanna Tsang, the firm's director of finance and accounting.

"In contrast to Hong Kong's Tao Heung, which targets the mass market, we aim to attract middle-class customers, and we see this group of people increasing," Leung said.

Mounting concern over the H7N9 virus might have a short-term impact on the catering business on the mainland, but Leung said: "Cantonese restaurants have the advantage of providing a large variety of food. If customers are worried about H7N9 and don't choose chicken, we can still offer other choices."