Cooks completes Chinese Esquires coffee deal

Cooks Global Foods [NZX: CGF], which owns most of the global rights to Esquires Coffee House, has successfully completed the purchase of the coffee chain’s master franchise in China.

Auckland-based Cooks signed an agreement in September to buy back the business from Beijing Esquires Management Co (Esquires China), and announced to the NZX this morning the deal has gone through.

The deal puts Cooks as one of the largest kiwi employers in China with about 180 employees, after Fonterra, the NZ Government, Fletcher Building and Nuplex Industries.

There are currently 21 stores running within the Chinese franchise but Cooks aims to have more than 200 stores operating there by 2020.

Cooks used to own the rights to the China master franchise but sold them in 2009 to a large investment company – Yunnan Metropolitan Construction Investment (YMCI) – in the country's south.

Shanghai stock exchange listed YMCI is part-owned by the Yunnan provincial government and owned 83% of Esquires China through its subsidiary Beijing Yunnan Building Hotel Co.

Cooks has now bought back that share, as well as shares owned by Kashgar Xinkun Chuangye Investment Co and Shuxin (Ellen) Zhang, for about $7.56 million. This includes the repayment of shareholder loans to Esquires China, a statement to the NZX says.

In turn, Beijing Yunnan Building Hotel Co has become second-largest shareholders in Cooks Global Foods, subscribing for 65 million shares at $0.128 a share – an investment of $8.32 million. This allows it to access Esquires’ global intellectual property.

“The vendors remain keen to be part of the growth of the Esquires brand and the coffee industry itself in China and internationally through the shareholding in the Esquires global business that they now have through their Cooks shareholding,” Cooks chairman Keith Jackson said in a statement to the NZX.

“We were able to come to an agreement to buy back the master franchise business for China and the vendors took a shareholding in Cooks. Effectively, that provides Cooks with a more direct interest in China, the world’s fastest-growing coffee market.”

The Chinese business will be run by Ellen Zhang, a former Esquires franchisee at the Auckland Quay St café.

Esquires overseas stores have a different focus from the New Zealand franchise (which is not owned by Cooks) and aim to have an independent look that resonates with the community it is in, rather the overt branding of Starbucks or other chains, Mr Jackson recently told NBR ONLINE.

“The Chinese are absolutely interested in fair trade and organic. A lot of the same drivers in Western society are also happening in China, as people get more disposable income. The timing’s great for us, actually.”

Cooks has the intellectual property rights to Esquires in Ireland, England, the Middle East, Canada and China.

The company is planning to launch on the new NXT market once it is up and running.