Cooking up success

South Beauty hopes to strike a chord with well-heeled customers as it charts global expansion plans

She is 54, but still makes heads turn with her tall, elegant looks, impeccable dress sense and business acumen. Though her face has graced the cover of Forbes magazine several times as one of the most visible faces of entrepreneurial success in China, Zhang Lan says her journey is still far from over. Zhang, chairwoman of the South Beauty Group, an upscale Chinese dining chain that has tasted success in the domestic market, wants her company to become the "Louis Vuitton" of the global dining market. Zhang wants her restaurant chain to be the place for high-end dining across the globe.

"It is not wishful thinking or a utopia. China's catering culture is time-honored and splendid. It offers everything from nutrition to taste. But it has suffered due to lack of promotion and the absence of high-end brands. I want to change the cheap price and bad atmosphere tag that most Westerners have about Chinese food," Zhang says.

"Through South Beauty Group, I want to convince foreigners that Chinese dining culture has high and refined standards."

Zhang, however, does not feel out of place when she tucks into her favorite local delicacies like the boiled beef stomach strips at small restaurants in downtown Beijing in an elegant Armani dress.

"I strike a balance between popular and top-end brands in my daily life. This also works for South Beauty Group, which aims to attract customers to a modern place to enjoy top-grade and popular Chinese cuisine," Zhang says.

Being an arts collector, Zhang finds time to squeeze in visits to art exhibitions and galleries despite her busy schedule. The artistic flair in her is more than visible in the modern interpretations of the age-old spicy Sichuan cuisine that are tastefully and attractively presented at her restaurants.

"Most people in China don't know how to present their food. I am happy that I have given some importance to the appearance of the food."

Dramatically presented cuisine, upscale dcor, a good dining atmosphere and knowledgeable waiters who can regale customers with stories about the dishes they are serving, all combine to give diners an exquisite and memorable Sichuan dining experience, Zhang says.

Stone-grilled beef, one of the most popular dishes at South Beauty, is a classic example of the creative elegance visible in most South Beauty outlets. The dish comprises moist slices of beef cooked on the table in hot oil over stones with a fiery sauce of chili and garlic. Stir-fried shrimp are arranged on a plate around a gold fish bowl filled with live fish in it.

"Buoyed by the booming domestic high-end catering market, South Beauty Group is looking to be a major luxury brand in the global catering industry. It is definitely not an easy task considering that there are several different cultures and eating habits. But my past experience has taught me that opportunities often come along with challenges," Zhang says.

High-end dining experience

It was a resolve and passion for innovation that helped Zhang overcome many challenges when she decided to transform her single restaurant into a top-end chain, says An Yong, co-CEO of South Beauty Group, who credits Zhang for most of the group's success.

It was Zhang who insisted that South Beauty Group should take the high-end dining route, says An, who has worked with the South Beauty Group for more than 12 years. Without her keen insight and persistence, the company could not have succeeded in such a competitive market, An insists.

The Beijing-based South Beauty was set up in 2000 and has 71 restaurants, of which 43 are located in major cities such as Beijing and Shanghai. The restaurants, well known in China for their innovative fusion style of authentic Sichuan food, are popular among white-collar businessmen and expatriates.

Though she declines to reveal the group's revenue and profits this year, Zhang says the figures have been good.

Both the revenue and profits of the group have been registering double-digit increase in recent years, and are likely to maintain an upward momentum over the next five years, Zhang said during the opening ceremony of South Beauty's new store in Yizhuang area in Beijing in September.

In 2008, CDH Investment and China International Capital Corp Ltd invested about 300 million yuan ($48.06 million; 37.23 million euros) for a 10 percent stake in South Beauty. These investments put the value of the company at more than 3 billion yuan four years ago.

With accumulated wealth of 3.1 billion yuan, Zhang was also ranked as China's second-richest woman entrepreneur in the 2011 China Restaurant Rich List by Rupert Hoogewerf, chairman and chief researcher of the Hurun Report.

Zhang says overseas expansion, a robust domestic market and a focus on innovation will be key weapons in her arsenal as she strives to achieve her goal of making the group a major global luxury brand.

But overseas expansion will have to wait for now, Zhang says, as the market conditions in Europe and the US are not conducive enough. Due to uncertain economic conditions, South Beauty will initially look at investing in the Asian market, particularly in Singapore, and then Europe and the US.

Less ambitious compared with last year, when she announced that the group would open restaurants in London and Singapore by 2012, she says that the group doesn't have a specific timetable for new overseas restaurant openings.

"Steady expansion is essential for a company's sustainable development, especially for catering groups, as they constantly face tight cash flows. Although we don't have a schedule yet, we will certainly enter the US and EU markets in the future to gain global recognition," Zhang says.

Most customers who visit the South Beauty outlets are those with high disposable incomes who want high-end services and she says she has the same target audience in mind for overseas markets.

According to Zhang, it is impossible for the group to set up restaurants in some places such as Chinatowns. She says outlets in bustling commercial centers are the only choice.

Part of that strategy also lies in not complying with the old adage of "do as the Romans do" when tapping overseas markets, Zhang says, adding that the group's cuisine will however maintain characteristics of traditional Chinese food.

"The distinctive and unique features of Chinese food are our biggest advantages when competing in overseas markets. We will preserve the unique flavor of dishes to make them as original as those made at home," Zhang says.

According to Zhang, going global was a long-thought out dream. In 2007, the group began to increase its international profile by providing Chinese food on flights from China to France, the Netherlands and South Korea.

The group began to win more global popularity when it was elected as the food and beverage provider for the 2008 Beijing Olympic Games.

Following its excellent performance during the Beijing Olympic Games, South Beauty Group was also invited by the Shanghai World Expo to provide catering services at the exhibition venues.

"These international events have given us great confidence in planning overseas expansion," Zhang says.

Zhang also likes to read biographies about successful global CEOs. She is "crazy" for management studies and has already completed EMBA courses from CEIBS and Cheung Kong Graduate School of Business, two of China's internationally acclaimed business schools. Currently she is enrolled as an EMBA student at the Shanghai Jiao Tong University.

"The cases studies that are part of the study curriculum at the EMBA courses often gives me a lot of inspiration and confidence," Zhang says.

She says to better control costs and fuel expansion, the company also plans to standardize processes.

"Standardization is very important for Chinese restaurants to expand fast and steadily, because it can increase the operational efficiency and ensure quality. We have also worked with McKinsey to advance our standardization process," Zhang says.

Besides accelerating overseas business expansion, the group is quickening its pace in domestic expansion.

"We plan to open 30 new restaurants annually in the next three to five years, most of which will be in less developed cities, such as Chengdu in Sichuan province," Zhang says.

According to a recent feasibility study by global consultancy firm McKinsey, out of China's 800 main cities, more than 300 cities hold potential for South Beauty Group.

She says compared with Beijing and Shanghai, less developed cities enjoy fewer costs in terms of rent, labor and raw material purchasing, and there are also increasing customer groups.

Zhang's success is the epitome of China's fast-growing dining market, analysts say.

The nation's dining business has maintained double-digit growth during the past 30 years. Last year, revenues from the Chinese dining industry topped 2 trillion yuan. The figure is expected to reach 3.7 trillion yuan by the end of 2015, according to the Ministry of Commerce.

The domestic market offers higher returns and lower costs compared with foreign markets, with the steadily growing middle-class segment providing a strong impetus for the group to expand domestic operations further, says Guo Jie, an analyst with Beijing-based Citic Securities.

Guo says despite the downturn in China's dining industry, hit by rising costs and slowing economic growth, the market for mid and high-end dining is still huge.

"The average profit margin of this sector is up to 10 percent, which is enough to offset higher labor and raw materials costs," Guo says.

Zhang, who never visits spas, says work is her best reward and she never draws distinction between work and life. "The secret for me to stay energetic is to do things that I like every day."

Born in Beijing in 1958, Zhang worked as an accountant at a state-owned construction company after graduating from the Beijing Technology and Business University in 1987.

She went to Canada to pursue further education in 1989. When she was studying there, she once took six part-time jobs at the same time, including washing dishes and cutting chunks of beef.

"During that period, I was so tired by the end of the day that I had to lift my legs onto the bed with my hands," Zhang says. Through hard work at restaurants and beauty shops, she made her first fortune of $20,000 within two years.

Those hard days have been valuable experience for Zhang to turn her group into one of the most popular restaurant chains.

In 1991, Zhang opened a small but special restaurant serving Sichuan cuisine in Beijing. During that time, not many people had the habit of eating out, but Zhang focused on the cleanliness of the restaurant and the quality of dishes to distinguish it from other restaurants.

She traveled to the countryside of Sichuan province and hired local farmers to gather bamboo, which was transported to Beijing by train and helped changed the restaurant into a little bamboo house.

In 2000, she opened her South Beauty Restaurant in Beijing's China World Trade Center, a high-end office building in Beijing's Central Business District.

Ambitious moves

"It was a bold decision as rental fee was high, but I knew the returns would also be high," she says.

The results proved she was right. The well-paid bankers and lawyers, who focused on environment and style, helped make Zhang's gamble more than successful.

In 2006, she opened Lan Club, a luxury restaurant in Beijing, and spent nearly 200 million yuan collecting art from around the world to decorate it.

She also invited Philippe Starck, a well-known French designer, to design the restaurant. She paid Starck 12 million yuan for the design, while the restaurant facelift involved a total investment of 300 million yuan.

"I was not disheartened when some people said that I threw money away like dirt and 12 million yuan was too much for a design draft. But I got great publicity and brand recognition with this design, far more than what is received by most companies which spend millions of yuan on television advertisements. Not everyone in China can boast of a Starck design in their restaurant," Zhang says.

The group also founded the chic club SUBU in Beijing in 2007 and opened another Lan Club in Shanghai in 2008. Now these three restaurants are under the direction of her son Danny Wang, CEO of South Beauty Group.

Last year, the group was rated by China Hotel Association as one of the top 10 Chinese restaurant brands.

Luo Yun, who looks after the group marketing activities, says the biggest reason why other senior executive officials of the group strongly believe in Zhang is her ability to make right decisions at every twists and turns.

"She has great courage to do something bold and innovative. And the results often prove that she is right," Luo says.

Zhang says South Beauty Group is looking to list its shares to fund future expansion programs.

"We hope to attract more investors and capital, but are still not sure on where to list. It would mostly be a toss-up between the A-share market and the Hong Kong stock exchange depending on the market conditions," she says.

"Our mission is to promote authentic Chinese cuisine across the world. With Chinese economy growing steadily and its cultural influence gaining, it will not be long before we see some big global Chinese catering companies, much like MacDonald's," Zhang says.

huhaiyan@chinadaily.com.cn

(China Daily 11/02/2012 page16)