The catering industry in China has been facing a precipitous decline recently. But the hotpot supplier Guoquan has bagged over CNY 450 million since last August and is still expanding despite the coronavirus outbreak.
Of the CNY 4.67 trillion (USD 664 billion) catering market in China, the hotpot sector has a share of over 10%. As the easiest-to-standardize local cuisine, it is showing its robust characteristics during the epidemic period.
Guoquan, a hotpot-focused food supplier in China, announced a Series B round of funding on February 24 of USD 50 million. IDG Capital led the investment, followed by Vision Knight Capital (嘉御基金) and the returning investor buhuo ventures (不惑创投).
Guoquan focuses on providing food ingredients for Chinese families and restaurants. It offers over 400 kinds of hotpot-related ingredients available both in its community stores and to catering companies. The company mentioned that the proceeds will be used in supply chain optimization, core market expansion, online business operation and more.
Though he started the company in 2017, Yang Mingchao (杨明超), the founder of Guoquan, is indeed a veteran in the catering industry. He established the well-known hotpot restaurant brand XIAOBANDENG, which owns over 600 stores in China and turned to the 2B business after that.
Yang said that the experience made him realize the pain points for most Chinese restaurants are embedded in the difficulty of standardization of both products and user experience. To be specific, the irregular operation, homogeneity of food and taste, decentralized suppliers, complex categories and lack of transparency in the purchase price all set bumps along the way of business expansion. And Guoquan’s inception is aimed at solving the upstream dilemma.
Yang’s idea was obviously welcomed by China’s capital firms.
“We’ve been researching the benchmarking companies such as US Food (USFD: NYSE) and Kroger (KR: NYSE) in the United States stock market. They are all billion-dollar giants that provide food, fresh groceries to the US communities, ” said Li Zhujie, partner of buhuo ventures. “Guoquan is undergoing a high-speed track assisted by the super supply chain in China; we expect a stronger scale effect for the company in the future.”
However, it is worth noting that Haidilao, the leader of the Chinese hotpot sector, started its supply chain business as early as 2016. Facing strong competition ahead, Guoquan should develop a differentiation strategy to maintain its business expansion in the future.