Industry Overview
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THIS DOCUMENT IS IN DRAFT FORM. The information contained in it is in draft form, incomplete and subject to change and must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this document. INDUSTRY OVERVIEW The information in the section below has been partly derived from various publicly available government sources, market data providers and other Independent Third Party sources. In addition, this section and elsewhere in this document contains information extracted from a commissioned report, or the Frost & Sullivan Report, prepared by Frost & Sullivan for the inclusion in this document. See ‘‘Sources of Information’’ in this section. We believe that the sources of information of this section are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information has not been independently verified by our Company, our Directors, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], any of our/their respective directors, officers, employees, agents or representatives, or any other person or party involved in the [REDACTED] and neither they nor Frost & Sullivan give any representations as to its accuracy and the information should not be relied upon in making, or refraining from making, any investment decision. SOURCES OF INFORMATION Our Company has engaged Frost & Sullivan, an Independent Third Party, to conduct a study of the catering industry in Hong Kong. We agreed to pay Frost & Sullivan a fee of HK$480,000 for the preparation of the Frost & Sullivan Report and our Directors consider that such fee reflects market rates. The methodology used by Frost & Sullivan in gathering the relevant market data in compiling the Frost & Sullivan Report included secondary research and primary interviews. Secondary research involves information integration of data and publication from publicly available resources, including official data and announcements from Hong Kong government departments, and market research on industry and enterprise player information issued by our chief competitors. Primary interviews are conducted with relevant institutions to obtain objective and factual data and prospective predictions. The information and statistics as set forth in this section have been extracted from the Frost & Sullivan Report. Frost & Sullivan is a global consulting company founded in 1961 in New York and has over 40 global offices with more than 2,000 industry consultants, market research analysts, technology analysts and economists. Frost & Sullivan’s services include technology research, independent market research, economic research, corporate best practices advising, training, customer research, competitive intelligence and corporate strategy. Frost & Sullivan has four offices in China and Hong Kong and direct access to the most knowledgeable experts and market participants in the catering industry. Frost & Sullivan conducts research on market size, share and segmentation analyses, competitor tracking and corporate intelligence, etc. Some of the information extracted from the Frost & Sullivan Report is also referred to in the sections headed ‘‘Summary’’, ‘‘Risk Factors’’, ‘‘Business’’ and ‘‘Financial Information’’ in this document. Except as otherwise noted, all of the data and forecasts contained in this section are derived from the Frost & Sullivan Report, various official government publications and other publications. RELIABILITY OF INFORMATION IN THE FROST & SULLIVAN REPORT Our Directors are of the view that the sources of information used in this section are reliable as the information was extracted from the Frost & Sullivan Report. Our Directors believe the Frost & Sullivan Report is reliable and not misleading as Frost & Sullivan is an independent professional research agency with extensive experience in its profession. DIRECTORS’ CONFIRMATION Our Directors have confirmed that after taking reasonable care, there is no adverse change in the market information since the date of the Frost & Sullivan Report which may qualify, contradict or have an impact on the information in this section. – 47 – THIS DOCUMENT IS IN DRAFT FORM. The information contained in it is in draft form, incomplete and subject to change and must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this document. INDUSTRY OVERVIEW ASSUMPTIONS AND PARAMETERS USED IN THE FROST AND SULLIVAN REPORT Analyses in the Frost and Sullivan Report are based on the following assumptions: (i) the economy of Hong Kong maintained steady growth from 2010 to 2015; (ii) the social, economic and political environments of Hong Kong remained stable from 2010 to 2015, which ensured the stable and healthy development of the hotpot restaurant market; and (iii) there was no war or large scale disaster from 2010 to 2015. The following parameters have been taken into account in the market-sizing and in the Frost & Sullivan Report: (i) GDP value and GDP growth rate of Hong Kong from 2010 to 2015; (ii) per household expenditure on food in Hong Kong from 2010 to 2015; (iii) food price index and consumer price index in Hong Kong from 2010 to 2015; (iv) sales revenue of the full-service restaurant market in Hong Kong from 2010 to 2015; (v) average monthly salary of employees in the full-service restaurant in Hong Kong from 2010 to 2015; and (vi) average monthly rent for retail premises in Hong Kong from 2010 to 2015; MARKET DEFINITION AND SEGMENTATION The Hong Kong catering industry refers to the commercial activities of providing prepared foods, consumption sites, and facilities for consumers. Set out below is a table showing the key characteristics of the common restaurant categories of the catering industry. Average spending per Length of meal Restaurant category Key characteristics customer time Full-service restaurants They offer a wider range of cuisines at HK$200 or Approximately fixed lunch and dinner times rather than above two hours all day. They generally provide a more comfortable dining ambience and full table service. Customers are served their meals at the table and typically pay at the end of the meal. Service fees are often charged. Target customers are those with high spending power. – 48 – THIS DOCUMENT IS IN DRAFT FORM. The information contained in it is in draft form, incomplete and subject to change and must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this document. INDUSTRY OVERVIEW Average spending per Length of meal Restaurant category Key characteristics customer time Casual dining They have longer opening hours and Approximately Approximately restaurants more flexible meal time compared with HK$100 one hour full-service restaurants. They provide a casual dining ambience and some table service. Target customers are mass market customers, including white collars and tourists. Examples are casual Chinese restaurants, casual western dining establishments, cafés, teahouses and bars serving drinks along with snacks. Quick service They are usually open long hours and Approximately Approximately restaurants someareevenopen24hours. HK$50 30 minutes They provide a simple dining ambience and fast and consistent food service. Limited or no table service is offered. Customers usually order food, settle their bills and take their meals at the service counter. Target customers include the young generation and the working class. Sales revenue split of catering market and growth in Hong Kong 2010–2015 Share Breakdown Segments CAGR 100% 3.6% 2.9% Others 0.8% Quick service 3.7% 17.0% 16.4% restaurants 80% Causal dining 40.4 41.3 4.9% 60% % % restaurants 40% Full-service 20% 39.0% 39.4% 4.7% restaurants 0% 2010 2015 Sales (HK$ billion) (HK$ billion) Revenue 84.0 104.4 Source: Frost & Sullivan Report Note: Others include takeaway shops, hawker stalls, roadside vendors and those establishments not otherwise described in the organised segments above. – 49 – THIS DOCUMENT IS IN DRAFT FORM. The information contained in it is in draft form, incomplete and subject to change and must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this document. INDUSTRY OVERVIEW MACROECONOMIC ENVIRONMENT IN HONG KONG Per household expenditure on food in Hong Kong Per Household Expenditure on Food (Hong Kong), 2010–2015 Expenditure (HK$/year) Hong Kong Households 150,000 120,000 90,000 80,292 83,877 87,323 90,768 60,000 70,941 75,933 30,000 0 2010 2011 2012 2013 2014 2015 Sources: Census and Statistics Department of Hong Kong; Frost & Sullivan Report Along with the increase in income, Hong Kong household expenditure on food is growing accordingly. From 2010 to 2015, the per household expenditure on food in Hong Kong reached a CAGR of approximately 5.1%. The percentage of dining-out expenditure from 2010 to 2015 was approximately 62.0% in the total expenditure on food. There are diversified food choices in Hong Kong, including Chinese cuisines, western cuisines and local flavours. Besides, the proportion of people’s dining out has remained high in recent years. Such a dining habit is likely to continue in the coming years and this leads to the growing expenditure on food. Average monthly salary of employees in the full-service restaurant market in Hong Kong (Thousand HK$/month) 14 12.6 12 11.9 11.1 10.6 10.1 10 9.2 8 2010 2011 2012 2013 2014 2015 Sources: Census and Statistics Department of Hong Kong; Frost & Sullivan Report Salary of employees is one of the major components of the operating costs in the full-service restaurant in Hong Kong. The average monthly salary of employees in the full-service restaurant market in Hong Kong has taken a stable upward trend in recent years. It increased from HK$9,200 in 2010 to HK$12,600 in 2015, representing a CAGR of 6.5%. The main reason for the increase relies on the fact of growing inflation leading to higher living cost.