Bottoms-up youth social scene bolstering barley beverage biz
Young consumers socialize in the "happy atmosphere" of a beer bar of Helens International Holdings Co Ltd in Chengdu, Sichuan province, in December. (PHOTO PROVIDED TO CHINA DAILY)
Helens International Holdings Co Ltd, China's largest bar chain and the first such listed company, has developed from small bistros and social networking places for college students and young office workers.
For many college students, Helens is the place to go at night, with multiple beer varieties on tap. Most brands such as Corona, Budweiser and its own Helens label brews carry price tags under 10 yuan ($1.55) per bottle, which is quite affordable for students. The same kind of Budweiser in 330 milliliter bottles is usually sold for 15 yuan to 30 yuan in supermarkets and convenience stores, according to market research provider LeadLeo Research Institute.
What we provide is not merely alcohol, but it’s more about a happy atmosphere and experience as consumers can purchase similar alcoholic products at supermarkets
Zhang Bo, senior vice-president of Helens
Helens currently operates 527 bars in more than 100 cities across the Chinese mainland. On Sept 10, Helens went public on the Hong Kong Stock Exchange. It initially planned to raise HK$2.51 billion ($320 million) from its initial public offering, the company said in a regulatory filing. During its first trading day, its market value reached as high as HK$30 billion.
Helens said it is targeting consumers aged between 18 and 28. A large number of young consumers in this age group don't have enough money to go to high-end bars and order alcohol with high unit prices, so Helens has become their primary choice.
"In the early days, the bar sector in China was mixed with good ones and bad ones, and we have kind of disrupted the market by launching a bar chain with standard products and services. A lot of customers stop by our bars based on peer recommendations. We hope to serve as a social venue that creates memories for young consumers," said Zhang Bo, senior vice-president of Helens.
"What we provide is not merely alcohol, but it's more about a happy atmosphere and experience as consumers can purchase similar alcoholic products at supermarkets. We hope to build a big brand with small front-end operations. We insist on operating the brand with direct ownership and not via franchise," Zhang said.
"Like in many overseas markets, going to pubs has become part of a lifestyle for many local consumers. Earlier in China, not many people drank coffee. Now, coffee has become quite prevalent in the country, and we would like to expand our bars just like Starbucks."
In March, Helens received $33 million in combined investment from China International Capital Corp Ltd and BA Capital－a consumer-focused fund in China.
Consumers enjoy themselves at a bar of Helens in Xi'an, Shaanxi province, in July. (PHOTO PROVIDED TO CHINA DAILY)
From 2018 to 2020, Helens' bars nationwide expanded from 162 to 351. In 2018, its sales revenue reached 115 million yuan, and last year, it achieved sales of 818 million yuan. The compound annual growth rate was 166.9 percent over the period, according to its prospectus.
In Wuhan, capital of Hubei province, Helens has 65 bars, the highest number of all urban markets. The company aims to bring the number of its bars in the city to about 80 by the year-end.
In Changsha, Hunan province, Helens operates some 45 bars. In an area of 8.3 square kilometers around the famous traditional food court Pozi Street, Helens has opened more than 10 bars.
From 2018 to 2020, the market scale of Helens remained the largest in China. It plans to expand the total number of bars nationwide to about 1,000 next year and to around 2,200 by 2023. Most new bars are expected to be launched in second and third-tier cities, and Helens will continue to offer the most competitive prices possible.
"We will not worry about possible dilution from opening too many bars as we see growing demand from young consumers and significant growth potential of the bar business in China," Zhang said.
By the end of 2020, China had about 35,000 bistros, or small-scale mass-market bars. Some 95 percent of them were independently operated. In terms of revenue, the combined market share of the top five bar operators in China makes up about 2.2 percent of the total, according to LeadLeo.
By the end of last year, China had about 300 million people aged between 20 and 34, accounting for 21.2 percent of the total population, according to the National Bureau of Statistics.
"Helens aims to target young consumers and achieve high turnover with thin profit margins. It has attracted a large number of young consumers thanks to cheap beer, as the group has a certain demand for socializing over drinks," said Liu Qi, an analyst of LeadLeo.
"Most of its bars are located in smaller cities. Avoiding fierce competition in first-tier cities is also one of the strategies that Helens managed to achieve growth. Whether or not it can stay competitive in the future remains to be seen, as more industry players are entering the sector," Liu said.
Besides Helens, China has a number of large-scale bar chains, with each of them operating more than 50 outlets nationwide. They include Perry's, music restaurant and bar Hutaoli, and Chengdu Erma Catering and Entertainment Co Ltd, according to LeadLeo.
In 2009, Helens opened its first bar in Beijing's Wudaokou area, and it quickly attracted a large number of foreign students and backpackers in China, with its relaxed atmosphere and cheap beers.
Initially, it provided various foods such as pizza, pasta and nonalcoholic beverages. Later, Helens simplified its menus to the most basic products, which made it easier for the company to manage supply chains and launch more bars.
To cater to a growing demand for online shopping, Helens has expanded its business. It has launched stores on e-commerce platforms such as JD, Tmall, Taobao and also on WeChat. The company said its online business is still in an initial stage of development, and online sales mostly satisfy demand of consumers who frequent bars.
It is also in discussions with some barbecue retailers and is considering introducing such offerings in more than 20 of its bars. The bar chain also allows customers to bring their own food as it hopes to create a cheerful and lighthearted atmosphere.
Last year, despite the impact of the COVID-19 pandemic, Helens managed to make a profit. It tends to rent stores that are located in major business districts, but at less prominent locations such as second floors of buildings. Thus, rents tend to be much cheaper than other more prominent locations.
Despite the operational pressure due to the pandemic, in May 2020, Helens offered a pay rise for its staff members. In May this year, the company raised employee pay again. It also has an incentive plan to give shares to its employees.