Browse Directory

China turmoil? These Australian restaurateurs don't think so

China's economy might be slowing and its sharemarkets fractured, but this has not dented the expansion plans of Australian restaurateurs and food companies, which are increasingly looking to Shanghai and Beijing for growth opportunities.
 
Luke Mangan, who this week opened the latest incarnation of his Salt restaurant in the Maldives, has his eye on Shanghai for his next move.
Luke Mangan, who this week opened the latest incarnation of his Salt restaurant in the Maldives, has his eye on Shanghai for his next move. Supplied
 

Chefs Luke Mangan and Bill Granger are among those set to open venues in China, along with Mexican chain Guzman Y Gomez, which is backed by Target Australia chief executive Guy Russo, who was previously the head of McDonald's in Greater China.

Dominos' China franchise, which counts Macquarie Group as an investor, and cafe chain Jamaica Blue also have big expansion plans in China, where incomes are rising and western food is becoming increasingly popular.

Mr Mangan, who already has venues under the Salt brand in Jakarta, Singapore, Tokyo and the Maldives, expects to have secured a location in either Shanghai or Beijing within the next 12 months.

"I see this [China] as a very important part to our brand strategy," he said via email.

Mr Granger, famous for creamy scrambled eggs and hotcakes at his Sydney cafe Bills, is tight-lipped about his China expansion.

"We are always looking for opportunities and had our first visit to China this year," he said via email from London where he recently opened a third casual dining venue.

Mr Granger already has restaurants in Seoul, Tokyo and Honolulu and is known to have held partnership discussions with the family behind textile conglomerate Shandong Ruyi, which is also the largest shareholder in Queensland's Cubbie Station.

"It might be a little early to talk," he said.

The Australian food scene has a strong profile in China due partly to the success of restaurateur Michelle Garnaut, chef Hamish Pollitt and cafe chain Wagas, which even serves a flat white coffee.

While high-end Chinese restaurants have suffered from the central government's two-year-old austerity drive, western eateries are still showing strong growth.

Overall spending on restaurants rose at an annual rate of 11.5 per cent in the first half, according to government figures, while urban disposable incomes were up 9 per cent.

It is this increasing affluence that is attractive to groups like Dominos, Guzman Y Gomez and Jamaica Blue.

But Australia's fast food king, Jack Cowin, who as chairman has guided the Australian-listed arm of Dominos into Japan and Europe, remains unconvinced by the China proposition for chain restaurants.

"What is required is enough faith to get to 100 or 200 stores and then you might be profitable," said Cowin, who owns Hungry Jacks. 

"But in the meantime you need to take a few deep breaths as the numbers [dollar amounts] in China are so large."

"That's the reality for any food service business going into China."

Despite such caution Guzman Y Gomez, which has 62 restaurants in Australia and plans for a further 25, will begin its China expansion in Shanghai.

"The plan is to start in Shanghai and build up to 10 restaurants there before looking to Beijing and Shenzhen," said director and chief financial officer Robert Hazan.

Guzman began its overseas expansion in Singapore nearly two years ago and has since opened in Tokyo and has plans for South Korea and Taiwan.

The chain's expansion on the mainland is being driven by Mr Russo, who got to know the market well during his time running McDonald's China.

At a more advanced stage is the Macquarie-backed Dominos, which already has 70 stores across China and is looking to open a further 50 over the next 12 to 18 months.

Macquarie is thought to have invested about $US15 million in early 2013 for a minority interest in the pizza chain's Chinese business.

Privately owned cafe chain Jamaica Blue is set to open two new stores in Shanghai shortly, taking its total in China to 23.

"We are very profitable in China and are seeing strong like for like sales growth," said Drew Eide, the Sydney-based brand manager for Jamaica Blue.

 

Source: Australian Financial Review, Angus Grigg and Lisa Murray, July 17th 2015