Michael Chan of Café de CoralCreating Kingdom with Iron fists

I t has been a quarter of a century since CAFE DE CORAL H (00341) first listed in the Stock Exchange in 1986. The CAFE DE CORAL H group now became the largest publicly listed Chinese fast food chain restaurant in the world, bringing huge honors to 7 million Hong Kong citizens. What makes shareholders even more delighted is that the group’s stock price has been rising stably hand in hand with results, outperforming the market for a very long while, leading to fruitful rewards. Over the past 25 years, the group’s market value jumped by 20 times, sales revenue leaped by 19 times, earnings lifted by 14 times while net capital value soared by 51 times. CAFE DE CORAL H’s Michael Chan expressed, during an interview with our website, that locally the management placed Cafe de Coral fast food restaurant as striker, “Spaghetti House” and “Oliver’s Supersandwich” as midfielders and institutional catering business as solid defenders. There is nothing to be worried for CAFE DE CORAL H group’s line-ups in the front, middle and at the back; business development is the only work needed to be dedicated to.

Data reveals the group’s sales revenue has been surging; in 2010 it reached HK$4.8 bln from the 2003 figure of HK$2.6 mln, displaying an evident lift. Shareholders’ profits also advanced from 2003’s HK$243 mln to 2011’s HK$514 mln, showing a very satisfactory rise. As at the end of July 2011, the group possessed a total of 588 stores, including 9 specially licensed stores in Hong Kong and overseas, taking the place of being the largest publicly listed Chinese fast food chain restaurant group on earth. Chan indicated that local food and beverage market has a market value totaled HK$80 bln, in Mainland such value has been climbing with double-digit growth year on year, therefore the group’s market share in Hong Kong and Mainland China could be infinite. In Hong Kong, the average consumption per head is around HK$30 with a total of 300,000 customers each day. Samestore sales in August and September picked up approximately 4%. Currently there are 26 sites of branches belonging to the group’s property and all are located at strategic points with great flow. In order words, there are around 100 mln people visiting Cafe de Coral every single month.

The single striker, Cafe de Coral, alone attains HK$300 mln for the group. Please bear in mind this figure excludes the sales revenue stemming from “Super Super Congee & Noodles” as well as “Spaghetti House”. These brands together bring long-term adequate cash liquidity to the group.

A majority of strategic store locations had been occupied by jewelry and cosmetics companies along with the increasing Mainland individual visitors starting from 2003. He frankly said that there is certain challenge in seeking such locations; luckily, Cafe de Coral has its own strengths. He said delightedly Cafe de Coral always possesses its own iconic food like baked pork chop rice, siu mei and curry. Siu mei becomes the food with highest cost as pork price rose to 2010’s HK$26 per kg from HK$18 per kg two years ago. No wonder Michael Chan claimed if everyone chooses to have siu mei in Cafe de Coral instead of Chinese dishes with lower costs such as minced beef over rice and spicy tofu with rice, it would affect the restaurant’s income to a certain extent in the long run. Therefore, Chan felt that recipe management is the thing to begin with, streamlining customers to opt for food offering high gross profits.

As Cafe de Coral has become an important local icon, Chan is putting efforts in conceiving the fifth generation of “5G design” in order to let his customers feel warm and being at home. He has come up with several initial ideas. First, infusing new ideas with seats design with a view to fitting customers from all walks of lives; second, making use of environmentally-friendly concepts to get eaters closer to nature; third, the main interior color should be in harmony with Cafe de Coral’s egg york color, bring visual comfort and entertainment. Hong Kongers tend to view Cafe de Coral as a place to satisfy hunger while Mainlanders regard this restaurant as a place for leisure. Average consumption per head in Mainland is around RMB26. Iconic products in Mainland China are just old wine in new bottles, which also includes baked pork chop rice, siu mei and curry. Even roast spring chicken is put out in Mainland. According to management’s plan, 30 new Cafe de Coral restaurants will be open every year in Mainland China and the business will focus on Southern and Changjiang delta region instead of developing in terms of national scale. It is estimated that in 2014, there will be 200 Mainland branches.

In response to the rumor about his retiring soon, Chan stated there should be two different persons to take up the posts of CEO and chairman to satisfy corporation management requirement; in the future he will focus on the latter’s role, handling management work with a strategic meaning. He added that he had read the book Jack Welch, who bears the title “God of Management”, on management and he disagreed with the author’s idea to almost discarding management and getting rid of bureaucratic management structure. Yet he was totally in line with the outlook that an ordinary person could carry out utmost extraordinary concepts to start a business, which is most appropriate to apply in Cafe de Coral’s management who always strives for 100 marks.