Date
18 August 2017
LVMH, the world’s largest luxury group, is a majority shareholder of Milan’s Cova pastry chain which operates a number of restaurants in Hong Kong. Photo: AFP
LVMH, the world’s largest luxury group, is a majority shareholder of Milan’s Cova pastry chain which operates a number of restaurants in Hong Kong. Photo: AFP

What makes these restaurants tasty for investors?

Cova, Pizza Express and Crystal Jade are famous restaurant chains. If you are a cheese lover, a pizzaholic or a fan of noodles, you might know these restaurants and might have even tried their food.

Over the past year, they have been attracting investment companies, even luxury giants.

Hony Capital, a Chinese private equity firm owned by PC maker Lenovo Group Ltd. announced recently that it will acquire British restaurant group Pizza Express for £900 million (US$1.5 billion).

A year ago, LVMH, the world’s largest luxury group, bought a majority shareholding in Milan’s Cova pastry chain. In May, Singapore-based Chinese restaurant group Crystal Jade was bought by L Capital Asia backed by LVMH.

I have tasted the food in these restaurants in Hong Kong. One of them is the market leader, with good food quality, a well established operation and continuous expansion.

The three deals were driven by increased consumption due to rising middle-class incomes. The Organization for Economic Cooperation and Development said the global middle class will increase to 3.2 billion by 2020 and 4.9 billion by 2030.

The bulk of this growth will be in Asia which will account for 66 percent of the world’s middle-class population and 59 percent of middle-class consumption.

Hony Capital and LVHM are keeping an eye on the business opportunities arising from this emerging group. The three restaurant chains are thriving in Hong Kong’s highly competitive market.

Also, they have great potential in different regions and countries in Asia, especially China.

A KPMG partner estimates China’s middle class will grow from 14 percent of the population in 2012 to 53 percent in 2022. The majority of Asia’s emerging middle class will be in China.

With Chinese consumers increasingly cautious about food safety in the wake of a scandal involving expired meat sold to McDonald’s, KFC and Pizza Hut, new entrants that offer higher food quality are likely to find favor in the mainland.  

This is where the likes of Cova, Pizza Express and Crystal Jade could come in. The challenge is differentiating themselves from other foreign brands and domestic rivals.

– Contact us at [email protected]

RA

The writer has been a columnist and a retail professional in Asia for over 10 years. He was born and raised in Hong Kong and graduated from the MBA program at the University of Northern Iowa, U.S.

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