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Guifaxiang Fried Dough Twists cooks up offering

2014-07-29 11:28 China Daily Web Editor: Qin Dexing
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Huge fried dough twists made by Guifaxiang, a time-honored brand from North China's Tianjin municipality, are on display at an expo in Beijing in 2011. HUANG XIAOBING/CHINA DAILY

Huge fried dough twists made by Guifaxiang, a time-honored brand from North China's Tianjin municipality, are on display at an expo in Beijing in 2011. HUANG XIAOBING/CHINA DAILY

Tianjin Guifaxiang, one of China's time-honored brands based in Tianjin, plans to make its debut on the Shenzhen Stock Exchange, according to an announcement by the China Securities Regulatory Commission.

Founded in 1927, Guifaxiang would become the first publicly listed maker of such products in China if its plan wins approval.

The food manufacturer netted more than 96 percent of its sales from the Tianjin market from 2011 to 2013. It plans to raise 570 million yuan ($92 million) through its initial public offering, according to its prospectus.

With the money raised, Guifaxiang plans to spend 287 million yuan on expanding its production capacity. It produced 7,748 tons of fried dough twists last year, which was 169 percent higher than the designed capacity, according to the prospectus.

The company also plans to speed up its expansion in China by opening 19 stores within three years of listing, with 10 stores in Tianjin, and nine others in the cities of Beijing, Shanghai, Shijiazhuang, Shenyang and Xi'an.

The prospectus shows that Guifaxiang, whose products also include bread and nuts, saw overall revenue of 462 million yuan last year. The revenue from fried dough twists was 355 million yuan, accounting for 77 percent of the total.

The sweet treats also generated a profit of 209 million yuan, a nearly 60 percent gross profit margin, according to the company.

Last year, the company sold the twists at 47 yuan per kilogram on average, making a profit of 27.66 yuan per kg, the prospectus shows.

The company said the main drivers of its revenue are rooted in its reputation. The fried dough twists are popular not only for their taste but their aroma and crunchy texture, and they have become a must-buy for visitors to Tianjin.

Guifaxiang would become the latest of China's time-honored brands to go public after Quanjude Roast Duck Restaurant and Wuliangye, a Chinese baijiu.

"Consumer goods that boast Chinese characteristics will have plenty of room to grow," said Mao Zhifang, an investment manager at the Beijing-based Hejun Consulting.

The major concerns for time-honored brands are launching their products in other cities. "These brands have strong geographical pull, and consumers usually prefer to buy them in their area of origin as a local specialty," Mao said.

"Time-honored brands also face strong competition from foreign and domestic food giants," he said. "When it comes to other cities beyond their origins, consumers will have many other purchase options besides these time-honored brands."

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