Thursday 22 September 2016 08:10 AM
Kiwi entepreneurs seek US$5 mln investment for Gung Ho! pizza expansion in China
By Fiona Rotherham
Sept. 22 (BusinessDesk) - Gung Ho! Pizza, founded by Kiwi entrepreneurs Jade Gray and John O’Loghlen, is seeking US$5 million to help expand the brand in Ikea malls as they roll out around China.
It will be the first external investment in the China-based pizza company which the pair and 12 key employees have bootstrapped themselves since it was founded six years ago. They now have four Gung Ho! stores in Beijing selling gourmet pizza, six stores under a separate brand, Pyro, selling a more Americanised, cheaper pizza, and one Lush hamburger bar/restaurant.
In June, Gung Ho! opened its first store within an Ikea LIVAT mall in Beijing and needs the capital to open other stores with Ikea, which has two sites already in Wuhan and Wuxi, one about to open, and plans for more.
It also needs funds to expand its central kitchen in Beijing which prepares items such as shredded cheese, dough, and sauces, that are then used to assemble pizzas in-store.
Gray, who is Gung Ho!’s chief executive and divides his time between Auckland and Beijing, said they’re looking for strategic partners rather than just money. They’re in negotiations with a couple of potential investors and hope to have struck a deal by Christmas, he said.
O’Loghlen joined Alibaba as a director of business development for Australia and New Zealand in March but remains a director and significant shareholder in Gung Ho!.
When Gung Ho! opened its first store in an Ikea mall, it also started selling other Kiwi brands such as Moa and Tuatara beer, Yealands wine, Whittaker’s chocolate, and Zespri kiwifruit and Gray wants to expand that side of the business further.
“They get in front of more Chinese eyeballs and we get a favourable deal on supplies,” he said.
It also incorporates the products into its pizza menu, with the NZ Inc approach giving it a point of difference in the now crowded Chinese pizza market.
When Gung Ho! first started as a delivered pizza business there were five pizza brands; there are now 483. Three years ago Chinese online retailers Alibaba, Baidu, and Tencent moved into the food delivery business, pouring billions of dollars each into it.
Gray said the market moved from three pizza delivery operators to over 5,000 people delivering them within six months.
Gung Ho! responded by developing instore dining stores where customers can also do classes on making pizza. They’ll also soon be able to buy a frozen take-home pizza though Gray said it was challenging developing a pizza that can be cooked in a wok as few Chinese have ovens.
It still derives 70 percent of revenue from pizza delivery which it contracts to Baidu.
Gung Ho! also acts as a food products adviser in China to dairy giant Fonterra Cooperative Group along with using a lot of its mozzarella on its pizzas. Gray said he was looking to “deepen that relationship” including potential investment in the pizza brand, though hadn’t discussed that to date.
The brand’s big break has been sealing the deal this year with Ikea which has led to interest from other property developers, he said. The company’s currently in negotiations with a Chinese company that has 160 malls around the country and wants to add the gourmet pizza brand to the mix.
“The upside is that once you get a contract with Ikea a lot of other property companies want to go with you as locally it is seen as an innovation leader,” Gray said.
A Chinese investor put $2.5 million into the Pyro brand last year and also opened its first franchised store in Zhangjiakou in north-western Hebei province which will host some of the 2022 Winter Olympics events.
Gung Ho! has 250 employees which it houses, feeds, and offers optional insurance to, as part of their remuneration package because of accommodation problems in Beijing for new young workers coming into the city from other parts of China.