Rising COVID-19 Cases Across China Impact Dining Out Stores
About 5% of Paris Baguette Stores Temporarily Closed
Mr. Pizza, Kyochon, Cheogajip Also Face Temporary Closures... Sales Decline Inevitable
[Asia Economy Reporter Choi Saeng-hye] As the number of confirmed cases of the novel coronavirus infection (COVID-19) in China surpassed 80,000, the damage to domestic food service franchises operating in China has continued for several months. As the infected areas expand, stores such as bakeries, pizza, and chicken located not only in Wuhan, Hubei Province, the origin of COVID-19, but throughout China, have been closing one after another, impacting sales.
According to SPC Group on the 3rd, about 5% of the approximately 300 Paris Baguette stores located in China are still closed due to the COVID-19 situation. Considering that 10% of stores were closed 2 to 3 weeks ago when the infection spread rapidly, this can be seen as a recovery trend, but the impact remains significant. Since entering Shanghai, China in September 2004, Paris Baguette operates stores in major Chinese cities including Beijing, Shanghai, Tianjin, Hangzhou, Suzhou, Nanjing, Dalian, and Chengdu. A Paris Baguette official explained, "About 80-90% of the stores are concentrated in Shanghai and Beijing, and it seems they have been somewhat affected as COVID-19 infections rapidly spread in China."
In the case of the Tianjin factory located in Tianjin, China, it has been confirmed that there has been no suspension of operations so far. SPC Group invested 40 billion KRW last year to complete the 20,800㎡ Tianjin factory. It is the largest facility among SPC Group’s 12 overseas production sites, producing about 390 items including bread, cakes, processed vegetables, and sauces.
For CJ Foodville, it is known that about 120 Tous Les Jours stores in China have suffered sales damage. Especially since the joint venture established with a local private equity fund operates the business in China, it is difficult to ascertain whether stores are closed or not. A Tous Les Jours official stated, "Currently, the joint venture B&C Craft, established with the local private equity fund Hosen Capital, holds the actual operating rights, so it is not easy to confirm whether stores are closed."
Tous Les Jours entered China in 2005 and once operated more than 180 stores, growing its presence, but it has recorded losses in the food service business every year in China, showing poor business performance. CJ Foodville has established B&C Craft by merging three corporations in Beijing, Shanghai, and Zhejiang among its five Chinese Tous Les Jours corporations and is conducting business through it.
MP Group’s Mr. Pizza has also suffered sales damage due to the COVID-19 situation. A Mr. Pizza official said, "Among the approximately 122 stores in China, those located inside large discount stores like Carrefour or shopping centers often suspend operations when the shopping centers close," adding, "Many of the standalone stores temporarily close but then resume operations."
Kyochon Chicken operated only the Chaobao branch without closure among its four stores in China, while the other three stores (Zhenhualu, Gonghualu, and Yangkaozhonglu branches) were closed. To prevent the spread of COVID-19, all four locations are currently operating with reduced hours. Cheogajip Yangnyeom Chicken suspended operations at its Wuhan store from January 23. Cheogajip Yangnyeom Chicken opened its first store in Wuhan last fall when it entered China.
The distribution industry is hopeful as the spread of COVID-19 infections in China is slowing down. While confirmed cases are rapidly increasing outside China, including South Korea, the number of confirmed cases in China is decreasing. There are even forecasts that the COVID-19 situation in China will calm down as early as April. According to the National Health Commission of China, the number of confirmed COVID-19 cases was 202 on the 1st. The number of patients has been steadily decreasing by more than 2,000 daily.
An industry official said, "In China, including Hubei Province and major metropolitan cities, there are forecasts that the COVID-19 situation will reach a lull by the end of April," adding, "Although sales in the first quarter will suffer serious damage, the Chinese market is so large that sales are expected to recover rapidly."
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