Haidilao, CHAGEE accelerate expansion in Korea as Chinese brands gain ground

Chinese food and beverage brands are accelerating expansion in South Korea, moving beyond initial market testing to opening more outlets in major commercial districts and building local revenue bases.

According to industry sources on Tuesday, Haidilao Korea, the Korean unit of Chinese hot pot chain Haidilao, posted 117.7 billion won ($82.3 million) in revenue last year, up 50.9 percent from a year ago, surpassing 100 billion won for the first time. Operating profit rose 84 percent to 20.2 billion won. Its operating margin was 17.2 percent.

Haidilao, which opened its first Korean outlet in Myeongdong, central Seoul, in 2014, now operates 11 stores in Seoul, Busan, and Jeju, and plans to open another in Cheongnyangni next month.

Newer Chinese brands are expanding much faster.

CHAGEE, a tea brand from China’s Yunnan Province, launched in Korea in April with three stores and has expanded to nine outlets in about five months. It opened its ninth store at Lotte World in Jamsil on September 18 and plans to open its 10th near Seoul National University Station next month.

CHAGEE had 7,639 stores worldwide as of the end of June, including 399 outside China. Its overseas gross merchandise value rose 114.3 percent on year to 504 million yuan ($75.2 million) in the second quarter, highlighting its rapid international expansion.

Other Chinese food franchises are also growing.

Malatang chain Tang Huo Kung Fu had more than 560 Korean outlets as of March, while its Korean unit posted 25.5 billion won in revenue and 11.1 billion won in operating profit last year.

Chinese brands are expanding as Korean consumers become more familiar with foods and beverages such as malatang, hotpot, and milk tea. They are increasingly targeting mainstream consumers through company-owned stores in major commercial areas.

However, industry observers say sustained sales and repeat customers will be key to determining whether the rapid expansion translates into long-term success, amid intense competition in Korea’s food-service market.