Cafe de Coral profits soar in 50th anniversary year

A sharp focus on customer experience and behind-the-scenes efficiency has driven a solid rise in profits for Cafe de Coral in its 50th year of trading.

Revenue for the Hong Kong-listed quick-service restaurant, catering and casual dining operator rose by a modest 0.8 per cent to HK$8.494 billion, however profit attributable to shareholders soared 28.9 per cent to $590.3 million, primarily due to improvements in operating efficiency and profit margins.

“The results achieved during the year under review indicate clear improvement in performance and customer experience, as well as a positive trend in all areas of operations,” said chairman  Sunny Lo Hoi Kwong.

“Our philosophy towards development is driven by a long-term view, and is inspired by a belief that development cannot be rushed, yet it cannot be slow. While a succession team and sustainable growth take time to nurture, it is important the business maintains forward momentum while adapting to the environment.”

He said the China market – and in particular the Greater Bay Area – was a key driver of growth for the group during the past year.

“Over the past 50 years, our business has organically grown outward from Hong Kong to include key neighbouring cities and regions, which cover largely the same footprint as the official Greater Bay Area region. In expanding from our home market, Cafe de Coral’s network in Mainland China has naturally focused on the Greater Bay Area – building on our knowledge of customers, markets, property and supply chain logistics. This has allowed us to grow at a comfortable pace, confident in our ability to maintain our high standards of quality, cleanliness and service throughout our network.”

He said focusing on the future business environment, technology will continue to be a key differentiator of the business this year. “Whether automating mobile ordering, payment or take-out and delivery, e-channels now represent a significant portion of our business, which will only grow as time passes.”

While sales in the QSR and institutional division decreased by 0.6 per cent to $6.26 billion, the businesses maintained their leadership positions in the Hong Kong market, and contributed 73.8 per cent of the group’s total sales. The division finished the year with 298 outlets – the same as at the same time a year earlier.

“Although the Hong Kong market remains very competitive, sentiment is positive and the fast food segment continues to grow,” said Lo. “In order to maximise growth opportunities, the group is maintaining its focus on improving all parts of the customer journey. With the manpower investment program in previous years now largely complete, costs are stable and under control – and margins are improving as a result.”

He said consumers remained price sensitive and continued to be attracted by price cuts and value promotions. Cafe de Coral fast-food recorded flat same-store sales growth during the year. A review of the store network saw one opened and six closed during the year, for a net 162 shops as at March 31.

“With network consolidation now complete, the group expects to expand its network. Seven new outlets have been scheduled to open in the months ahead.”

A new customer loyalty program launched in May last year has proven highly popular with customers, with a significant increase in membership.

The group has strengthened Super Super Congee & Noodles’ brand positioning as Hong Kong’s No 1 leading neighbourhood chain, providing nostalgic traditional and authentic Chinese cuisine (congee, noodles and wok-fried dishes). It achieved 2 per cent same-store sales growth during the year.

Casual dining

The casual dining business achieved revenue of $905.8 million during the year, an increase of 2.7 per cent year on year. Following rationalisation of the brand portfolio and branch network, the division operated 60 shops at the end of the year, eight fewer than a year earlier.

The group’s Chinese cuisine brands, Shanghai Lao Lao and Mixian Sense, maintained sizeable networks and shop presence with 12 and 17 shops at year end, respectively. Shanghai Lao Lao, the company’s leading home-grown brand, was successful in its promotions during the year.

Mixian Sense opened three more shops during the year, introduced QR code ordering to improve the customer experience and operational efficiency, and also launched a new VIP program to encourage customer response.

Non-Chinese cuisine brands continued to rationalise their branch networks to improve performance. The Spaghetti House ended the year with seven shops and Oliver’s Super Sandwiches with 13, both chains two stores down year on year.

Lo said Mainland China represents a major opportunity for the group’s business. “Continuing last year’s momentum, the Mainland China business delivered strong performance during the year, achieving 7 per cent growth in revenue to $1.152 billion and same-store sales growth of 2 per cent.”

Building on management’s confidence in the market, the group doubled the number of store openings compared to the previous year, opening 16 shops to end with 107. Another 20 new stores are planned for this year.

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