Date
17 December 2017
Many middle-class parents are willing to spend more on quality education for their young children even if that means cutting back on discretionary spending. Photo: parenting.com
Many middle-class parents are willing to spend more on quality education for their young children even if that means cutting back on discretionary spending. Photo: parenting.com

Why running kindergartens is a lucrative business

In Hong Kong, parents need to pay more than HK$100,000 in annual tuition for sought-after kindergartens, a lot more expensive than a college education.

Teaching kids appears to be such a lucrative business that it has attracted new entrants like C.banner International Holdings (01028.HK) in China and Chow Tai Fook Enterprises in Hong Kong.

C.banner, a mainland footwear company, said in a recent announcement that it has agreed to pay US$79.41 million to acquire a 45.78 percent stake in EtonKids Educational Group, which established Beijing EtonKids International Kindergartens in 2002.

It now operates more than 40 high-end kindergartens in Beijing, Shanghai, Tianjin, Chongqing, Nanjing etc. The group offers bilingual education and adopts the Montessori philosophy, a child-centered educational approach.

It’s now one of China’s largest private kindergarten groups, and it made a net profit of 38.27 million yuan in 2015 and 50.86 million yuan in 2016.

EtonKids is one of the most expensive kindergartens in China. For example, students who enroll in its Beijing campus this year need to pay an annual tuition of 150,000 yuan. Harrow International School Beijing, affiliated with Harrow School London, charges 200,000 yuan a year.

China’s kindergarten industry will benefit from the nation’s second-child boom, according to Chen Yixi, chairman of C.banner. “The acquisition will enable us to diversify our business and expand our presence into early childhood education,” he said.

C.banner is one of China’s second-tier footwear companies. But its business has been heavily battered by the online shopping boom.

It suffered a 59 percent slump in first-half net profit to 39.06 million yuan. Given that, the profitability of its kindergarten business could be comparable to its original core operation.

Meanwhile, Victoria Educational Organization, a well-known private kindergarten group in Hong Kong with 53 years of history, will hand over the management of eight kindergartens and nurseries to Chow Tai Fook Enterprises from next year.

Chow Tai Fook is one of the major shareholders of the kindergarten chain. It decided to run the Victoria kindergartens under the newly established education business unit.

Victoria is one of the most expensive kindergartens in Hong Kong. For example, half-day and full-day courses in its Causeway Bay campus cost HK$89,000 and HK$139,000 a year, respectively.

To give their children a head start, not a few middle-class parents are willing to spend on children’s education, even if that means cutting back on other discretionary expenses. No wonder shoe retailer C.banner and jewelry group Chow Tai Fook are both eyeing the kindergarten business.

This article appeared in the Hong Kong Economic Journal on Sept. 7

Translation by Julie Zhu

[Chinese version 中文版]

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RT/RA

Hong Kong Economic Journal columnist

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