Text | Wei Wen
Edit | Peng Xiaoqiu
Among the echelons of restaurant groups listed in Hong Kong, Green Tea is the most tenacious. After three consecutive submissions of forms to the Hong Kong Stock Exchange, the restaurant chain Green Tea (Green Tea Group Limited) has finally passed the hearing and is about to go public in Hong Kong. Green Tea intends to raise RMB1.5 billion, with CitiGroup and CMB International as co-sponsors.
In addition to green tea, hot pot chain restaurants Laowang and Qixintian, and fast food chain restaurants Rural Ji and Yang Guofu have all submitted prospectuses to the Hong Kong Stock Exchange. Cash flow is critical to restaurant chains, and going public may be a good way to continue expanding.
Green Tea Restaurant, once the original Internet celebrity restaurant, is now a common restaurant in the mall. There are many kinds of dishes, more than 100 dishes, and the environment is "small bridges and flowing water people's homes", which is 50-80 yuan per capita. Fusion cuisine accommodates Hundred Rivers and begins to move towards mediocrity. With the downturn in the Hong Kong catering market and the listing of domestic chain restaurant groups, is the green tea casual restaurant chain business still sexy?
The net profit point of green tea is already less than 10%. In the past performance of Green Tea, the revenue in 2020 is 1.57 billion yuan, the loss is 55 million yuan; in 2021, the revenue is 2.3 billion, and the net profit is only 110 million. If we exclude the impact of the epidemic, we can look at its 2019 performance, with revenue of 1.7 billion and net profit of 100 million.
This makes people wonder, where did the money earned by green tea go? Analyzing the prospectus again, we learned that in 2021, the cost of raw materials used in green tea restaurants was 850 million yuan, accounting for 36.9%, employee costs were 570 million yuan, accounting for 24.8%, and rent-related costs were 320 million yuan, accounting for 14.5%. The three core costs accounted for 76.2% of revenue and have remained high in recent years.
Source: Green Tea Prospectus
Limited by the business model of the past: low prices, queues
In 2004, when Green Tea founders Wang Qinsong and Lu Yan opened a youth hostel in Hangzhou's West Lake Scenic Area, they found that backpackers liked their fusion dishes such as roast chicken and flame shrimp. In the face of young backpackers, the dishes of the owner and the hostess are priced and popular. More diners came to the hostel than guests, so in 2008, Green Tea opened its first store in Hangzhou.
Low prices and queuing used to be the keywords of green tea. Different from the same low-priced duck neck and honey snow ice city, for the green tea casual restaurant chain business, labor, rent, raw materials have squeezed net profits. Therefore, the low price must be large, and the customer pays for the low price is the cost of queuing time. The first generation of internet celebrity restaurants, green tea at the beginning of its opening, became the king of the queues of that year. Grandma's house, which is also the original Internet celebrity and fusion cuisine "Hangcheng Three Musketeers", also made diners wait for 100 tables because of a piece of mapo tofu.
Fusion dishes are not addictive, there are many choices, and diners' dietary preferences are difficult to maintain. With the expansion of scale, the "net red effect" will eventually fade, and a new generation of consumers will begin to pursue endless creative restaurants, from Haidilao to Taier sauerkraut fish, to Wen Heyou and so on, green tea, grandmother's home began to be ordinary.
By the end of 2021, in China's casual Chinese catering market, green tea ranked fourth with 236 stores and 2.3 billion yuan in revenue; Grandma's family ranked fifth with 104 stores and 1.6 billion yuan in revenue. In this list, the first place is the Xibei Noodle Village, which is not listed, but also intends to be listed; the second place is the Taier Sauerkraut Fish under the listed company Jiumaojiu, and the third place is the small vegetable garden. That is to say, if the single-point model and scale expansion run through, chain catering enterprises still have investment value.
Top 5 in China's casual Chinese food market in 2021
In the early days of the development of shopping malls, fast fashion chain restaurants such as green tea and grandma's house were once used as a card for shopping malls to attract investment. Wu Guoping, the founder of Grandma's House, said in an early interview, "The development of Shopping Mall is also the basis for Grandma's House model to quickly open stores, because the rent that restaurants can afford is usually much lower than that of clothing stores, and Shopping Mall is willing to open up special floors or areas to do catering in order to attract customers." "But as shopping malls continue to grow and mature, many internet celebrity restaurants have emerged, and green tea without new stories and grandmother's home are facing the problem of popularization."
Wang Qinsong, the founder of Green Tea Restaurant, once said in an interview with China Chain media in 2015, "Green Tea Restaurant flipped the stage 4 times a day to protect the capital, and the highest is 7 times. "The lower limit of green tea is 4 times, which should be a threshold for mass catering, if it is not reached, it may be necessary to consider whether there is any problem." According to public reports, at that time, the daily passenger flow of green tea reached 1500 person-times, and now, diners have more choices, no longer queue for them, the overturn rate of green tea is gradually lower than 4 times, and the average number of daily receptions is cut by half to 500-600 person-times.
Per capita consumption and turnover rate of green tea
As early as the time of the explosion, Green Tea realized the survival crisis of other catering brands once squeezed in, so it crossed over to do the "Kanto-made" stew brand and the "playking" Western restaurant brand. Now, Green Tea tried to seize the next era of consumption, but all ended dismally, and Green Tea closed all its sub-brand stores before going public.
Judging from the financial data of the past three years, most of the newly opened stores of Green Tea have lost money. By the end of 2021, Green Tea had 236 restaurants. In the case of a poor dining environment, Green Tea still opened 59 new restaurants in 2021, but the number of loss-making restaurants in 2021 was 44, most of which were newly opened.
Green tea newly opened restaurant
Loss-making restaurants
In addition, from the perspective of the return on investment of the restaurant, the return on investment cycle of green tea is longer. A green tea store invested between $3.2 million and $3.7 million, taking 2.2 months to break even and 17.5 months to achieve a return on investment. It is reported that due to the impact of the epidemic, since the beginning of 2022, Green Tea has closed 80 restaurants.
How should the story of the original business model be outdated, the new brand folded, and green tea be told?
Next step: build the factory and sink
36Kr learned from the prospectus that the next plan of green tea is to break into the sinking market with the cost performance of dishes, and at the same time build its own factory and start to do pre-made vegetable retail business.
The dishes are comprehensive and cost-effective, which is the main feature of green tea since it was a youth hostel. In general, Green Tea offers 80 to 100 dishes per restaurant, mainly including signature dishes, appetizers, soups, main courses, vegetarian dishes, desserts and drinks. Green Tea updates about 20% of its dishes each year, with 120, 147 and 178 new dishes launched in 2019, 2020 and 2021 respectively. The average person is 60 yuan.
These dishes rely essentially on 176 third-party processors. After the processing manufacturer makes a "pre-made dish", it is sent to the store, and the back kitchen is simple processed. For example, bread tempts this dish, where two food processing plants produce bread for green tea, and another signature dish, green tea roast chicken, which requires only kitchen staff to bake the pre-pickled chicken in the oven for a period of time before it can be served.
Green tea signature dish
Third-party processors come to make pre-made dishes, green tea can concentrate on dish design, but the risk points are also concentrated here, and green tea dishes are easily copied and copied. Therefore, after the green tea is listed, it will establish a self-operated central food processing facility in Zhejiang Province, covering an area of 24,500 square meters. It will provide 6,800 tons of processed products and 93,000 tons of processed ingredients. Green Tea Central Kitchen is expected to start construction in the fourth quarter of 2022 and be completed in the second quarter of 2023, with a maximum annual production capacity of about 170,000 tons by 2028.
The central kitchen will be equipped with food processing equipment, such as machines that automatically clean, cut and marinate different types of raw materials. "We will selectively prepare semi-processed foods at the facility, such as green tea roast chicken, bread-seductive bread, while continuing to work with third-party food processing companies." By building a central kitchen, green tea can reduce its own high raw material costs (850 million yuan in 2021, accounting for 36.9% of revenue). Through the establishment of the facility, Green Tea is expected to follow the example of Haidilao, Laowang and Yafu to develop new retail businesses and sell pre-made dishes as the "second growth curve".
Second, Green Tea believes that continued store openings mean scale effects. Driven by more efficient and flexible manpower deployment, an increase in restaurant density in a city will bring about operational synergies generated by economies of scale and improve profitability at the restaurant level. Specifically, regional managers can redeploy staff across restaurants in nearby cities (with three or more restaurants) to cope with short-term spikes in foot traffic, enabling effective staffing between different restaurants within the cluster. Restaurants located in different parts of the same city (e.g. commercial and residential areas) often have different peak hours, and restaurant staff receive standard training before being sent to other restaurants without further training to take up their posts immediately.
Prospectus data shows that in terms of staff costs, cities with three or more restaurants decreased by 2.9%, 1.8% and 1.6% in 2019, 2020 and 2021 compared with cities with less than three restaurants. Green Tea believes that continuing to open stores can improve the profitability of green tea restaurants.
Source: Green Tea Prospectus
As a result, Green Tea has accelerated its opening of stores, planning to open 75 to 100 new restaurants per year from 2022 to 2024. In the future, most of the new restaurants added by Green Tea will be set up in second-tier, third-tier and below cities. In other words, sinking into the eyes of small-town youth is the goal of green tea's future chaining. Green Tea believes that with the continuous development of second-tier cities and below, the frequency of people eating out will increase, and the demand for casual Chinese fusion restaurants is expected to increase.
Source: Green Tea Prospectus
It's still a family business
Founder Lu Yan (Lu Changmei) once told the media in a 2014 interview about the ambition of 10 billion yuan and the premise of accepting financing is to let employees be the bosses. In the 14 years since Green Tea was founded, the only external investor has been Partners Gourmet. In 2017, United Group spent about $70.631 million to buy a stake in Green Tea from Time Sonic, controlled by Wang Lu and his wife, which accounted for 30% of the shares at the time, and 61 restaurants of Green Tea, valued at $235 million (about 1.6 billion yuan). Through this transaction, we can see that Wang Qinsong Road Changmei and his wife have been worth 1 billion yuan.
United Group is a private equity group from Switzerland, which has invested in nearly a dozen local Chinese funds, including CDH, Hony, Today Capital, Cybernaut and so on. According to the statistics of China Investment Network, it will earn $29 billion in revenue through project withdrawal in 2021 (2020: $12 billion). At the end of 2015, United Group had strategically financed the relevant service provider of maternal and infant products retailers, and the baby-friendly room was listed on the Shanghai Stock Exchange in 2018 (stock code: 603214).
But in fact, employees have not become the bosses of green tea, but the family business genes have become more and more concentrated. Chain restaurant groups are mostly bought and sold by husband and wife, such as Haidilao, Yang Guofu and even Laowang, and green tea is no exception. Green tea is the family business around Wang Qinsong and Lu Changmei. The three executive directors are Wang Qinsong, Lu Changmei's sister-in-law Yu Liying, and Wang Qinsong's nephew Wang Jiawei. In 2020, green tea lost 55 million yuan, of which 23.11 million yuan was subsidized by the government. Executive Director Yu Liying earns an annual salary of 3.7 million yuan and Wang Jiawei 1.7 million yuan.
Green Tea Group Structure
The couple even set up a family trust to diversify risks and preserve assets. Mr. and Mrs. Wang transferred 99% of their time Sonic control to Wang Qinsong's Yiedling Sky (49%) and Lu Changmei's Contemporary Global Investments (51%).
Green Tea establishes a family trust
Perhaps because of the experience of falling from the peak to the usual, the green tea family began to plan ahead and make financial planning in advance.