Introduction: This time, China's largest dining bar is also heading for an IPO listing! It's widely known that in recent years, the restaurant industry has not been as profitable as before, and bars have been closing one after another, with the underlying reasons understood by all. Under the emerging entertainment consumption landscape, thriving dining bars are particularly popular, while struggling ones are deserted, creating a mixed picture of joy and sorrow! Now, China's largest dining bar, COMMUNUE Huan Shi, with over a hundred stores nationwide and annual revenue once surpassing the 10 billion yuan mark, is also preparing for a Hong Kong IPO listing.

The increasingly crowded Hong Kong stock market is about to welcome the "first dining bar stock." This nighttime business has not been mercilessly abandoned by the market but has instead become a darling of capital. How exactly have dining bars, which understand young people's nightlife better than restaurants, cafes, and bubble tea shops, managed to achieve annual revenues exceeding 1 billion yuan and are now sprinting towards a Hong Kong listing?

China's Largest Dining Bar Selling Not Just Drinks, But Also Food In reality, those in the know understand that dining bars belong more to the entertainment industry than the food service sector.

Furthermore, Huan Shi is far from just a bar; it is also a restaurant. Unlike traditional bars that only serve as social hubs for nighttime consumers, it also offers crafted beverages and fine food during the day, all with a great atmosphere. Therefore, this dining bar operates not only during the day but is also busy making money at night, covering consumption scenarios across almost all time periods.

Currently, this top-ranked dining bar in China had 112 directly operated stores nationwide by the end of the third quarter of last year. Instead of expanding aggressively like some trendy food outlets, it focuses more on refined services. Indeed, this direct-operated dining bar model appears more suitable for young people to gather and drink freely, and offers more urban charm, compared to small pubs, coffee shops, bubble tea stores, or pool halls.

HELENS small pub, once hailed as the "Starbucks of the Night," did not deliver impressive financial results after its IPO, with annual revenue declining instead of increasing, resulting in disappointing market performance.

Now, HELENS has closed over 500 directly operated stores in two years and is shifting towards a franchise model. But can a "big gamble" on franchising easily rewrite its lackluster financial report? At least based on HELENS's recent market performance, the road ahead is tough and the task is arduous. Huan Shi, founded in November 2016 and not yet ten years old, has received several billion yuan in funding from investors like Hillhouse Capital, Richland Capital, and Tomato Capital, making it somewhat of a capital darling.

Although some investment institutions exited before this Hong Kong IPO, the previous rounds of substantial funding have, to some extent, injected ample cash flow into Huan Shi. This dining bar, which sells both drinks and food, derived nearly 45% of its revenue from high-margin alcoholic beverages and drinks in the first three quarters of last year, generating 872 million yuan in nine months, a year-on-year increase of over 14%.

Following this trend, the company is highly likely to surpass the 10 billion yuan revenue mark in 2025.

The prospectus also shows that Huan Shi's revenue reached 1.074 billion yuan in 2024, a year-on-year increase of over 27%, also hitting a record high. Indeed, the gross margin on alcoholic drinks is generally higher than the average margin for Chinese/Western food or hot pot (around 50%). In fact, Huan Shi's gross margin has consistently exceeded 67% for many years and remains quite stable.

According to the prospectus, Huan Shi has launched several Chinese-style craft tea drinks, with flavors like Peanut Milk, German Wheat, and Ice Grape Green Tea available for consumers to choose from, offering a complete variety to suit different tastes.

Besides drinks, it also serves different food items during brunch, afternoon tea, and dinner hours. Whether for casual friend gatherings, company events, or couple dates, it's a great place for a meal.

Thus, by operating both a beverage business and a food culture, China's largest dining bar is quietly making a fortune.

Over 9 Million Members Support a Hong Kong IPO "Firmly Capturing" Consumers with Extreme Value for Money In reality, consumers are becoming more cautious with their spending. They are willing to spend, but it must be worth it.

Dining bars like Huan Shi, founded by 40-year-old tech professional Tang Weitang, are actually quite common in China's first and second-tier cities, let alone smaller pubs. Data from Hongcan Big Data shows that China's pub market size reached 112 billion yuan the year before last, a year-on-year increase of 7.7%.

In this hundred-billion-yuan pub market, the number of pubs nationwide has exceeded 60,000, and the market size is expected to grow by over 5 billion yuan by 2025, indicating "immeasurable financial prospects." Huan Shi, eyeing this "big cake," has deployed stores in large, medium, and small cities across China. Although, financially, only second-tier cities saw positive same-store sales growth, the overall trend is positive. In 2023, there were 15 stores in first-tier cities, with same-store sales of 212 million yuan, almost less than half of that in second-tier cities; by 2024, only second-tier cities saw a 3.6% year-on-year increase in same-store sales.

It is worth noting, however, that the consumption level in first-tier cities is significantly higher than in second and third-tier cities, which is reflected in the average daily revenue per store, remaining stable at over 38,200 yuan. The average daily revenue per store in second-tier cities hovered around 26,000 yuan, a difference of about 12,000 yuan. This is understandable, as city positioning differs, leading to variations in single-store revenue. However, Huan Shi's food sales began to gain momentum in the past two years. In 2023, food revenue lagged far behind beverage revenue, but by 2024, it had surpassed beverages, accounting for 50.2%.

Furthermore, in the first nine months of 2024, the gap between the two narrowed significantly. By the third quarter of last year, cumulative food revenue had overtaken beverage revenue, reaching 471 million yuan, with its share soaring to 54%. The near parity between food and beverage revenue reflects the changing demands of current consumers for both drinks and food.

Dining bars like Huan Shi have attracted more consumers by collaborating with famous chefs and creating viral hit products, elevating the dining experience costing around 150 yuan per person to new heights. This business strategy of extreme value for money, with relatively affordable prices without compromising on quality, combined with scenario-based marketing centered around "tipsy socializing," has indeed firmly captured a segment of consumers.

But whether the value for money is high or not is ultimately for consumers to judge. At least the prices aren't particularly cheap, but compared to traditional bars, the wider variety of drinks and richer food options give consumers more choices.

However, Huan Shi often runs promotions like "Screaming Wednesday" or "Drunkard Challenge," where sometimes 10 drinks cost only 99 yuan, a 10-inch pizza is less than 30 yuan, with additional voucher benefits, making it quite affordable overall.

Yet, those in the food industry know that some items might be pre-made or semi-prepared, making it hard to control reputation and difficult to compete with professional restaurants on "authentic atmosphere," although dining bar food is generally better than that in pure bars. Now, Huan Shi has over 9 million members. Drinking and enjoying food are just consumption scenarios; the primary aim is more about creating emotional value. Therefore, dining bars resemble social gathering places built on emotional value. Whether Huan Shi's over 9 million members can support a Hong Kong IPO remains something to look forward to.

Emergency Dividend Over 100 Million Yuan Before IPO Can the Day-Meal, Night-Drink Social Model for Young People Last? Whether selling alcohol or food, Huan Shi's concept lies in creating a small social world for young consumers.

Launching a Hong Kong IPO is just a routine capital operation, but can this scenario-based marketing of "day meals and night drinks" truly fulfill the boundless imagination of young people's social space? The past glamour of the "tipsy economy" is gradually fading. HELENS, focused on the nighttime economy, saw its market cap plummet from over HKD 30 billion at IPO to HKD 1.152 billion, a significant shrinkage.

In fact, there are many similar trendy F&B brands. A well-known brand is somewhat linked to consumer repurchase rates but can also be easily replaced by other brands. When it comes to eating, foodies are perhaps becoming increasingly "picky," putting pressure on brands like Huan Shi and HELENS. Brand appeal is no longer the sole factor in consumer choice.

By pursuing a Hong Kong IPO, Huan Shi might also intend to internationalize this "day-meal, night-drink" business model, aiming to create more profit while maintaining its brand. It is noteworthy, however, that before the Hong Kong IPO, Huan Shi had already engaged in substantial dividend distributions for two consecutive years. It distributed a dividend of 32 million yuan the year before last and announced an 80 million yuan dividend at the end of last year, totaling over 112 million yuan in dividends.

On the other hand, the company's advertising expenses have risen from 8.2 million yuan to over 13 million yuan in recent years. While distributing emergency dividends exceeding 100 million yuan twice before the IPO, and facing rising annual ad costs, the前提 is that the company is profitable. Indeed, it has held the top spot in revenue among domestic dining bar brands for three consecutive years and is currently the largest dining bar in China by scale.

However, this direct-operated, non-franchise model has both advantages and disadvantages. The benefit is unified brand identity, but heavy assets remain a "burden," with pressures from rent, labor, and materials all falling on the stores. Now, the social赛道 for young people is not only crowded with tea shops and hot pot restaurants but also bars and dining bars. The competition is intensifying. Even star companies like HELENS struggle to hide growth slowdowns. Can Huan Shi maintain its growth advantage?

Ultimately, whether it's food or drinks, they are merely means for capital realization. What truly makes consumers willing to pay is the entertainment experience, not just the dining experience at a dining bar.

In Conclusion As China's largest dining bar with annual revenue exceeding 1 billion yuan, having distributed over 100 million yuan in cumulative dividends before its IPO, it is already the "absolute champion" in the pub赛道. If successfully listed in Hong Kong, it might continue writing a more exciting story around "young people's socializing." Therefore, in this blue ocean economy, it is inevitable for an industry giant like Huan Shi to冲击 a Hong Kong listing, which would also be a masterstroke for its expansion. But listing does not guarantee lasting success; there are many challenges and difficulties awaiting it.

From food to drinks, the Chinese flavors enjoyed by young people are sometimes about nostalgia and sometimes about paying for social interaction. Can Huan Shi, after surpassing a hundred stores, continue its past revenue miracle? Perhaps this local dining bar will create more market surprises post-listing. What are your thoughts on this? Welcome to leave a comment below to discuss and share your opinions or views. Thank you.