Li Bao Ge Acquires Sun Kau Kee to Venture into Shanghai Market; Enters into Framework Cooperation Agreement with Freshippo

To Drive Cross-Regional O2O Development

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HONG KONG, CHINA - Media
OutReach - 9 January 2020 – Li Bao Ge Group
Limited (“Li Bao Ge” or the “Company”; stock code: 1869) today announces
its acquisition of a 70% stake in Yaoliang
(Shanghai) Food Co., Ltd. (“Yaoliang”), the brand owner and operator of Shanghai Sun Kau Kee (“SKK”) at a
consideration of RMB22.4 million. The acquisition is in line with the Company’s
strategy of exploring opportunities in China’s “new retail” light-meal
delivery market through an asset-light business model. Concurrently, the
Company enters into a framework cooperation agreement with Shanghai Freshippo Network Technology Co., Ltd. (“Freshippo”) to deepen the cooperation
and accelerate the pace of store opening.

 

Pursuant to the acquisition agreement, Li Bao Ge will acquire a total
of 32 SKK in-store counters opened in Freshippo stores. SKK is specialized in cooked food with roast duck as its signature product. It is
one of the leaders in the roast meat (“Siu Mei”) industry in Shanghai, China.
Through this acquisition, Li Bao Ge will expand the presence of its in-store
counters in Freshippo from Hong Kong and cities in the Greater Bay Area such as
Shenzhen and Guangzhou, to Shanghai, where the consumer purchasing power is
strong. Furthermore, pursuant to the framework cooperation agreement, Li Bao Ge
will open in-store counters at Freshippo stores and will offer Cantonese-style
soup, dim sum, dessert, as well as other specialties such as festive
delicacies. Taking advantage of Freshippo’s comprehensive online-to-offline
(“O2O”) platform and technical support, including its marketing initiatives,
online sales resources, delivery service and potential customers, Li Bao Ge will
be empowered to further expand its businesses in Mainland China.

 

“We are actively exploring opportunities in the light meal delivery
market, developing from a restaurateur to a multi-channel operator covering
eat-in, takeaway and retail. SKK expands its market with a new retail mindset,
which is in line with Li Bao Ge’s development strategy. With the existing
network of SKK and the proper use of Freshippo’s brand awareness and high traffic,
we believe that the ‘Sun Kau Kee’ brand will work in synergy with the Company’s original ‘Li Bao
Ge’ brand, which is conducive to the Company’s penetration in eastern China
with Shanghai as the center. It will also help us to continue exploring China’s
fast-growing food delivery and takeaway market through our new retail model, so
as to further improve our profitability. In addition, since the size of the
Company’s new in-store counters are significantly smaller than its customary
high-end Cantonese restaurants, the investment cost will be considerably
lowered. This will enable the Company to transform into a less
capital-intensive business model,” said Li
Bao Ge Chairman Chan Chun Kit.

 

Presently, Li Bao Ge operates eight mid-to-high-end Cantonese
restaurants in Hong Kong and Shenzhen. Its revenue is mainly derived from
banquets. The Company has recently announced a cooperation with Freshippo to
jointly explore new retail opportunities in the catering market, and plans to
set up no less than 10 in-store counters (under the brands “Li Bao Ge” and “Sun
Kau Kee” ) at Freshippo’s stores in Shanghai before 31 December 2020. After the
acquisition of SKK, the target number
of Li Bao Ge stores in Mainland China will increase significantly to a total of
more than 60 by the end of 2020, laying a solid foundation for the Company to
tap into a consumer base with high spending
power.

 

Upon completion of the acquisition, SKK’s existing management team will
stay in place. Leveraging SKK’s existing platform and accumulated experience in
new retail, the Company can further expand the eastern China market. The
Company can also apply the experience of its new retail model to the Greater
Bay Area to speed up its expansion in the area.

 

By strengthening the cooperation with Freshippo, Li Bao Ge will benefit
from more diversified revenue streams from O2O sales. The Company will
gradually transform from a conventional banquet dining operator to a light meal
delivery industry player, and will also explore the opportunities for the
retailing of packaged food to accelerate the pace of expansion and enhance
profitability.

 

“We appreciate Li Bao Ge’s dedication to catering. Li Bao Ge is a
leading brand in Cantonese cuisine rooted in Hong Kong with famous Hong
Kong-style Siu Mei. We firmly believe that our alliance can strengthen the
foundation of the ‘Sun Kau Kee’ brand and ‘Li Bao Ge’ brand in the catering
industry, and make full use of our potential in the field of new retail to push
the business to new heights,” said SKK
Founder and President Luo Lu.

 

SKK is a brand under Yaoliang and has extensive new retail experience.
It has maintained steady business development and has 32 stores as of 9 January
2020.

 

Mr. Hou Yi, President of
Freshippo, said,
“Freshippo is committed to improving the shopping experience for
consumers. The further cooperation with Li Bao Ge will definitely bring a
better shopping experience to consumers.”

 

Freshippo is the new retail flagship under Alibaba Group. With fresh
foods as its main attraction, its physical retail stores focus on enhancing
customer experience, while delivery speed is the strong suit of its online
business. It has built a comprehensive commercial channel comprising
“fresh food supermarket + catering + App e-commerce + logistics,”
with a quick delivery cold-chain distribution system that guarantees deliveries
as quick as 30 minutes within a radius of three kilometers. As of 30 September
2019, there were 170 self-operated Freshippo stores in China.

 

About Li Bao Ge Group Limited (Stock code: 1869)

Li Bao Ge Group Limited is a Chinese restaurant group recognised for
delivering Cantonese cuisine and Chinese banquet and dining services. The Group
operated five full-service restaurants in Hong Kong and three full-service
restaurants in Shenzhen in order to provide
Cantonese cuisine under the brand name of “Star of Canton (???)”. The Group also
opened a Jingchuanhu cuisine restaurant in Hong Kong under a new brand name of “Beijing House (???)” and established a Thai Restaurant, namely “La Maison D’Elephant (??)” in Shenzhen. All of the Group’s restaurants are strategically
situated in landmark shopping arcades or commercial complexes at prime
locations. The Group maintains a business philosophy of offering quality food
and services at reasonable prices under an elegant and comfortable dining environment.
The Group wishes to diversify its restaurant business and customer base as well
as to expand its market share in the PRC.

 

Issued by
Cornerstones Communications Ltd. on behalf of Li Bao Ge Group Limited.