To Drive Cross-Regional O2O Development
CHINA – Media OutReach – 9 January 2020 – Li Bao Ge Group Limited (“Li Bao Ge” or the “Company”; stock code: 1869) today announces its acquisition of a 70% stake in Yaoliang (Shanghai) Food Co., Ltd. (“Yaoliang”), the brand owner and operator of Shanghai Sun Kau Kee (“SKK”) at a consideration of RMB22.4 million.
The acquisition is in line with the Company’s strategy of exploring opportunities in China’s “new retail” light-meal delivery market through an asset-light business model. Concurrently, the Company enters into a framework cooperation agreement with Shanghai Freshippo Network Technology Co., Ltd. (“Freshippo”) to deepen the cooperation and accelerate the pace of store opening.
Pursuant to the acquisition agreement, Li Bao Ge will acquire a total of 32 SKK in-store counters opened in Freshippo stores. SKK is specialized in cooked food with roast duck as its signature product. It is one of the leaders in the roast meat (“Siu Mei”) industry in Shanghai, China. Through this acquisition, Li Bao Ge will expand the presence of its in-store counters in Freshippo from Hong Kong and cities in the Greater Bay Area such as Shenzhen and Guangzhou, to Shanghai, where the consumer purchasing power is strong.
Furthermore, pursuant to the framework cooperation agreement, Li Bao Ge will open in-store counters at Freshippo stores and will offer Cantonese-style soup, dim sum, dessert, as well as other specialties such as festive delicacies. Taking advantage of Freshippo’s comprehensive online-to-offline (“O2O”) platform and technical support, including its marketing initiatives, online sales resources, delivery service and potential customers, Li Bao Ge will be empowered to further expand its businesses in Mainland China.
“We are actively exploring opportunities in the light meal delivery market, developing from a restaurateur to a multi-channel operator covering eat-in, takeaway and retail. SKK expands its market with a new retail mindset, which is in line with Li Bao Ge’s development strategy. With the existing network of SKK and the proper use of Freshippo’s brand awareness and high traffic, we believe that the ‘Sun Kau Kee’ brand will work in synergy with the Company’s original ‘Li Bao Ge’ brand, which is conducive to the Company’s penetration in eastern China with Shanghai as the center.
It will also help us to continue exploring China’s fast-growing food delivery and takeaway market through our new retail model, so as to further improve our profitability. In addition, since the size of the Company’s new in-store counters are significantly smaller than its customary high-end Cantonese restaurants, the investment cost will be considerably lowered. This will enable the Company to transform into a less capital-intensive business model,” said Li Bao Ge Chairman Chan Chun Kit.
Presently, Li Bao Ge operates eight mid-to-high-end Cantonese restaurants in Hong Kong and Shenzhen. Its revenue is mainly derived from banquets. The Company has recently announced a cooperation with Freshippo to jointly explore new retail opportunities in the catering market, and plans to set up no less than 10 in-store counters (under the brands “Li Bao Ge” and “Sun Kau Kee” ) at Freshippo’s stores in Shanghai before 31 December 2020. After the acquisition of SKK, the target number of Li Bao Ge stores in Mainland China will increase significantly to a total of more than 60 by the end of 2020, laying a solid foundation for the Company to tap into a consumer base with high spending power.
Upon completion of the acquisition, SKK’s existing management team will stay in place. Leveraging SKK’s existing platform and accumulated experience in new retail, the Company can further expand the eastern China market. The Company can also apply the experience of its new retail model to the Greater Bay Area to speed up its expansion in the area.
By strengthening the cooperation with Freshippo, Li Bao Ge will benefit from more diversified revenue streams from O2O sales. The Company will gradually transform from a conventional banquet dining operator to a light meal delivery industry player, and will also explore the opportunities for the retailing of packaged food to accelerate the pace of expansion and enhance profitability.
“We appreciate Li Bao Ge’s dedication to catering. Li Bao Ge is a leading brand in Cantonese cuisine rooted in Hong Kong with famous Hong Kong-style Siu Mei. We firmly believe that our alliance can strengthen the foundation of the ‘Sun Kau Kee’ brand and ‘Li Bao Ge’ brand in the catering industry, and make full use of our potential in the field of new retail to push the business to new heights,” said SKK Founder and President Luo Lu.
SKK is a brand under Yaoliang and has extensive new retail experience. It has maintained steady business development and has 32 stores as of 9 January 2020.
Mr. Hou Yi, President of Freshippo, said, “Freshippo is committed to improving the shopping experience for consumers. The further cooperation with Li Bao Ge will definitely bring a better shopping experience to consumers.”
Freshippo is the new retail flagship under Alibaba Group. With fresh foods as its main attraction, its physical retail stores focus on enhancing customer experience, while delivery speed is the strong suit of its online business. It has built a comprehensive commercial channel comprising “fresh food supermarket + catering + App e-commerce + logistics,” with a quick delivery cold-chain distribution system that guarantees deliveries as quick as 30 minutes within a radius of three kilometers. As of 30 September 2019, there were 170 self-operated Freshippo stores in China.