China’s stature as an industrial dynamo is unchallenged. Yet its dramatic economic growth has not bred a class of Chinese marketing powerhouses whose brands have become synonymous with their products outside of their country.
Now, two large Chinese restaurant chains have come to Los Angeles, using it as a test kitchen as they attempt to build name recognition for their uniquely Chinese brands.
Hai Di Lao Hot Pot, which had $510 million in 2012 revenue, opened its first U.S. branch last month, a 6,000-square-foot restaurant in Arcadia serving its signature “hot pot” of boiling broth with meats, seafood and vegetables. It will be joined in Los Angeles County next month by Meizhou Dongpo, a Sichuan-style restaurant, which will open its North American flagship in the Westfield Century City Mall.
The successful privately held chains, each with more than 70 outlets at home, are investing heavily in U.S. expansion. In doing so, they might be going from the frying wok to the fire.
Both are entering a culturally distinct, highly competitive market with no name recognition and no marketing plan of which to speak.
“Marketing is not our priority for now,” said Michael Wang, who is overseeing Meizhou’s entrance into the United States. “But it will be our next step.” Executives at Hai Di Lao said the chain would use the same word-of-mouth marketing strategy it found so successful at home, hoping to impress American customers with good food and service.
That might explain why representatives of both companies tried to avoid sounding too ambitious when talking about their otherwise bold move into the U.S. market.
Hai Di Lao invested more than $3 million in its Arcadia eatery, while Meizhou (pronounced May-cho) invested $1.8 million in its 4,500-square-foot Century City venue. Hai Di Lao’s second American restaurant is planned for Irvine. Meizhou is targeting Santa Anita, a heavily Asian community, for its next venue. It plans to open a larger, $4 million restaurant there next year.
Wang said the risk the chain was taking on extended beyond its own success or failure.
“Many (Chinese) companies want to expand overseas, but they don’t know how,” he said. “Our success will be encouraging to those companies. But if we fail, it will trigger even more concerns.”
Learning market
Meizhou, which had $300 million in sales last year, has invested far more resources in its first U.S. outlet than in any of its other eateries, Wang said.
After deciding two years ago to enter America, company officials spent a year doing market research and looking for locations. A squad of 13 people, including management and chief chefs, came to the United States to scout the market, eventually choosing to make their debut in Los Angeles because of its proximity to the port, large Chinese-American population and access to a larger labor force.
The company spent another year preparing the Century City outlet: from design to renovation to importing dinnerware and finding suppliers.
The process, Wang said, was more complicated than anticipated, in part because the company’s Beijing design firm was unfamiliar with local building codes. Further delays came when construction material shipped from China was crated in wood containers that U.S. Agriculture Department regulations required to be treated before being allowed through customs. The containers were treated, but Meizhou was not aware of rules requiring a third party to verify the treatment and label the containers. The containers remained at the port last week.
As a result, Meizhou’s opening has been delayed twice. Rather than opening this summer, it is now scheduled to open in November.
The complications arose, in part, because there was no roadmap for Meizhou to follow.
“No one knows what works for this market,” Wang said. “We need time to work out our own model.”
Figuring out U.S. rules and regulations is just one of many hurdles. Once the doors open, the chains must bring in customers, many of whom might be unfamiliar with their fare.
Katie Chung, general manager of Hai Di Lao’s Arcadia outlet, said despite locating in a heavily Chinese community, the chain has been trying hard to appeal to non-Asian diners by localizing its menu and broth flavors. It also offers chopstick helpers and is planning to add videos or apps explaining how to eat hot pot.
Meizhou tried to adapt its approach for the American market by hiring two American management consulting firms, only to find that cultural differences were a two-way street: The consultants knew little about authentic Chinese food, and the restaurant designs and menus they recommended didn’t fit Meizhou’s style.
“I think a big part of being successful is to target based on your authenticity,” said Darren Tristano, executive vice president at Chicago market research firm Technomic Inc.
Restaurants targeting a market with a strong Asian population should focus on more authentic products, he said, while restaurants wanting a broader appeal are very likely to be similar to P.F. Chang’s China Bistro, which is less authentic –and less spicy.
“You probably apply one of those two strategies depending on where you are choosing to open your restaurant,” he said.
Both Meizhou and Hai Di Lao are trying in some way to split the difference, remaining as authentic as possible while acknowledging cultural differences in the new market.
Opening its first outlet in Century City is a clear statement that Meizhou wants its brand to be perceived as accessible to American tastes, said Wang, who was born in China and has had 13 years of experience running Chinese restaurants in the United States. Yet they don’t want to sacrifice authenticity.
To accommodate American palettes, Meizhou tried to limit the variety offered on its menu, choosing authentic dishes that are appealing to Americans. Peking duck and soup dumplings, for instance, which are not Meizhou’s specialty dishes in Beijing, will be centerpieces of the menu here.
Chinese flavor
Hai Di Lao’s Chung came to the United States in her teenage years and speaks English and Chinese. She said that while the chain wants to appeal to both American and Chinese consumers, more than 95 percent of its customers are Asian, unsurprising given census figures showing more than half the population in Arcadia is Asian.
Yuan Huaqiang, Hai Di Lao’s vice president in charge of U.S. operations, said the company didn’t think much about targeting Asian consumers or American consumers, figuring that its strategy of focusing on products and service would win over customers across ethnicities.
Like its spices, not all of the services Hai Di Lao offered at home translates here.
Hot-pot dining in China is known for both its communal nature and for a good bit of splashing as people dip into a shared pot of broth. Famous for its service in China, Hai Di Lao provides small plastic bags to cover cell phones, cloths for diners to clean their glasses, ointment for burns (a rare necessity) and even hairpins.
Waits can sometimes reach an hour, and to keep customers comfortable, Hai Di Lao restaurants in China offer enclosed karaoke spaces, free fruit and snacks, and even a nail salon in the waiting area. That last amenity did not survive scrutiny by Los Angeles County Health Department officials, who ruled that chemicals used in manicures were not allowed in restaurants.
Another accommodation to American tastes is that while all the diners eat from the same pot in its China eateries, the company provides individual boiling pots here.
One thing the company keeps exactly the same is its famous noodle dance. The “dancer” stretches a large batch of dough into slim ribbonlike noodles more than 10 feet long by swirling it through the air as if he or she were dancing.
