After the epidemic, mainland brands have been flocking to Hong Kong to set up shop. In the bustling areas of Hong Kong, mainland brands have been popping up like mushrooms after the rain. However, some brands like “Fragrant Handmade Lemon Tea,” restaurant brand “Radish Facing South,” and snack shop “Gulu Meatball House” have recently closed down before operating for a year. Analysts believe that the low profit margins in the catering industry, coupled with the influx of mainland brands opening shops in Hong Kong, might not be immediately absorbed by the market. Furthermore, some analysts point out that opening stores in Hong Kong is a way to move money overseas under the increasingly strict foreign exchange controls in mainland China.
According to comprehensive data, since the middle of last year, at least 42 mainland catering brands have opened stores in Hong Kong, including “Explore Fish,” “Log Cabin BBQ,” “Four Seasons Coconut Grove,” “Too Two Pickled Fish,” and others, with over a hundred stores opened in prime locations like Yau Tsim Mong and Causeway Bay.
The “Milksha” store that opened in the bustling Mong Kok district at the end of last year initially drew long queues, but the crowd has dwindled in recent times. Our reporters interviewed a customer named Ah Chun who visited the “Milksha” store in Mong Kok. He mentioned that the drinks at the store were “cheaper than the bubble tea shops outside.” He stated, “This cup of lemon water costs 9 Hong Kong dollars, which is half the price,” and felt that the taste was similar to other stores, saying, “It’s acceptable.” However, he expressed that the proliferation of drink shops specializing in handcrafted lemon concoctions might be due to a novelty factor as “Hong Kong people like to try new things.”
He mentioned that he has tried the pickled fish and BBQ dishes from mainland brands but admitted it was just out of curiosity, saying, “Try it once, that’s it.” As for the recent closures of mainland catering brands in Hong Kong, he attributed it to the residents’ lack of acclimatization to the taste.
Mr. Kam, who works in the banking sector, stated that Hong Kong has always had a business-friendly environment, and the closure of some mainland brands in Hong Kong within a few months is market-driven. While he does not oppose mainland brands coming to Hong Kong to set up shop, he admitted he personally would not patronize them, expressing concerns about the quality of ingredients. He mentioned, “It doesn’t make sense to sell a cup of handcrafted lemon tea for 7 dollars. They won’t necessarily provide you with natural ingredients.”
The Guangzhou snack shop “Gulu Meatball House,” with over 500 branches in mainland China, opened a shop near the Yau Ma Tei MTR Station on Nathan Road with a monthly rent of around 60,000 dollars last September. However, the shop was put up for lease again at the end of April, including the equipment inside the shop.
Furthermore, the chain barbecue restaurant “Sita Old Lady,” with over 400 stores in mainland China, opened a branch in the New World Center in Tsim Sha Tsui with a monthly rent of 300,000 dollars last April. However, recent reports indicate that they have been in arrears in rent for several months, and the landlord is looking for new tenants. But until a new tenant takes over, the barbecue restaurant is still in operation.
Economic analyst Luo Jiacong, speaking on the YouTube program “Looking at China from Hong Kong,” pointed out that these mainland brands may not fully understand the Hong Kong market. The tastes may differ from the preferences of locals. He remarked, “People are getting tired of the mainland stuff. If something new suddenly appears, people will want to try it out of curiosity. Previously, Hong Kong had trends like eggettes and pearl milk tea, which became popular for a while but eventually faded. As for the influx of mainland brands into Hong Kong, he believed that the way mainland companies operate in Hong Kong, opening numerous stores in a short period, may lead to market saturation and fatigue among customers.
The retail sales situation in Hong Kong has worsened after the pandemic, with provisional figures for April showing a 14.7% year-on-year decline in total retail sales value to 29.576 billion dollars, the largest drop since July 2020 during the pandemic. Compared with April 2022 during the pandemic, the figures were even worse.
In terms of restaurant revenue, it stood at 9.342 billion dollars in March this year, a slight decrease compared to 9.361 billion dollars in the same period last year but still below the 9.194 to 10.589 billion dollars during the same period from 2017 to 2019 before the pandemic.
Despite the slow recovery in Hong Kong post-epidemic, the government continues to promote the entry of mainland enterprises into the market.
In November 2023, the Invest Hong Kong department participated in a seminar co-hosted with the Jiangsu Provincial Government in Nantong City, Jiangsu Province, aiming to encourage Jiangsu enterprises to expand overseas markets. The chairman of Jiangsu Hefu Catering Management Co., Ltd., Li Xuelin, shared his experience of expanding business overseas. According to available information, their brand “Hefu Noodle” has over 400 outlets in more than sixty cities in mainland China, and a branch of “Hefu Noodle” opened in Causeway Bay in February this year.
In April this year, the Invest Hong Kong department held an exchange meeting with the Sichuan Provincial Business Department in Chengdu, Sichuan, promoting investment opportunities in the Hong Kong catering industry to encourage Sichuan catering companies to leverage Hong Kong’s advantages and enhance their brand’s international visibility before entering foreign markets.
However, columnist Gao Tianyou raised doubts in an article in the Sing Tao Daily on the high operating costs in Hong Kong, indicating that mainland catering brands may find it challenging to balance the three key factors – ‘affordable,’ ‘attractive,’ and ‘authentic,’ which are emphasized in mainland markets. He believed that these enterprises might have strategic considerations, using Hong Kong as a stepping stone to further expand into overseas markets. More importantly, with the tightening foreign exchange controls in mainland China, the explanation for brands opening and closing within half a year may involve shifting funds abroad.