Hong Kong Fast Food Chain Closes East China Stores

Popular Hong Kong fast food chain Cafe de Coral Holdings Ltd. has shuttered all its eastern China stores amid declining profits.

The closures are a result of the firm’s “short-term strategic adjustment,” and the company will focus on southern China, where it operates 93 restaurants and may open more, a Cafe de Coral spokesperson told Caixin.

The restaurant chain — which serves Cantonese-styled rice, noodles and milk tea — is popular among Hong Kong diners and it entered the Chinese mainland market in 1992.

It then opened branches in southern China, where diners share food preferences with their Hong Kong neighbors. But early efforts were stymied by high costs for rent and relocating employees from Hong Kong and it exited the key Guangzhou market in 1999.

It returned after 2000, applying a more localized strategy of employing mainland Chinese staff and offering more customized menus, according to Guangzhou government-backed media outlet Win Weekly.

However, the company saw its profit drop 11.7% to HK$518 million ($66 million) in the financial year ending Mar. 31, 2017. Its Hong Kong businesses achieved a 5% growth in revenue while sales from southern China declined 7%. And “performance in eastern China also suffered as a result of softening market conditions,” the group said in a statement.

“The food and beverage industry in Mainland China as a whole experienced slower growth during the year as a result of the economic slowdown and lower consumer spending,” Cafe de Coral said.

The group said it would resume its expansion when the economy begins to recover.

Shares of Hong Kong-listed Cafe de Coral stayed flat at HK$24 on Tuesday.

Contact reporter Coco Feng (renkefeng@caixin.com)