Chinese braised duck chain Zhou Hei Ya International hopes to open a shop in Macau next year, its first outside mainland China, in a step towards achieving its ambition of bringing its popular fast food snack to the every corner of the world.
“We are talking to some partners in Macau. We hope, as our first store outside mainland, it can yield a solid business model that we can apply to other markets,” Zhang Yuchen, chief executive officer, told the Post in an interview. “Our dream is that wherever a human being exists, Zhou Hei Ya is there.”
Starting out as a stall serving freshly cooked spicy duck necks in a Wuhan wet market in 1997, Zhou Hei Ya built its name on its special flavours and seasonings. It is now a Hong Kong-listed company operating in more than 100 Chinese cities, with a market value of nearly HK$20 billion (US$2.58 billion).
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Now, it is seeking a second growth spurt as competition between home-grown casual food makers heats up.
It aims to more than double its outlets to about 3,000 in the next two years, from the 1,300 it currently runs. In comparison, its biggest rival Juewei Food, which also specialises in braised duck, has over 10,000 stores, including 25 in Hong Kong.
“We are facing head-to-head competition and we are upgrading ourselves, from new flavours to new sales channels and even new meat – vegan duck products – to pave our way to becoming a company that can survive for at least 100 years,” said Zhang.
“Unlike the three essential meals a day, casual snacks are not necessary. The hunger for braised duck neck can easily disappear or be replaced by hunger for other snacks if customers cannot find us at that moment.
“We have to make sure that our products are accessible to our customers at any time and anywhere they want us. Thus we need to boost our presence, both offline and online.”
Zhou Hei Ya also plans to establish a presence in China’s fast-growing omnichannel fresh grocery markets – a business model combining online grocery orders, bricks-and-mortar shops and home delivery championed by Freshippo, which is owned by the South China Morning Post’s parent, Alibaba Group Holding.
Zhou Hei Ya aims to have up to 10,000 sales points in the next three years, a huge increase from the 2,000 it currently hosts on such platforms as Freshippo, Miss Fresh, Dingdong Maicai and Pupumall, as well as convenience stores like FamilyMart and 7-Eleven.
To fund such grandiose expansion, the company raised HK$1.55 billion selling bonds on November 5, citing the need to “support further penetrate in existing markets and explore new business opportunities, especially in overseas markets,” in a filing to the Hong Kong stock exchange.
Investors seem to believe in Zhou Hei Ya’s potential growth and the future of China’s fast-food snack sector. The company’s shares have rallied 50 per cent so far this year, versus a drop in the Hang Seng Index of 8.75 per cent.
China’s snack industry is forecast to grow 36 per cent by the end of this year to 3 trillion yuan (US$432 billion) from 2.2 trillion yuan in 2016, according to the Snack Report published by the Ministry of Commerce. Growth is being partly driven by younger snackers, who are less price sensitive, the report said.
Zhou Hei Ya saw revenue of 903.5 million yuan (US$136.8 million) in the first six months of this year while its main rival Juewei Food generated 2.4 billion yuan in the same period.
Meanwhile, other major casual snack makers, including Shenzhen-listed Three Squirrels and Shanghai-listed Bestore, which used to focus on nuts and dried fruits, have also dipped their toes into the braised duck market .
Foreign capital has been flooding in to the sector. PepsiCo in June completed its biggest acquisition in China, forking out US$705 million on Be & Cheery, an online retailer of dried fruits, duck necks and other snacks.
Its 45-year-old founder, the billionaire Zhou Fuyu, recently joined a three-hour live-streaming event with Chinese actor Chen He, drawing an audience the size of Hong Kong’s population and selling 150,000 products.
“We welcome every method that can help us touch our consumers, including traditional e-commerce platforms like Taobao and JD.com as well as live-streaming on TikTok and vlogs. There is always nothing to lose by keeping up with the trend,” said Zhang.
Income derived from online channels increased more than 45 per cent year-on-year, according to the company’s latest interim report released in September.
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