Photos: Aries Consulting
TSUI WAH GROUP (HK: 1314), a Hong Kong-based café restaurant chain with new sites opening in the PRC, sports sky high gross margins of near 70% and an equally lofty reputation for fine food and atmosphere, with delectable dinners now deliverable right to your front door, an executive told investors.
And the restaurant’s frequent exposure in cinema and a steady stream of stars popping in for a meal significantly boosts brand cachet.
Almost all Hongkongers are familiar with the Tsui Wah chain, with prominent restaurant locations in prime property space across the city’s central business district and beyond.
The Tsui Wah chain, launched in 1967, now sports 21 restaurants in Hong Kong, four in the PRC and one in Macau, all offering high-end traditional Hong Kong-style local food items and cuisine.
Tsui Wah also operates its “Tsui Wah EATery” at the Hong Kong International Airport, as well as providing home-cooked meals delivered right to your door via its “Supreme Catering” division.
And like countless Hong Kong businesses, a major recognized future growth driver is not necessarily just those who call the city home.
“Tsui Wah successfully capitalized on the Hong Kong Tourism Board’s promotion to build a quality brand recognizable to PRC tourists, and thus opened a chain of new restaurants in Hong Kong at hotspots for Mainland tourists,” Tsui Wah CFO Mr. John Yang told investors at the Aries Consulting-sponsored “Braving the Waves: China Investment Strategies 2013” conference.
Sky-high margins
Speaking at the event in Shenzhen featuring China, Hong Kong and Singapore-listed firms, Mr. Yang said Tsui Wah has become renowned for its fine food and efficient serving format which affords the restaurant chain much more generous pricing flexibility.
When compared with Hong Kong’s other garden variety café style restaurants, Tsui Wah offers a far richer selection of Hong Kong-style foods to both tourists and locals alike and thanks to its near half-century of brand building, it commands higher prices than its peers.
In the Hong Kong-listed firm’s most recently released results, April-September group revenue rose 35.7% to 487 million hkd while net profit was up 38.8% at 64.8 million.
“Performance improved thanks to new restaurant openings and higher revenue per shop over the period,” Mr. Yang said.
Gross margins over the period stayed steady at around 69.7%, while the net profit margin edged up 0.3 percentage point to 13.3%.
He added that enjoying and protecting such healthy margins was what set Tsui Wah apart from the competition.
Tsui Wah’s café style restaurants are perhaps the most popular type of eateries in Hong Kong these days.
In 2011, Hong Kong had 15,760 restaurants with around 2,034 café restaurants classified as “Hong Kong-Style Café Restaurants (Cha Chaan Teng).”
There are around four chains operating under the “Cha Chaan Teng” category while Tsui Wah is the largest and the most successful, claiming a 3.2% market share.
TWG’s prices are therefore set at a steep premium to its peers – differentiating itself from its smaller local rivals.
“A watershed moment for us was the launch of a café restaurant in the core commercial center of Central’s “Lan Kwai Fong” as it set in place a 24-hour around-the-clock high-turnover business model which successfully attracted diners from the finance industry, white collar executives and night owl diners,” Mr. Yang said.
He added that Tsui Wah enjoys “very strong brand recognition.”
It also earns a very high gross margin and has a fast customer turnover rate.
For the “Cha Chaan Teng” chain café restaurants, average annual revenue per restaurant is 11.3% higher than peers at 9.9 million hkd in 2011.
Shooting for the stars
The Wellington Street restaurant in the hip Lan Kwai Fong section of Central has grown to become a stargazing mecca where hungry diners have a relatively good chance of occasionally catching a glimpse of their favorite local or Mainland celebrity.
The more upscale Lan Kwai Fong nightlife district also lends itself to a post-clubbing snack at the nearby Tsui Wah restaurant by the rich and famous.
The restaurant has been prominently featured in a growing number of films as a must-visit eatery for the well-to-do in Hong Kong, with popular hits like Perfect Couples (1993), Love in a Puff (2007), Love in the Buff (2011), and Lan Kwai Fong (2011) all providing excellent product placement and gratis PR for Tsui Wah’s brand.
And to top things off, adding to the popular image boost via movie shoots, the financial world began paying attention to Tsui Wah as much more than just a place to eat and be seen after the restaurant chain launched its IPO in Hong Kong just two months ago.
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