This is an English adaptation of a FoodBud historical article originally published on January 29, 2022.
On January 28, 2022, Juewei Food announced that Hefu Noodle was an investee company of Shenzhen Wangju Capital, a wholly owned subsidiary of Juewei. In connection with Hefu Noodle’s proposed overseas listing, Juewei said it planned to support related outbound-investment work, including ODI filings and approvals, investment agreements, equity-transfer agreements, capital-reduction agreements, and possible adjustments to the investment plan or implementation path, provided the listing objective was supported and Juewei’s shareholding interests were not impaired.
Shenzhen Wangju held 16.92% of Hefu Noodle. Another Juewei-linked vehicle, Juele Capital, held 4.47%. Tencent was the third-largest shareholder, with an 11.54% stake.
If Hefu Noodle listed successfully in 2022, it would mark another investment win for Juewei. In 2021, Juewei had already cashed out RMB100 million from the IPO of Qianwei Central Kitchen.
According to disclosed financing information, Hefu Noodle completed a nearly RMB800 million Series E round in July 2021. The round was led by CMC Capital, with participation from new investor Zhongwei Capital and existing investors Tencent Investment and Longfor Capital. After the Series E, Hefu Noodle’s valuation reached RMB7 billion.
Since 2015, Hefu Noodle had raised multiple large rounds above RMB100 million, including RMB100 million in 2017, RMB215 million in 2019, and RMB450 million in 2020. Over six years, total financing exceeded RMB1.6 billion.
Juewei had invested RMB230 million in Hefu Noodle. During Hefu’s 2021 financing round, Juewei transferred part of its Hefu stake, cashing out RMB179 million, of which RMB110 million was recorded as after-tax net profit for the listed Juewei entity.
In October 2021, Shenzhen Wangju transferred 6.16% of Hefu Noodle for US$28 million, or RMB179 million, based on a RMB2.9 billion valuation. The buyers and payment amounts were CMC at US$19.458 million, Zhongwei at US$5.189 million, Tencent at US$1.916 million, and LFC at US$29,000.
Data from Jihai Brand Monitoring showed Hefu Noodle had 440 operating stores nationwide, with 83 openings and 19 closures in the previous 90 days.
Its stores were concentrated in East China, Beijing, Guangdong, and other first-tier and new first-tier cities. First-tier and new first-tier cities accounted for more than 81% of stores.
Hefu had previously said its stores performed well in lower-tier markets, citing one Shijiazhuang store that reached labor productivity of 77,500 and sales per square meter of 6,460 in April 2021.
According to earlier media reports, by the end of June 2021 Hefu had more than 340 stores nationwide. Average store revenue was RMB550,000 per month, sales per square meter were RMB4,800 per month, labor productivity was RMB55,000 per month, and average ticket was RMB45. Daily noodle sales exceeded 150,000 bowls, with annual customer traffic above 50 million.
The article noted that costs declined as the store network scaled. At 1-30 stores, Hefu Noodle found profitability difficult. At 30-100 stores, its ingredient-cost control began to show, with ingredient cost falling from 35% of sales to about 25%. After achieving scale, average cost across the product line was 22%-23%, helped by production-process improvements.
By location type, Hefu stores were mainly in malls and office districts. Mall stores accounted for 56.9%, while office-area stores accounted for 22.9%.
Rent once accounted for as much as 26% of total cost. As brand recognition improved, malls began actively inviting the chain, making rent negotiable and in some cases allowing rent to be paid as a sales commission instead of base rent. In 2019-2020, rent cost was controlled at around 16%, and overall net profit was about 15%. Shanghai and Beijing had the highest contribution rates, each at about 18% net profit. In most regions, table turnover was 7-8 times, while South China stores were somewhat weaker.
Hefu invested early in supply chain infrastructure. Before its first store opened, it had already planned a supply chain and central-factory system capable of supporting 1,000 stores. It also invested early in digital capabilities, building its own information systems across supply chain, operations, and logistics to connect front-, middle-, and back-office functions.
In 2021, Hefu put a noodle production base into operation with annual capacity of 20,000 tons, described as a leading scale in the fresh wet noodle category and capable of supplying 1,500 stores. The facility was built to food-industry clean-room standards, with constant temperature and humidity to protect flour and noodle quality. It also used automated noodle rolling, packaging, and transportation processes to protect the product from factory to warehouse, logistics, store, and consumer table.
A nearly 100,000-square-meter modern factory had entered the design stage. The planned new factory was expected to support RMB7 billion in sales and meet Hefu Noodle’s development needs for 5-10 years. It was also expected to support OEM/ODM services for the broader industry.
Juewei’s announcement disclosed that Hefu Noodle generated RMB1.1 billion in 2020 revenue and a RMB210 million net loss. In the first half of 2021, it turned profitable, with RMB13.857 million in net profit on RMB850 million in revenue.
Two listed noodle-chain comparisons were Ajisen China and Tam Jai International.
Ajisen China’s 2021 interim report showed first-half 2021 revenue of RMB1.01 billion, net profit of RMB49.7 million, and 707 stores. In 2020, Ajisen China generated RMB1.82 billion in revenue and a RMB78.89 million net loss. Its market capitalization, however, was only about RMB1.1 billion, converted from HK$1.343 billion.
Tam Jai International, a Hong Kong rice-noodle chain, listed in Hong Kong in 2021. At the time of the article, its market capitalization was about RMB3.24 billion. For the six months ended September 30, 2021, Tam Jai reported RMB960 million in revenue and RMB110 million in net profit.
Against that backdrop, Hefu Noodle’s potential 2022 revenue scale of more than RMB2 billion made its public-market valuation an important signal for the category.
The article also pointed to other fast-growing noodle-chain brands in Hefu’s wake, including Yujian Xiaomian and Chen Xianggui. After a new 2021 financing round, Yujian Xiaomian’s valuation reached RMB3 billion. After its latest financing round, Chen Xianggui’s valuation reached RMB1 billion.
Yujian Xiaomian’s 2020 full-year transaction volume was RMB290 million. Data from Zhai Men Can Yan showed it opened 63 stores in 2021 and had reached 146 operating stores, making it smaller than Hefu Noodle.
The article argued that if Hefu Noodle’s RMB7 billion private-market valuation did not perform well after listing, the public-market signal could flow back into private-market valuations for still-unlisted restaurant-chain projects.
Ajisen China’s weak market capitalization was already a cautionary comparison, even though its revenue base and store count remained substantial. For Hefu Noodle and other emerging noodle chains, the question was what growth story they could tell after listing to avoid a similar outcome: lower-tier-market expansion, global expansion, or another path.
Note: IPO plans, valuations, ownership stakes, financing figures, market capitalizations, and forward-looking capacity or sales targets are historical figures from the January 29, 2022 source article.