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    Shaxian Delicacies’ Journey From Wontons to Stock Market

    State-owned company investing in popular chain plans to go public.
    Dec 04, 2017#business

    Shaxian Snacks Group, a popular restaurant chain from eastern China’s Fujian province that is known for wontons and peanut butter noodles, is planning separate public listings for its supply and media subsidiaries, The Beijing News reported Wednesday.

    The plans signify the state-owned conglomerate’s grand ambitions to develop into a multi-pronged corporation. It would be a huge step for the brand, which sprung up in the 1990s as string of modest eateries known as “Shaxian Delicacies.”

    Yet most of the people who have built up the Shaxian Delicacies name have nothing to do with Shaxian Snacks Group. Though the stores have the appearance of a chain, most of them are independently owned and run.   

    Ding Jie, a director at FTI Consulting, a global business advisory firm, told Sixth Tone that Shaxian Snacks Group will have to fight the perception of uneven quality through the business. “There’s a long way to go before they can achieve their goal of going public,” she said Thursday.

    Shaxian eateries started off as independent small businesses, named after Fujian’s Sha County — “Sha Xian” in Chinese — where most of the restauranteurs came from. The stores soon spread all over the country but operated separately, and with inconsistent standards. Though the Sha County government has since 1998 attempted to regulate the brand name and organize stores through a guild system, it has seen little progress: Most of the eateries were happy to go it alone.

    In 2006, the Sha County government set up Shaxian Snacks Group — a company it still wholly owns — and had planned as early as 2011 to take the company public. It has recently ramped up efforts to unify, standardize, and modernize operations at the restaurants it opens or brings into the fold. But as Sixth Tone reported in October, Shaxian Snacks Group has about 500 restaurants nationwide, while The Beijing News estimates that there are 60,000 restaurants using the “Shaxian Delicacies” name.

    In December 2016, Shaxian Snacks Group signed a 135 million-yuan ($20 million) contract with Chuying Agro-Pastoral Group, a pork supplier based in central Henan province that also has stakes in the internet, esports, and finance fields. The deal comprised 90 million yuan for a supply subsidiary, Shaxian Catering, and 45 million yuan for a media, advertising, and tourism joint venture, Shaxian Media. Currently, Chuying owns 45 percent of each subsidiary, while Shaxian Snacks Group and other business partners own the rest.

    According to The Beijing News, Shaxian Media is charged with advertising for a range of clients, as well as installing televisions in each store to run commercials. Shaxian Catering, on the other hand, is responsible for supplying raw pork to the stores and building 30 central kitchens to unify supply and distribution throughout the chain.

    As a partner, Chuying stands to benefit directly from its investment and through its contract as the chain’s supplier: According to The Beijing News, each store consumes more than 4 tons of pork each year. But Hou Jianfang, Chuying’s chairman, told the newspaper that the group plans only to list the supply and media subsidiaries for the time being, as diffuse ownership of the stores themselves complicates the process of going public.

    Ding, the consultant, says that having separate IPOs would help speed up the listings because it would make the profit model clearer. “Under this plan,” she explained, “Shaxian Snacks can make a breakthrough in its supply chain and media units.”

    Contributions: Chen Na; editor: Qian Jinghua.

    (Header image: A food worker stands outside a Shaxian Delicacies restaurant in Shanghai, Nov. 12, 2015. Ng Han Guan/IC)