Caixin
Dec 15, 2017 05:45 PM
SOCIETY & CULTURE

Hatching Beijing’s Next Big Food Idea

A test kitchen at Hatchery’s outlet in Dongsi that allows aspiring chefs to try out their new food ideas. Photo: Hatchery
A test kitchen at Hatchery’s outlet in Dongsi that allows aspiring chefs to try out their new food ideas. Photo: Hatchery

China’s obsession with food makes it a particularly appetizing destination for aspiring restaurant owners. Although it has a huge consumer base and many discerning pallets in big cities are turning to international or fusion cuisine, the market is also fraught potential pitfalls.

Some successful foreign brands have had to close shop after an year in business, even after spending millions of dollars on their launch because they’ve failed to understand local tastes, which change at lightning speed, said Hatchery co-founder Stew Johnson.

Hatchery is Beijing’s first dedicated incubator for food startups that helps aspiring chefs or restaurant owners to test their ideas at a low cost and get real consumer feedback and advice from veterans in the field. It also helps those with creative ideas connect with potential investors.

Johnson and his co-founder stumbled on the idea of creating a place to test drive new restaurant ideas, while helping a classmate at Tsinghua university introduce Peruvian food to Beijing.

“He didn’t know how to touch consumers, have the products tested, and navigate the legal framework or find suppliers,” said Johnson. Over the past two years, the hatchery has served as a launch pad for several ventures that have changed the city’s foodscape.

What are some of Beijing’s current big food fads? “The Beijing palette at the moment is loving natural flavors and healthy ingredients, but also likes to indulge from time to time!,” said Johnson. “Concepts that leverage imported, fresh seafood and natural fats (butter, cheese and cream) are hot, along with concepts that are offering affordable health and taste.”

Johnson sat down with Caixin to talk about the craziest fusion food he’s had, how to survive in Beijing’s cut-throat restaurant industry and how to tackle food safety issues.

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Stew Johnson (pictured) and his co-founder stumbled on the idea of creating a place to test drive new restaurant ideas while helping a classmate at Tsinghua University introduce Peruvian food to Beijing.

Caixin: What exactly does a “food incubator” do? What inspired this idea and how has it evolved?

Stew Johnson: Our ‘culinary/food incubator’ is a new platform that helps validate food ideas quickly through an accelerator process we call HatchTrack. The idea behind Hatchery is that we help food entrepreneurs and companies alike to test their food business ideas at Hatchery in front of a real community of Chinese millennial. The bad ideas get sifted out quickly, whilst the great food ideas move through HatchTrack and then leave Hatchery with a validated business model and brand, performance metrics and customer following. With the onus then on growing the concepts, Hatchery as a platform helps connect the validated/accelerated food ideas with growth partners and investors (including crowd funding) to scale in China and abroad. We evolved from doing pop-ups in Beijing to realizing that there are a lot of market efficiencies surrounding F&B and we could help solve some of the bigger problems by setting up an incubator model like Hatchery. We hope to have our incubators across 15 city hubs in China and Asia Pacific in the next 8 years to help more entrepreneurs and good food ideas to grow.

How competitive is being’s restaurant scene? Can you throw in some numbers to compare it with other major destinations in Asia or elsewhere?

Beijing like any mega city has a thriving, highly competitive F&B scene. This said, there are lots of opportunity for new brands (whether local, from across China or abroad) to position themselves in Beijing, particularly in front of 15-35 year olds with higher disposable incomes and insatiable appetites for new ideas and delicious food. We have been watching the mall-trends closely (Swire, HKL, China World etc.) and F&B revenue is becoming much more important for developers to attract and keep malls busy. Average F&B revenue for Tier 1 malls is expected to increase from 13-17% to 20-25% - allowing for new opportunities for food entrepreneurs to position their foods offline (and then to channel that interest and following online). Another thing to watch is the online food delivery models cannibalizing offline food experiences, we are seeing some of this given the large amounts ele.ma and others have raised from VCs (venture capitalists) to subsidize online purchases. We expect this to stabilize once an online winner declares itself, and it provides interesting opportunity for delivery-only food models from centralized kitchens. We want to support both offline and online concepts at Hatchery, and to support the latter we are launching a centralized, delivery model-only food kitchen in the Guomao central business district early 2019.

What’s your favorite restaurant in the city and why?

ZhangMama is a team favorite for quintessential Sichuan heat and brilliant, bold flavors; Taco Bar and Bottega for well executed, consistent foreign concepts; TRB for its location and timeless elegance, and Migas for its Nali rooftop on a spring, good air day!

How do you spot a good restaurant idea?

We rely on our HatchTrack process to flesh out and validate whether an assumed good food idea is actually any good! At the origination stage (the first stage of the accelerator process) we rely on our food and marketing teams to regularly share local and international F&B insights and trends, and then we have a vetting system that funnels ideas into a gate. We then hold pop-ups and focus groups to validate whether the food ideas are any good – and the good ones then pass through into our second validation stage. It’s important to note that we rely heavily on our community’s interest (as they are the paying customer!) to know whether we are onto a good food ideas or not, and validate this demand through actual sales. We don’t believe in free product or experiences to gauge demand as this distorts the data and final assessment of whether an idea is any good. This is quite closely aligned to design thinking principles promoted in other industries and by other tech incubators. Once it’s passed Hatchery’s incubator and ready for growth, we know we have a good, validated food idea on our hands ready for funding and growth! A good restaurant in Beijing requires a clear, differentiated concept with a good team, location and understanding of what your customer wants from you. Once you’ve dialed the menu and concept offering, and backed that up with offering a consistent, good experience and understanding of costs and margin, the focus turns to training and marketing to grow your audience offline and online. Don’t overlook Dianping and deliveries either!

How open is the Chinese market to diverse food tastes? What does the Chinese palette crave for?

Shanghai is very open to diverse food tastes, Beijing followed by Chengdu and Shenzhen increasingly so. The Beijing palette at the moment is loving natural flavors and healthy ingredients, but also likes to indulge from time to time! Concepts that leverage imported, fresh seafood and natural fats (butter, cheese and cream) are hot, along with concepts that are offering affordable health and taste E.g the rise of salad and whole food delivery concepts like Canteen, which just launched from our incubator in December.

Name three of the craziest fusion foods you’ve tasted?

Baozza (Italian baozi), Yeyo coconut-based yoghurt and the Impossible Foods plant-based protein burger. All very delicious and innovative.

Your latest funding round closed in August? How much did you raise and how do you plan to spend it?

We have raised 4 million yuan to date and require another 3.5 million yuan to close our Pre-A round. This will help us set up in Shanghai (to validate Beijing and Shanghai food insights in realtime!) and then we plan to do a bigger Series A (over 30 million yuan) to ramp up our incubator locations in China and elsewhere, as well as build up our data and analytics software, and take more positions in some of the great concepts coming off Hatchery with our community and partners. Chengdu, Shenzhen, Guangzhou, Hong Kong, Manila, Singapore, Jakarta, Tokyo, Seoul, Taipei, Sydney, LA are all interesting markets we're looking at across the APAC region.

What are the top 5 things to know if you are a foreigner who wants to start a food business in China?

Build up your licensing and regulatory understanding; things always change so build a business model that leverages change; local partners are key but not essential at the start; don’t forget to trademark before the going gets good!

Major food brands including Yum and Haidilao have struggled with food quality issues in China. Can you really trust your food supply sources here? What can restaurants do to avoid major food scares?

Controlling food quality is all about trust and going as vertical as possible between customer and source. Blockchain-based food-tracing solutions will be a great help in the near future to help ensure food safety, and in the meantime it’s all about understanding avoiding any shortcuts and having a plan/mitigation for any risk. Training, education and working with good people and partners across the food supply chain is a key to ensuring food safety from farm to fork. Don’t let it be about price, and any issue is costly in the long term.

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