South Beauty Group: In Quest of a 'Beautiful' Growth Story

Abstract

Since the 1990s, China's catering industry had boomed sharply with over 15% CAGR (Compound Annual Growth Rate). In 2007, the catering market size of RMB1,200 billion (US$155 billion) accounted for 4.87% of GDP (Gross Domestic Product) in China. This percentage was only 1.5% in 1978. China's restaurant market was in a typical state of perfect competition, not only in terms of the number of players, but also in terms of the food varieties. Intrigued by the successful story of western fast food in China, the leading Chinese players were exploring how to expand their scale through the development of restaurant chains. Considering the difficulties of standardizing Chinese cuisine, the scale expansion of the Chinese Dinner segment was slower than that of Hot Pot and Chinese fast food segments. It was October 18th, 2007. As an innovative upper-middle player in the Chinese Dinner segment, the South Beauty Group, with 20 restaurants and two soon-to-be-opened restaurants under three different brands, was dreaming about expanding its scale to 100 restaurants in three years (35 in China and 65 in the international market). To meet this ambitious target, the Group faced many challenges, including standardizing Chinese cuisine, selection of domestic and international locations, development of franchising operations and the launch of an IPO. Moreover, as the only Food Service Partner of Chinese cuisine for the 2008 Beijing Olympics, the Group also had to organize the company's resources efficiently to fulfill this prestigious contract. This case had been developed mainly for MBA and EMBA students, with the main teaching objective being to understand the challenges of growth. The students will also be exposed to the dynamic Chinese business environment and the dreams, innovativeness and decision-making behaviors of Chinese entrepreneurs, even in such a traditional industry. An audio-visual support, including an introduction to the company, the restaurants and the dishes, and two interviews with Ms. Zhang Lan is available to instructors.