Good News on Listing | Frost & Sullivan Assists Helen's International Holdings Limited to Successfully List on the Hong Kong Stock Exchange (9869.HK)

In recent years, China's catering industry has experienced significant growth, with the scale increasing from 3231 billion yuan in 2015 to 4672.1 billion yuan in 2019, a compound growth rate of 9.7%. In 2020, the domestic catering industry was affected by the COVID-19 pandemic and saw a contraction, but it is expected to recover in the short term. The catering industry scale is expected to increase at a compound growth rate of 14.0% from 2020 to 2025, reaching 7621.4 billion yuan.

The bar market is part of China's catering industry, mainly referring to dining venues that primarily serve alcoholic beverages with snacks as an accompaniment. Some bars also offer entertainment facilities such as live singing, billiards, and darts. Compared to other nightlife venues, bars mainly generate revenue through selling alcohol, food, and snacks, with lower per capita consumption and average area of operating premises. The Chinese bar industry is highly fragmented, consisting of a large number of independent bars. In 2020, there were a total of 35,100 bars in China, with an estimated 56,900 bars by 2025, resulting in a compound growth rate of 10.1% during this period.

The rapid development of the night economyThe growth of disposable income and entertainment expenditure among Chinese residents has directly driven demand for China's night economy and related consumption. In addition, as an important measure for developing local economies, the development of China's night economy is also directly promoted and encouraged by local governments. For example, since 2018, local governments in Beijing, Chengdu, and Shanghai have successively issued the 'Measures of Beijing Municipality on Further Prospering the Night Economy to Promote Consumption Growth', the 'Implementation Opinions of the General Office of Chengdu Municipal People's Government on Developing the City's Night Economy to Promote Consumption Upgrade', and the 'Guiding Opinions on Shanghai's Promotion of Night Economy Development'. From 2015 to 2020, the total market volume of China's night economy increased from about RMB 1.09 trillion to RMB 1.68 trillion, with a compound annual growth rate of 11.4%, and it is expected to further increase to RMB 2.82 trillion by 2025, corresponding to a compound annual growth rate of 10.9%. The development of the night economy has directly guided the development of China's liquor industry, and participants in the liquor industry can further enhance their market participation.

Young customers have become the main force in consumptionDue to its vast population size and high consumer demand, the young customer segment has become a major component of China's consumer group. By the end of 2020, the number of people aged 20-34 in China had approached 3 million, accounting for about 21.2% of the total population. Compared to the previous generation, China's young population is more active in social settings, more sensitive to brands, and place greater emphasis on affordable goods and high-quality services. Bars that can provide a high-quality product portfolio, service, and consumption environment can meet the young group's needs for value-for-money drinks, service, and social atmosphere. Therefore, especially the Chinese bar industry is expected to continue to be driven by the growth of consumption capacity among China's young population in the future. In particular, due to the continuous increase in brand sensitivity among the young customer segment, bars operating under chain models have a clear competitive advantage in providing consistent drinks and services.

Market potential in third-tier and lower-tier cities— Third-tier and lower-tier cities in China have a large consumer population, with a total population of about 1.1 billion, accounting for about 78% of China's total population. Thanks to urbanization in these cities, local residents' disposable personal income reached 26,000 yuan in 2019, with a compound annual growth rate of 8.8% from 2015 to 2019. The large consumer population and rapidly growing disposable personal income are expected to directly drive consumption growth in bars among residents of third-tier and lower-tier cities.

The industry concentration will further increase.By the end of 2020, the top five participants in China's alcohol industry accounted for less than 3% of the market share, indicating a further trend towards market concentration. The leading participants in China's alcohol industry, which possess high-cost-performance products, highly standardized services, a mature supply chain, and sufficient financial support, therefore have strong competitive advantages and market potential.

Brand recognition, brand image, and the profound influence of social mediaThe Chinese liquor industry market participants rely heavily on word-of-mouth and mutual recommendations among consumers, and strive to cultivate highly loyal customer bases through online media to increase consumption frequency and user stickiness.

The popularity of branded liquor has increased.In recent years, market participants in the development, promotion, and sales of their own brand culture and beverages in China's catering and hospitality industry have seen an increasing acceptance from consumers. These market participants typically develop their own beverages with the same brand name and entrust qualified producers for production. These own brand beverages are priced by bar operators and can help them promote their brand culture and enhance their brand image.

Helen's revenue in 2020 was approximately RMB 820 million, accounting for about 1.1% of the total market revenue. In 2020, according to bar operating income, Helen ranked first in the Chinese bar industry. At the same time, Helen owned 162, 252, and 351 bars on December 31, 2018, 2019, and 2020, respectively. In terms of the number of bars, Helen has ranked first in the Chinese bar industry for three consecutive years.