Cooks Global signs JV with BuBuGao, targets 150 coffee stores in China in five years

Cooks Global Foods [NZX:CGF] expects to open 150 Esquire Coffee stores in China in the next five years, after signing up to a joint venture with Chinese retail and property investor BuBuGao (Better Life) Group.

The deal with the Shenzhen-listed retail and property investor will see Cooks open 30 stores in the Hunan province by 2020, the Auckland-based company said in a statement. That boosts its planned stores in China to 150 by 2020, making it the chain's fastest growing region and is part of Cooks' plan to have 800 stores worldwide.

Cooks operates 21 stores in China, employing 130 people, making it the third largest Kiwi non-government employer in the People's Republic, it said.

In June 2013, Cooks agreed to pay Esquires founders Stuart and Lewis Deeks $300,000 in cash and an undisclosed number of shares for the franchisee rights for the coffee houses worldwide, excluding New Zealand and Australia. The coffee chain has stores in the UK, its largest market, Ireland, China, Saudi Arabia, Bahrain, United Arab Emirates, Kuwait and Canada, and is now pushing into Indonesia and Northern Cyprus.

BuBuGao has annual sales of $2.7 billion, employs more than 70,000 people and operates 373 retail outlets, including supermarkets and shopping malls, across several provinces in China. It also has $2.2 billion under management in its property portfolio and is active in online commerce and finance, Cooks said.

"The venture is a continuation of our strategy to drive growth in China by partnering with significant domestic businesses that can provide the resources, retail expertise and local knowledge that are prerequisites for success in the region," says Cook executive chairman Keith Jackson. "These capabilities, coupled with a Chinese Esquires Coffee management team that understands how to translate the brand's unique take on New Zealand café culture into domestic settings, gives us great confidence in the potential of the business to grow."

In December, Cooks increased its first-half loss to $1.2 million in the six months ended September 30, from a loss of $831,000 a year earlier, after buying the Canadian franchise rights to Esquires Coffee Houses, completing its ownership of the brand outside New Zealand and Australia, and spending more to expand its global footprint. Operating income was $4.3 million, from zero a year earlier, before it embarked on it franchise buying strategy in October 2013.

Shares of Cooks last traded at 14c on the New Zealand Alternative Index and have gained 3.7% since the start of the year.

(BusinessDesk)