On December 20, 2024, Xiaocaiyuan, a portfolio company of Harvest Capital, officially listed on the Main Board of the Hong Kong Stock Exchange (stock code: 00999.HK), marking a new chapter in the standardization and modernization of the mass-market affordable Chinese dining industry. This listing aims to further expand the restaurant network, enhance brand influence, strengthen supply chain advantages, and upgrade intelligent equipment and digital systems to create greater value for consumers.

By Harvest Capital

At the listing ceremony, Mr. Wang Shugao, Chairman of Xiaocaiyuan, remarked: "Xiaocaiyuan's listing is an important milestone in our enterprise development. We are grateful to our customers for choosing Xiaocaiyuan, to our team for their dedication, and to our partners and investors for their trust. Xiaocaiyuan will continue to lead the team, driving the market through innovation, insisting on craftsmanship in our cuisine, serving with sincerity, and caring for every family member with love, building a first-class catering group with a modern scientific management system and advanced technology. We will continue to forge ahead with gratitude, responsibility, growth, and mutual benefit, creating greater value for our customers and society."

Mr. Alan Song, Founding Partner and Chairman of Harvest Capital, stated: "Mass-market consumer goods will form the foundation of China's future society—a long runway with thick snow. Xiaocaiyuan is a quintessential example of Harvest Capital's philosophy of 'embracing everyday life and empowering people's livelihoods.' Xiaocaiyuan not only embraces standardization, modernization, and regulation, but also emphasizes a people-oriented business philosophy and an entrepreneurial spirit of striving upward. We are honored to participate in Xiaocaiyuan's investment and work hand-in-hand with the company to drive the modernization and management transformation of Chinese dining."

Since 2023, Harvest Capital has invested RMB 500 million in Xiaocaiyuan across two consecutive rounds, becoming the only external institutional shareholder before the listing. Xiaocaiyuan has seized the structural opportunities in Chinese full-service dining by providing affordable, high-quality products and services to meet the daily dining needs of mass consumers. By enhancing operational standardization and digitalization, the company has continuously strengthened its supply chain capabilities, forming a competitive advantage. The investment in Xiaocaiyuan exemplifies Harvest Capital's commitment to the "essential, high-frequency, livelihood-oriented" consumer investment track and its philosophy of "embracing everyday life and empowering people's livelihoods."

As close partners, we sincerely congratulate Xiaocaiyuan on opening this new chapter in the Chinese full-service dining sector. As a representative restaurant enterprise, Xiaocaiyuan's successful listing in a challenging capital market environment not only brings greater confidence to practitioners in the catering industry but also to those persevering in the consumer and livelihood sectors.

As a fellow traveler in Xiaocaiyuan's journey and an intimate partner witnessing its rapid growth, we believe Xiaocaiyuan has achieved leading advantages in products, supply chain, digitalization, and strategic operations:

Xiaocaiyuan's Product Advantages

Delicious Yet Affordable: The High Value-for-Money Choice

Founded in 2013, Xiaocaiyuan has opened 663 directly-operated restaurants nationwide, including 658 "Xiaocaiyuan" brand stores and 5 other sub-brand stores, spanning 146 cities/counties across 14 provinces in China.

Xiaocaiyuan positions itself as a mass-market affordable dining option, providing consumers with home-style dishes and attentive service through healthy, fresh, premium ingredients, exceptional product strength, and extremely high value for money. Aligned with healthy eating concepts, Xiaocaiyuan employs cooking methods using less oil, less salt, and fewer seasonings, transforming regional specialty dishes into branded, mass-market offerings more suitable for diverse tastes and group dining scenarios across China.

In menu development and design, to ensure taste standardization and customer dining experience, the company has streamlined from nearly a hundred SKUs to 45-50 items, adjusting according to local conditions and regularly introducing new dishes to meet consumer demand for variety.

To ensure dish quality, taste, and "wok hei" (breath of the wok), Xiaocaiyuan does not use pre-prepared meals, insisting on using fresh, premium ingredients prepared on-site at each restaurant. Through central kitchen processing for pre-cut vegetables and establishing efficient dish preparation workflows, Xiaocaiyuan ensures fast service, delivering on its promise of serving dishes within 25 minutes of ordering.

Xiaocaiyuan's average spending per customer ranges from RMB 50-70, extremely competitive compared to dining brands with prices often exceeding RMB 100, meeting consumers' rigid demand for "delicious yet affordable" products. According to Frost & Sullivan market research, in 2023, Xiaocaiyuan ranked first among all brands in China's mass-market affordable Chinese dining market with average spending between RMB 50-100 per customer.

High-Quality, Stable Supply Chain Management

Concentrated Store Opening to Enhance Efficiency

Beyond understanding consumer needs and the extreme pursuit of "quality and affordability" in products, competitive advantages at the product level depend on supply chain capabilities.

Xiaocaiyuan maintains strict procurement standards and supplier management systems, rigorously controlling ingredient sources, strategically planning ahead for key ingredients, leveraging rich product selection experience, and carefully selecting each key ingredient supplier based on established procedures. The company insists on long-term cooperation with reputable top-tier suppliers, including Nongfu Spring, Wilmar International, and Dahu Aquaculture. Most ingredients have achieved centralized procurement, realizing cost control and economies of scale.

Xiaocaiyuan has established one central kitchen in Anhui and 14 warehouses nationwide, with a self-built transportation fleet of 200 vehicles. The self-built processing, warehousing, and logistics systems ensure efficient ingredient processing, precise daily delivery to all restaurants, and safe, secure quality control.

The company's key restaurant layout focuses on the Yangtze River Delta region, including Jiangsu, Shanghai, Anhui, and Zhejiang, extending from core provincial capital cities to other prefecture-level cities and counties. This concentrated restaurant layout allows full leverage of supply chain procurement and distribution advantages, substantially reducing logistics costs and improving logistics efficiency.

Meanwhile, Xiaocaiyuan continues to strengthen supply chain digitalization, having launched online management for the entire supply chain process and will soon complete a digital full-process quality control traceability management system, further ensuring food safety and efficient operations.

Xiaocaiyuan Has Built a Standardized and Digital Modern Management System

Beyond dish standardization, Xiaocaiyuan has achieved standardized management across operational aspects including restaurant service, online and offline operations, employee training, food safety and quality control, and store expansion—one of the core reasons for its counter-cyclical growth during the challenging three-year period.

While standardizing business processes, Xiaocaiyuan leverages information technology and intelligent equipment to further enhance operational efficiency and capabilities, actively building digital capabilities centered on data assets. In recent years, the company has successively launched member systems, Business Intelligence (BI) systems, business middleware systems, and SAP systems.

The member system aims to cultivate customer lifetime value, aggregating multi-channel traffic, generating deep consumer insights, forming data assets, and feeding back into business operations to increase member repeat purchases. Since early 2021, Xiaocaiyuan's membership has grown from 1.5 million to over 8.3 million.

The BI system possesses capabilities in data collection, data cleansing, data analysis, and data visualization. Through the BI system, Xiaocaiyuan more efficiently extracts valuable information from massive datasets and, based on data assets' insights into store operations and consumer preferences, develops the capability for "data-driven operational decisions," ultimately improving operational quality.

Xiaocaiyuan's intelligent camera system supports 360-degree comprehensive coverage of back kitchens. By introducing AI modules that automatically capture non-compliant behaviors, working together with the BI system, the system timely and accurately identifies abnormal events, reducing manual management. Some restaurants have already deployed intelligent back-kitchen equipment such as cooking robots, further enhancing kitchen standardization and efficiency.

Digitalization has become the foundation of Xiaocaiyuan's modern management system. Post-listing, the company will continue to invest raised funds in digital infrastructure development, further forming structural competitive advantages.

Entering the Mass-Market Affordable Community Canteen Business

Forming Dual-Brand-Driven Development

China's economic and social development is undergoing complex historic changes. Steady yet moderating growth in urban residents' per capita disposable income, gradually rising urbanization rates, and demographic shifts favor the development of mass-market affordable dining, meeting the growing demand among the public for "delicious yet affordable" dining options.

Xiaocaiyuan, with its keen market insight, has seized the growth opportunities in the rapidly developing mass-market affordable Chinese dining market. Based on understanding macroeconomic trends and consumer needs, Harvest Capital and Xiaocaiyuan jointly incubated the community dining model "Caishou Canteen," building the model and formulating action plans from scratch. Unlike Xiaocaiyuan's pricing and commercial district location strategy, Caishou Canteen's price range is RMB 20-40, opening in densely populated areas such as residential communities and office buildings.

Building on Xiaocaiyuan's standardized operational experience, Caishou Canteen will achieve efficiency breakthroughs by introducing intelligent equipment, reducing labor requirements, and lowering management complexity, with the ultimate goal of becoming a lifestyle and infrastructure for the masses.

In the future, under a scientific management system, Xiaocaiyuan will deeply cultivate the mass-market affordable dining track, achieving dual-brand-driven development with Xiaocaiyuan and Caishou Canteen, as well as an omnichannel business layout primarily focused on offline dine-in, supplemented by online delivery, and synchronized development of new retail.

Harvest Capital's Post-Investment Support Drives Enterprise Efficiency Breakthrough

Starting in 2022, multiple members of Harvest Capital's investment team stationed themselves in Tongling, Anhui, focusing on the company's core development issues and deeply participating in Xiaocaiyuan's development planning. Beyond playing a role in corporate strategic planning, they delved deeply into building and operating the enterprise's modern scientific management system, safeguarding the company's development.

Through research and deep collaboration with the Xiaocaiyuan team, we clarified the enterprise's long-term strategic positioning: focusing on "mass-market affordable Chinese dining," concentrating on "delicious yet affordable" dining solutions. In the era of mass consumer democratization, seizing consumer pain points from social trends such as smaller family sizes and aging populations, with the mission of empowering household kitchens, deeply cultivating the high-frequency, essential dining track, centered on consumers, and forming a sustainable high-repeat-purchase growth model.

Harvest Capital deeply participated in building Xiaocaiyuan's digital systems, helping the company successfully establish member operation systems, optimize data management platforms, and build BI data analysis systems, successfully assisting the company in completing its digital transformation. At the corporate strategy level, we helped the company formulate a complete five-year development strategic plan, covering not only future business model development planning but also a complete digital transformation and upgrade plan, encompassing supply chain management digitalization, intelligent site selection, intelligent store inspection, store lifecycle management, and financial internal control management.

During the post-investment process, we assisted Xiaocaiyuan in optimizing its organizational structure and improving talent incentive mechanisms. From compensation incentives to equity incentive plans, we comprehensively enhanced the cohesion and execution capabilities of the core team. Meanwhile, through systematic training and supervision mechanisms, we ensured the enterprise's standardized management system could be precisely implemented at the store level.

As consumption enters the democratization era, Caishou Canteen, jointly created by Harvest Capital and Xiaocaiyuan, has begun pilot operations in Nanjing and Shanghai. This model will open sustainable development space and growth potential for Xiaocaiyuan.

Harvest Capital not only provides financial support but also offers substantive assistance through knowledge accumulation and capability replication from cumulative investments in over 30 leading enterprises. Harvest Capital positions itself as a variable in enterprise growth, growing together with the enterprise—a process in which we feel deeply honored.

Eleven Years of Dedication, Moving Toward Common Prosperity

Xiaocaiyuan opened its first store in Anhui in 2013. Eleven years of dedication, through diligence and wisdom, have opened a new chapter in the standardization and modernization of the Chinese full-service dining industry.

In Chairman Wang Shugao, we see his strong, sincere altruistic aspirations. The corporate culture established by Xiaocaiyuan hopes to enable more chefs and servers to change their destinies, helping every ordinary employee realize personal dreams and personal value.

Within the company, a comprehensive mentorship system and performance incentive system, as well as equity incentive systems for outstanding employees, ensure the vitality of enterprise innovation. This approach also reconstructs the labor-management cooperation relationship and management methods of traditional catering enterprises. Xiaocaiyuan gives all employees and chefs the treatment of starting businesses together, allowing those who strive together to enjoy the dividends brought by career progress and development.

Among Xiaocaiyuan's current shareholders, 90.4% grew from grassroots store employees. Almost all store managers and head chefs come from internal cultivation and promotion, while regional managers are 100% internally cultivated and promoted. Xiaocaiyuan's approach reconstructs productivity and production relations, greatly liberating productivity and leading more employees toward common prosperity.

All this is inseparable from the founding team's forward-looking vision, outstanding leadership, and over a decade of dedication to the catering industry.

Listing is merely one important milestone in Xiaocaiyuan's brand development. Xiaocaiyuan will continue to serve consumers with craftsmanship, lead the industry through innovation, and write the next decade's legend with excellence. As Xiaocaiyuan founder Wang Shugao envisions, Xiaocaiyuan's goal is to further develop the company into a world-class chain catering group with a modern scientific management system, deeply cultivating mass-market affordable Chinese dining, ultimately achieving "Xiaocaiyuan wherever there are Chinese people."