If you can’t stand the heat, get out of the kitchen. That adage has become a growing mantra lately for Chinese consumer brands, which are increasingly looking overseas for relief from their overheated home China market plagued by cutthroat competition and consumer caution. The trend is particularly acute in the restaurant industry, where “poor man’s meals” have become the flavor of the day, as Chinese eateries battle to see who can offer the lowest prices.
Seeking relief from that domestic maelstrom, former highflyer Jiumaojiu International Holdings Ltd. (9922.HK) announced a major new overseas investment this week that will give it 49% ownership of a small but growing North American chain serving hotpots, one of China’s favorite dining formats. The deal will see Jiumaojiu, whose signature “sauerkraut fish” is a variation on hotpots, pay $43 million for its investment in Big Way Group Inc., operator of the Big Way Hot Pot chain, according to its Dec. 29 announcement.
The deal will see Jiumaojiu pay $15 million for stock from existing shareholders, plus another $28 million for newly issued shares. Jiumaojiu previously purchased 10% of Big Way’s stock last July, and the latest purchase will lift its total ownership to 49%. But the company’s voting rights at Big Way will be markedly lower, at just 10.8%, showing Big Way’s owners, husband and wife Yao Xinzhong and Luo Xiaofang, will remain squarely in control of the company.