By Feng Yiming, Caixin Weekly

The Trend of Chinese Cuisine

In June, Chinese tea brand Heytea held a seven-day pop-up event at Lion City Mall in Singapore, with some customers waiting in line for an hour.

This pop-up event was to build anticipation for Heytea’s official store opening in August 2024. In fact, Heytea had entered the Singapore market through a national distributor back in 2018. However, after five years, disagreements arose between the two parties regarding store locations and renovations. In early 2024, over a dozen Heytea stores in Singapore were rebranded as “Amps Tea”, with the distributor going independent.

Overnight, Heytea found itself “displaced” and had to start over. Since 2023, a new wave of Chinese food and beverage businesses expanding overseas has emerged. This time, Heytea decided to abandon the distributor model and hire a local CEO for direct operations. Heytea told Caixin that it plans to expand to eight Asian countries: Singapore, Malaysia, Thailand, Indonesia, Vietnam, the Philippines, Japan, and South Korea. Among these, expanding to six Southeast Asian countries is the most important plan for the next five years. The company will establish its Asia-Pacific headquarters in Singapore, with products currently identical to those in China.

In 2023, Nayuki announced the opening of franchises and launched its first stores in London, Melbourne, New York, Kuala Lumpur, and Vancouver. In July 2024, it set up a pop-up store in Paris. Another milk tea brand, Shuyi Burning Grass Jelly, has been expanding overseas since 2023 and has now entered markets in Southeast Asia, Spain, and the United States.

Chain Chinese restaurant brands like Tai Er Sauerkraut Fish, Zhang Liang Spicy Soup, and Yang’s Braised Chicken Rice have noticeably accelerated their overseas expansion. “After August and September (2023), we clearly felt the heat of ‘going global’ coming at us. First, there was a surge in inquiries about franchise opportunities. Second, industry events, exhibitions, forums, and exchange meetings began to appear frequently, and it felt like the focus of upstream and downstream attention suddenly shifted overseas,” the overseas head of Zhang Liang Spicy Soup told Caixin. The company’s overseas store count reached 63 across 15 countries in 2023 and continues to expand in 2024.

Lin Tan, CEO of overseas human resources platform PayInOne, also told Caixin that this year, catering companies are recruiting heavily overseas, and related companies in catering raw materials, services, and equipment are also following the trend of “going global.” “In the past three years, the number of overseas employees and payroll in our company has grown by over 200% annually.”

“When catering businesses, as consumer entities, ‘go global,’ most companies first choose the Southeast Asian region, mainly considering factors such as low personnel costs and convenient management, before gradually expanding to Europe, America, Australia, Japan, and South Korea,” Lin Tan said. “The ‘going global’ model depends on the company’s own operational strategy, with both franchising and direct operation options available. Overall, more companies choose franchising over direct operation.”

2023 was dubbed the “first year of going global” by the catering industry. Over the past decade, various catering businesses have gradually laid out plans for overseas markets, but “going global” was not an industry consensus. In 2023, the catering industry, having experienced the pandemic, quickly resumed its “internal competition” mode. A Huafu Securities research report pointed out that in 2023, the number of newly registered catering enterprises in China reached 3.1869 million, a year-on-year increase of 24.24%, with 3.18 million new catering-related enterprises opening, significantly intensifying competition. In contrast, the demand for Chinese cuisine in overseas markets has not been fully released, with about 600,000 Chinese restaurants overseas, and the international Chinese catering market remains highly fragmented.

“Small catering businesses are now fiercely competitive, placing high demands on companies’ operational efficiency, costs, and innovation,” Li Weisen, Deputy General Manager of Yang’s Braised Chicken Rice, told Caixin. In 2021, the company’s Asia-Pacific headquarters internally discussed the next steps, ultimately deciding on domestic brand upgrading and “going global” to seek incremental growth as two important directions…

In March 2024, China’s Ministry of Commerce and eight other departments jointly issued the “Guiding Opinions on Promoting High-Quality Development of the Catering Industry,” which mentioned accelerating the global expansion of Chinese cuisine, supporting catering operators to actively explore overseas markets, and actively promoting Chinese chefs to work abroad, as well as supporting catering raw materials to enter international markets.

For many years, the biggest challenge for Chinese catering businesses “going global” has been the supply chain issue. However, after years of development, the maturity of the supply chain in domestic chain catering has improved, creating conditions for this new wave of “going global.” The franchise chain model relies on relatively mature Chinese franchisees, “but the overseas supply chain is not smooth, and there will be problems in stocking, customs clearance, and store connection, which to some extent limits the research and development and new product launches of local stores,” an investor who has investigated the U.S. milk tea market told Caixin.

Liao Tianshu, Chairman of Boston Consulting Group (BCG) China, pointed out to Caixin that currently, domestic catering businesses going global are mainly focused on categories with high standardization and low supply chain requirements, such as milk tea and coffee. “The local market abroad has a higher acceptance of coffee flavors, and Chinese fast food (QSR) may have opportunities in the future, but it still needs to explore overseas acceptance.” She cited KFC as an example, which has undergone a long period of localization exploration even in China.

He Xiaoqing, President of Kearney Greater China, told Caixin that even for China’s most globalized hotpot brand, it’s still difficult to “break out” of the local Chinese circle abroad. “It’s hard to imagine foreigners making hotpot a habit. Chinese catering going abroad still needs to adapt flavors for localization.”

A New Round of “Going Global”

On June 21, 2024, Yang Lijuan resigned as CEO of Haidilao (06862.HK) to become CEO of Super Hi International. Haidilao’s announcement stated that the executive change was due to the company entering its next stage of development, where it will focus on refining management of business fundamentals while promoting entrepreneurship, innovation, and digital development.

“This personnel change means that Haidilao will accelerate its expansion in overseas markets, while the domestic market enters a stage of refined operations,” analyzed a person close to Haidilao. Yang Lijuan had previously led the development of markets in Singapore and the United States, and during the pandemic, she led the “Woodpecker” and “Hard Bone” plans that helped the company successfully turn losses into profits. Yang Lijuan has strong market development capabilities, while her successor, Gou Yiqun, excels in operations. Haidilao’s Entrepreneurship and Innovation Committee was established under Gou Yiqun’s leadership.

Haidilao is a representative of the previous wave of chain catering “going global.” It opened its first overseas store in Singapore in 2012, later expanding to markets in Thailand, Malaysia, Japan, the United States, the United Kingdom, Australia, and more. In 2022, Haidilao spun off its overseas business into an independent company, Super Hi International, which was listed on the Hong Kong Stock Exchange. As of the first quarter of 2024, Super Hi International operated 119 stores, with 60% located in Southeast Asia.

Yang Xibei, Public Relations Director of Super Hi International, also serves as the manager of a Haidilao store in Singapore. She told Caixin that in the past, overseas Chinese cuisine mainly manifested as “immigrant cuisine,” but Haidilao brought overseas Chinese dining into the “brand dining” stage. Its first overseas store opened in Clarke Quay, a core commercial area in Singapore. “Now in many Southeast Asian countries, the localization rate of Haidilao store customers has reached 80%-90%.”

Before chain Chinese restaurants like Haidilao “went global,” international consumers’ impression of Chinese cuisine was mostly limited to “mom-and-pop shops” in Chinatowns, with menus largely confined to internationally known dishes like Peking duck, Kung Pao chicken, and Mapo tofu.

The “2024 Chinese Catering Brand Going Global to Southeast Asia Research Report,” jointly released by the China Chain Store & Franchise Association and Singapore consulting firm Pan-Asian Franchise Consultants, points out that around 2010, private Chinese catering brands represented by Haidilao, Meizhou Dongpo, and Huang Ji Huang became more systematic and professional when “going global,” paying more attention to brand building and standardized management. This not only initially established the position of some leading Chinese catering brands in the international market but also cultivated a group of management teams and technical talents with international practical experience. “The ‘going global’ of Chinese cuisine during this period marked the transition of Chinese catering enterprises from passive adaptation to active integration into the international market.”

In the decade following Haidilao’s global expansion, more chain Chinese restaurants and milk tea brands have tested overseas markets. Unlike Haidilao’s fully direct-operated model overseas, many catering brands export their franchise model, which has been quickly embraced by overseas Chinese, with strong franchise demand.

The process of Chinese catering brands “going global” has accelerated. During this period, overseas stores were seen as “icing on the cake” for brands. Which market to enter was more dependent on whether local Chinese had franchise needs, with franchisees largely responsible for store location and operation, and headquarters management being relatively loose, often making it difficult to ensure store survival rates.

“In 2015, our first overseas store opened in Melbourne, Australia. At that time, we didn’t have the concept of ‘going global.’ If a franchisee wanted to do it, they would come to headquarters to learn,” said Li Weisen. Yang’s Braised Chicken Rice is a fast-food brand originating from Shandong, established in 2011, with over 6,000 stores nationwide. In 2016, they established a subsidiary in the United States, and in September of the following year, opened their first U.S. store in Los Angeles, offering only one dish – “braised chicken rice” – priced at $9.9. “At that time, (the U.S. store opening) caused quite a stir. We could sell 400 portions a day, but later, due to long queues, we limited it to 200 customers per day.”

In 2017, Yang’s Braised Chicken Rice entered markets in Thailand, Japan, Myanmar, South Korea, and other countries. Now, they have over 100 franchise stores in more than 10 countries. “We have stores at the entrance of the first Disneyland (in California) and in Beverly Hills (a wealthy area in the U.S.),” Li Weisen said.

Heilongjiang fast-food brand Zhang Liang Spicy Soup established its overseas team in 2019 and announced the opening of overseas franchises. The overseas head recalled that the company’s initial intention to layout overseas was not to seek a “second growth curve,” but to “add luster” to the brand. However, in the year they opened overseas franchises, she felt the enthusiasm of franchisees. “In terms of inquiries, there were about 300 potential customers throughout the year, mostly from the United States, followed by Southeast Asia and Europe. That year, we signed contracts for more than a dozen stores.”

The ensuing pandemic caused overseas development to stagnate. “The number of inquiries and store openings during the three years of the pandemic decreased by nearly 80% compared to 2019, until it rebounded in early 2023, reaching a level of hundreds of inquiries per month.” As of June 2024, Zhang Liang Spicy Soup had 19 stores in the United States (including stores under renovation), 10 stores each in Singapore and Thailand, with plans to open 8 more stores in Singapore in the future.

Jiumaojiu Group’s (09922.HK) Tai Er Sauerkraut Fish persisted in overseas store expansion during the pandemic. Chen Xi, head of Tai Er Sauerkraut Fish’s international business department, told Caixin that their first overseas store opened in Singapore in 2021, attracting long queues of consumers even during the pandemic. After making a name in Singapore, Tai Er Sauerkraut Fish expanded to Malaysia, Thailand, and Indonesia in 2022, and entered the U.S. market in 2023. The company divides its overseas markets into three major regions: Southeast Asia, North America, and Hong Kong, Macau, and Taiwan. They currently have 5 stores in Singapore, 4 in Malaysia, and one each in Thailand, the United States, and Canada.

Beyond Chinese cuisine, coffee and milk tea stores have expanded overseas more rapidly, as these categories have smaller stores, require fewer staff, and have simpler supply chains. Luckin Coffee began laying out its overseas market in 2023, viewing Singapore as its “overseas outpost,” opening 32 direct-operated stores within a year.

Luckin replied to Caixin, stating that Singapore has a mature coffee consumption market, with developed economy, transportation, and technology, making it to some extent a “touchstone” for going global. Luckin maintains its brand positioning and new retail coffee business model in the Singapore market as it does in China. However, a person close to Luckin said that Luckin will next open stores in Malaysia and the United States, “currently all adopting a direct operation model, without opening franchises.”

Chengdu local coffee brand 5coffee signed its first Malaysian franchisee in 2023, and in just the first half of 2024, signed contracts for around 20 overseas stores. The company’s head, Zi Hao, told Caixin that nearly 20 potential customers inquire about franchising every month. Another milk tea brand, Sweetala, opened its first overseas store in Indonesia in August 2023. The company’s chairman, Wang Wei, announced at the 2023 partner conference that they will fully develop the Southeast Asian market in the future, expecting to open 500 stores by the end of 2024.

Chayan Yuese took a different approach, avoiding the competitive Southeast Asian market and opening its first overseas store in South Korea, then entering the Thai and Australian markets. On June 13, Chayan Yuese’s official Weibo account stated that they had opened 4 stores in South Korea and two each in Thailand and Australia.

As China’s largest milk tea chain brand, Mixue Bingcheng was also the earliest to “go global,” opening its first overseas store in Vietnam in 2018. According to the company’s prospectus, as of September 30, 2023, Mixue Bingcheng had opened about 4,000 stores in 11 countries overseas. The aforementioned report by the China Chain Store & Franchise Association states that Mixue Bingcheng’s initial “going global” was not an important decision at the company’s strategic level, but rather a trial driven by the personal interests of senior management. “They formed a small team to conduct market testing, verifying the feasibility of overseas markets.”

A person close to Mixue Bingcheng pointed out that the company started researching overseas markets as early as 2016, ultimately choosing Vietnam because of its proximity, smooth supply chain, cultural similarities, and a market already educated by milk tea brands like Gong Cha. A Mixue Bingcheng franchisee in Malaysia told Caixin that currently, Mixue Bingcheng has about 300 stores in Malaysia, while the number of stores in the Indonesian market has reached 3,000. “They have stopped recruiting in Indonesia and Singapore, but are still in the expansion phase in markets like Thailand.”

Replicating Mixue Bingcheng’s Model

“Mixue Bingcheng has essentially ‘killed off’ all local milk tea brands. Their lemonade sells for 3 ringgit (Malaysian currency, 1 ringgit is about 1.54 yuan), while most Malaysian local milk tea brands have an average customer spend of 10 to 12 ringgit,” said the aforementioned Mixue Bingcheng franchisee in Malaysia. Mixue Bingcheng’s pricing and marketing strategies in China are still applicable overseas.

The person close to Mixue Bingcheng also stated that Mixue Bingcheng continues its strategy of extreme cost-effectiveness in pricing overseas. The “brainwashing song” and “Snow King” IP image are also replicated and exported. “The first Chinese phrase many Southeast Asian children learn is ‘You love me, I love you, Mixue Bingcheng is sweet,’ and unauthorized ‘Snow King’ image merchandise has even appeared in Southeast Asian markets.”

The export of the “Mixue model” has also driven changes in local tea beverage markets, most typically in the Indonesian market. A person in the milk tea business in Indonesia said that before Mixue Bingcheng, most chain milk tea brands in the Indonesian market cooperated with local malls and chain supermarkets to open stores, not offering franchises, which led to slow development. Mixue Bingcheng, with its “novel” franchise model and first-mover advantage, quickly occupied the market gap. “In 2021 and 2022, Mixue’s development in the Indonesian market was rapid, with some stores possibly breaking even within six months of opening. But in 2023, as the market gradually became saturated, Mixue’s store opening speed began to slow down, and the payback period also lengthened.”

Several people familiar with the Indonesian market said that Mixue Bingcheng was able to expand rapidly in Indonesia because it prioritized local vivo and OPPO distributors when recruiting franchisees. “Many of those running Mixue Bingcheng or other milk tea brands in Indonesia are former executives from vivo and OPPO who have started their own businesses. They have many local resources. Ten years ago when they came to Indonesia, over 200 million people needed to switch to smartphones. Now that the frequency of phone upgrades has decreased, they’ve turned to the milk tea business for their second entrepreneurial venture,” said the aforementioned person.

Mixue Bingcheng’s success in Indonesia has also spawned a batch of local freshly-made beverage brands, but most of the investors in these chain businesses are Chinese. For example, Indonesian milk tea brand MOMOYO was established in 2023, with its founder coming from the vivo system. It now has over 500 stores in Indonesia, making it the second-largest milk tea brand in the country.

MOMOYO’s recruitment manager, Tiger, told Caixin that the company benchmarked against Mixue in terms of products and pricing from the beginning, but its channel building and market expansion model is more like that of mobile phones rather than catering. MOMOYO divided the entire Indonesian market into 30 regions, with a person in charge for each region, expanding stores by leveraging the founder’s connections in mobile phone channels. “We have direct-operated stores, joint ventures, and franchises. Before establishing brand awareness, we first increase exposure through direct-operated stores, then open a batch of joint venture stores with capable partners, and after the brand becomes well-known, we open up franchising opportunities to ordinary franchisees. Now the ratio of joint venture stores to franchise stores is about 50-50.”

As for why they chose to create a new brand instead of directly adopting a franchise model, Tiger believes that the Indonesian milk tea market is still in its early stages, and new brands still have opportunities. “There are no more than five brands that can be called ‘brands’ in the entire market. Any Chinese brand coming to the Indonesian market is also a new brand, and choosing to franchise is not necessarily lower in cost compared to creating your own brand.”

More brands are exploring paths suitable for themselves. Chen Xi believes that it is “relatively correct” for chain catering companies to choose Singapore, which has a culture close to China and higher per capita customer spending, as their first overseas destination. Although Indonesia has a large population, most people have weak consumption power, making it more suitable for tea drinks with lower customer spending.

Zhang Liang Spicy Soup initially focused on the U.S. market, but later expanded stores in Southeast Asia faster than in European and American countries. The company’s research found that the Southeast Asian market has more obvious cost advantages and consumption dividends. For example, Indonesia has a large population base, and young people are more accepting of Chinese cuisine and spicy soup flavors. The average customer spending in Indonesian stores is about 70 yuan, and due to lower labor costs, the payback period ranges from 6 months to a year. Additionally, entering the Singapore market can test a catering company’s core competitiveness and innovation ability, more like a “rehearsal” before entering European and American markets.

An overseas business manager from Zhang Liang Spicy Soup believes that the model of rapid store openings and winning through scale, which works for milk tea and coffee, is not suitable for catering. Zhang Liang Spicy Soup stores are mostly located in areas with high concentrations of Chinese people, expanding to surrounding areas after opening stores in core business districts of key markets. Initially, they preferred to cooperate with small and medium-sized franchisees, but these franchisees need to have lived in the local area for many years and have certain funds and business experience.

“Many catering novices in China can go from ‘0 to 1’ through training and support from headquarters, but this is much more difficult overseas. Rental contracts, supply chains, policies, and regulations can all be potential pitfalls.” Starting from 2024, Zhang Liang Spicy Soup has also begun to look for national distributors in some markets.

Localization is Not Easy

“Before going to Singapore, we thought there was a large Chinese population base, and the cultural background and consumption habits were similar to China. Later, we found that the vast majority of customers didn’t know how to eat Malatang, and some would directly say ‘Give me a Malatang’,” said the overseas manager of Zhang Liang Spicy Soup. She explained that Singaporeans are accustomed to ordering from a menu and are unfamiliar with the self-service food selection model. As a result, she coordinated with the design department to create step-by-step instructions for eating Malatang in overseas stores.

Chen Xi mentioned that Tai Er Sauerkraut Fish made significant adjustments in the North American market, canceling self-checkout and self-service tea, and adding more manual service for customers. “Americans have a tipping culture, so they prefer more service during their meals.”

Beyond product and service localization, the real challenge lies in supply chain and employee management. “Initially, when we surveyed overseas markets, we found significant gaps and believed our standardization, store operations, and personnel quality had considerable advantages. However, upon implementation, we discovered that the overseas Chinese food supply chain was immature, foreign employees had low efficiency, and overseas regulations differed greatly from China,” frankly stated an overseas manager of a chain Chinese restaurant. He emphasized that localization is a threshold that Chinese catering enterprises must cross when “going global.” The advantages of domestic catering brands may be concentrated in the early stages of going overseas, but if localization adjustments are not made, these advantages could become constraints on overseas development.

Ensuring a smooth supply chain is the primary issue in “going global.” An investor who has examined the U.S. milk tea market told Caixin that overseas supply chain construction is still in its early stages, with many bottlenecks, making it difficult to support research and development and new product launches in overseas stores. “In the future, the supply chain will definitely follow brands ‘going global,’ and now some large raw material companies are also starting to ‘go global’.”

Lin Tan of PayInOne stated that currently, most employees recruited by Chinese restaurants overseas are sales and service personnel, suggesting that many raw materials are shipped from China and have not achieved localized production. “However, as overseas demand continues to expand, if these catering enterprises can develop stably and long-term overseas, the supporting upstream and downstream industries will gradually achieve localized production.”

The current solution for most Chinese catering enterprises is to split the supply chain – exporting easily transportable and customs-clearable items like soup bases and seasonings from China, while sourcing perishable and hard-to-export fresh ingredients locally. Yang’s Braised Chicken Rice, Tai Er Sauerkraut Fish, and Zhang Liang Spicy Soup all export seasoning packets and other raw materials from China to ensure the core flavors of their dishes, while sourcing ingredients like chicken, fish, and vegetables locally.

A person close to Chayan Yuese said that short shelf-life raw materials like fresh milk and fruits can only be sourced locally, but fruit prices in Korea are about 10 times those in China, so local products have to be priced higher. Fresh fruit tea that sells for around 10-20 yuan in China is priced at 25-35 yuan in Korea. Some customers reported that a meal at Haidilao in Singapore costs nearly 1000 yuan RMB, including a 10% service charge and 9% GST (Goods and Services Tax).

The person close to Mixue Bingcheng mentioned that core raw materials like jam, white sugar, and milk are exported from China, but the export situation varies for different countries. For example, Thailand has a quota on tea imports, so Mixue’s tea exports to Thailand can only cover 10% of local store demand. Indonesia has many restrictions on stainless steel imports, so there are almost no canned products in stores. He further stated that Mixue’s global procurement network covers about 36 countries, and the huge procurement scale allows it to significantly reduce raw material costs, thereby keeping overseas product prices low.

According to the prospectus, Mixue Bingcheng has established a localized warehousing system in Southeast Asia, including 11 self-operated warehouses totaling about 66,000 square meters. The aforementioned Malaysian franchisee said that franchisees need to pick up goods from local warehouses, usually twice a week.

Super Hi International built its own central kitchen in Singapore in 2017 to meet the storage and food processing needs of local stores. Yang Xibei pointed out that Haidilao initially cooperated with local high-quality supply chains, and building its own supply chain was a choice made after reaching a certain scale. The central kitchen in Singapore, besides basic processing and distribution functions, can also conduct research and development of local dishes.

This central kitchen is also open to external clients. Semi-finished raw materials from external customers can be processed in Super Hi International’s central kitchen and distributed by them. As many Chinese restaurants in Singapore have stores located close to each other, the reuse of the supply chain can improve efficiency.

Overseas personnel management is another major challenge in “going global.” The overseas manager of Zhang Liang Spicy Soup believes that most catering enterprises have multi-point layouts overseas with large spans, but the management radius of enterprises is limited, inevitably creating communication barriers with local employees.

Lin Tan stated that key positions like store managers and managers in overseas catering enterprises are generally dispatched from China, while service staff and kitchen staff are mostly recruited locally, predominantly Chinese. Non-key positions are not necessarily full-time employees, with part-time employees accounting for 50% of the total overseas workforce. “When a certain listed catering company first ‘went global’ to Australia, all employees were full-time, and the stores were consistently losing money. Later, when most employees were changed to part-time, the stores turned from loss to profit.”

Super Hi International “emphasizes stores over headquarters” in terms of personnel and delegates more authority to stores. The company’s 2023 financial report shows that its management structure has been adjusted from the original “headquarters – regional manager – store manager” to “headquarters – regional manager – country manager – store manager,” making management more detailed.

Yang Xibei mentioned that when entering new markets, Haidilao would dispatch experienced management from headquarters for market development. However, they would subsequently recruit and train local employees and establish fair mechanisms to ensure promotion channels. “Now, there are many locals in management positions in Thailand, Indonesia, and Vietnam.”

Qin Min, Qu Yunxu, Liu Peilin, Bao Yunhong, and Sun Yanran also contributed to this article.