Xiangeqing entering high-tech sector

Graphics: GT

Restaurant chain exploring cloud service and Internet fields as part of diversification

High-profile Chinese restaurant chain Beijing Xiangeqing Group Co, famous for spicy Hubei and Hunan cuisine, announced Wednesday that it has changed its Chinese name and turned to high-tech ventures including establishing a cloud service platform.

The company said in an announcement with the Shenzhen Stock Exchange it will start cooperation with the Institute of Computing Technology under the Chinese Academy of Sciences, China's leading national academy for natural sciences, to explore high-tech fields involving cloud service platform and mobile Internet.

In line with the company's new business focus, Xiangeqing decided to change its Chinese name into "China Sciences Cloud Net Group Co." The company's former Chinese name was also its English name, which remains unchanged.

Analysts said the business transformation for -Xiangeqing is "not typical" among high-end catering operators, who are struggling to sustain their revenue after the central government started a campaign against lavish official spending in late 2012.

It was more difficult for Xiangeqing to adjust its market position in the catering sector than other high-end restaurant chains, as "the location of Xiangeqing restaurants used to be near government departments, while strong reliance on business from officials is unhealthy," Zhao Jingqiao, a scholar with the Chinese Academy of Social Sciences, told the Global Times Wednesday.

The catering operator suffered a huge loss of 564 million yuan ($90.81 million) in 2013, according to its annual fiscal report.

It seems that Xiangeqing has chosen a new area which "has huge market potential and bright prospects," but the transformation model is "not clear," Zhang Lili, an analyst at Internet and IT consultancy Analysys International, told the Global Times Wednesday.

"The concepts of 'big data' and 'cloud computing' that Xiangeqing talked about are hot, but also very general, and it didn't explain what exactly it plans to do," Zhang said.

Xiangeqing's move was not a big surprise as it has been trying to diversify for a long time after it started making losses in the dining sector.

The company announced in December 2013 that it would acquire a 51 percent stake in Jiangsu Shengyi Environmental Technology Co. Later the same month, the company said it would buy a 51 percent stake in Hefei Tianyan Green Energy Development Co.

Two months later in February it said it would wholly acquire Hefei Tianyan.

Another recent move by Xiangeqing was its annoucement in March that it would buy into two TV content companies, Beijing CCTV Splendid Film and TV Corp and Dinv Television Media (Shanghai) Co.

The investments in the past seven months that Xiangeqing has made are "not consistent," and it is difficult for investors to understand what Xiangeqing is doing, said Cai.

But Cai also noted that Xiangeqing could still succeed if it could combine the energy, media and culture sectors together with big data and cloud computing technologies through innovative ways.

Xiangeqing is not the only high-end restaurant operator which has experienced a slowdown and made changes to operations.

In 2013, combined revenue of larger catering enterprises - those with at least 2 million yuan in annual sales revenue - dropped 1.8 percent to 818.2 billion yuan in 2013, the first fall since the statistics started being tracked, according to data from the National Bureau of Statistics.

China Quanjude Group, another high-end restaurant, has already adjusted its menu to cater more to the mass market.

Shanghai-based Xiao Nan Guo Restaurants Holdings, which also suffered big losses in 2013, still focused on catering business during its transformation.

For instance, it expanded some lower-end brands such as Uncle Tetsu's, which is popular in cities like Beijing and Shanghai.

"There is still demand for high-end cuisine in the mass market if the restaurants could offer unique services," Zhao said.