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China healthy food market

Podcast transcript #33: Behind the scenes of China’s healthy food market

Find here the China paradigm episode 33. Learn more about how to run a business in China’s healthy food market and find all the details and additional links below.

Matthieu David: Hello, everyone. I am Matthieu David, the founder of Daxue Consulting, and this China marketing podcast, China Paradigm. Today, I am with Benjamin Patin. I have translated it in French, but in English, it will be Patin. Right? Benjamin Patin?

 Benjamin Patin: Yeah, that’s right.

Matthieu David: I guess English speakers will more easily spell it if I say, Patin. You are the co-founder of Wheat Co and Sailang Solutions. So Sailang Solutions is a bit older. So, you found it in 2012. I am not sure you are a co-founder or founder.

Benjamin Patin: For Sailang Solutions, I am the only partner, so founder.

Matthieu David: Founder. Okay. And co-founder of Wheat Co in June 2015. 

Benjamin Patin: Yes.

Matthieu David: Sailang is all about imports and exports. It’s about supporting importing services for companies which want to import from China to Western markets as far as I understand. And Wheat Co is very, very different. It’s about the restaurant business in China.

Benjamin Patin: Yes.

Matthieu David: Totally different. And you are one of those entrepreneurs who are able to do very, very different businesses. Basically, start from scratch again and creating something totally new. So, Wheat Co is a restaurant business in China you have. And you’re going to tell us more if I’m correct or not. Two restaurants plus a third P&L as you say on your LinkedIn profile, which is the logistics. I will like to understand why you say it’s three P&Ls, which are two restaurant businesses in China and a logistic business you have internalized some way, I feel. So, you are going to tell us more about it.

Wheat Co is first a concept, a concept about eating well and healthily, which is very attractive in China and Shanghai because a lot of people have this concern about eating healthy. China’s healthy food market is bigger now. During this interview, I’d like to go really in-depth on how you started and how you manage Wheat Co, especially because I know that now you are a bit pivoting. And what I noticed in your LinkedIn profile is that you are talking about Sailang Solutions and Wheat Co. in the past. I was managing three P&Ls. I was managing export and import business for different companies. It gives me a sense that you are pivoting. You are doing something else because you are using past tense on your LinkedIn profile.

Benjamin Patin: Okay.

Matthieu David: I will like to know more about all this. So first of all, thank you very much for being with us in this new episode of China Paradigm. Could you give us an idea of how outright accurate I was in my description, and what was wrong?

Benjamin Patin: Yeah. Alright. Thank you for having me. Thank you for taking the time to talk to me today. So Sailang was created, like you said, in 2013. Import and export businesses in China to compete with one of my family’s factories in China. We discovered that the factory was not necessarily as competitive as we wanted to. So, I created an export company to put in competition for this factory. And we found out that all the factories not in Shanghai were definitely more competitive. So, we did a lot of business with other factories. It was a good way for us to exit our factory management situation in China.

Matthieu David: So, you had a factory in China, right?

Benjamin Patin: My family did. Not me.

Matthieu David: Yeah. Your family has a factory in China.

Benjamin Patin: Yes.

Matthieu David: And you wanted you to challenge the prices basically or the way they were working.

Benjamin Patin: Yes.

Matthieu David: And you outsource basically to other factories by finding them and checking what they were doing, and you found that it wasn’t actually more efficient. 

Benjamin Patin: Yeah. So, this was in 2012/13. I was in Shanghai for only five years. I studied Chinese for five years. I got a Bachelor of Chinese Language during these five years. So very fluent in Chinese. And we realized that not everything was clear between China and France. So, transparency was not very there. And we decided to do something about it.

Matthieu David: Could you give some specific examples of transparency. Is it because they were hiding some profit and taking out of the profit from the situation? Was it,

Benjamin Patin: I will not say it like this. It’s just that I wanted to know the cost of everything. And I never got a clear report of the cost of this or that project from the supplier. So, when you want to do a price, a selling price or to calculate your margin, you need to know your cost. And it’s something that I never got.

So, it made wonder, like if you don’t even know the cost, how can you make sure that the company’s making money or losing money and how can you control this? So, it was one of the first things that made me realize that we need to do something different because it wasn’t going to work. And me speaking Chinese and reading Chinese and trying to completely redo all the numbers and stuff was just impossible. So, we decided we needed to do something different.

Matthieu David: Okay. I imagine it would be very, very painful and costly to close a factory in China. I don’t think it was an easy decision. Right?

Benjamin Patin: They didn’t close it. We still have some business running. All the years I was running Sailang, or I was running Sailang, it’s just that some products were more interested in doing in that factory because the workers were used to it and the customer already approves the factory and all these things. So, we kept some business in that factory.

Matthieu David: I see. You are talking in the past because now, I feel that Sailang is more like running by itself. You have the clients. They are ordering all the time. That’s why it’s more like what has financed the second business, which is Wheat Co.

Benjamin Patin: Yeah. So Sailang was a good business. We had some setbacks two, three years ago, when I started thinking about other projects. So, we have good customers, like recurring customers. We want to focus more on importing into China because here in China, and the price isn’t as competitive as it used to be. The rate when I came to China was €1 for ¥12. Today, it’s €1 for ¥8. The cost of labor has increased a lot. So, it’s not as interesting for a European company to buy in China for some products. It’s tedious for some others, but we got some projects that were shifted to Portugal or Eastern Europe. So closer to France, closer to Europe, for a delivery time, etc.

Matthieu David: Sourcing from Portugal?

Benjamin Patin: Yes.

Matthieu David: Okay.

Benjamin Patin: So, our clients got some new contracts with suppliers in Portugal. For wood and metal, it can be more interesting. So, we lost some business in that sense. We want to develop more the export business in China, but we’re not ready yet. We don’t have a salesforce here. We don’t have logistics. We don’t have all of what you need to be successful for import. So, it will take us time to develop this.  We are thinking about it. Just not as much as of a hurry because of other businesses.

Matthieu David: Before we move more in-depth on it, I would like to understand more about Sailang and all those import and export business in China.

Benjamin Patin: Okay.

Matthieu David: Let’s say export because you’re mainly focusing on the export.

Benjamin Patin: Yeah.

Matthieu David: I see a lot of entrepreneurs in export businesses in China., but I always question myself, with the Internet and so much information and the fact that we are speaking better English, what is the value of someone as an intermediary? And the second question is, how do you price your work? Because if you price on the volume they buy and the price your clients buy, you have the interest to sell at a high price. You have the choice for the factory to sell at a high price. If your invoice on the number of units, then you need to price for every client differently. If you price on period, then okay, yeah, it’s like externalized workforce, but then it’s not scalable. So, what’s your view on the business model, which can really work in export?

Benjamin Patin: Seven years ago, we used to price based on a margin. So, we were buying at 1 and setting at 1.1, 1.2, or 1.3.

Matthieu David: Did the client know that?

Benjamin Patin: Yes, the client will know more or less that we made a margin on it.  Today, with Alibaba, AliExpress, and all these platforms, it’s much more difficult to get a good price, let’s say for the customer because they will go on Alibaba and be like, Oh yeah, Alibaba is cheaper. Our added value is that we deal with the suppliers directly. We remove a lot of middlemen. When we did research online, we realized that many people sell through middlemen. And in the end, there’s one factory providing for everybody. So, we try to get to the producer directly, which takes time, but in the end, we get better prices. And either we put margins, or we put a price per order, which works well for some countries. So, we say one container, we’re going to take X margin, and we just base out profit on that. 

Unfortunately, we get a lot of requests for very, very small quantities that they don’t want to deal with AliExpress or suppliers. We don’t do it because it’s very time-consuming. It’s just not interesting enough. So, we have a lot of people that ask us, like hi, I want 1000 pieces of this jewelry. And we tell them like you just go to Alibaba and buy it. Don’t ask us to do this for you. Pricing won’t be interesting for you guys to just start a new business. So, we try to select our customers. It works a lot. We’ll say it like Bouche à Oreille in French. Word to mouth.

Matthieu David: Word of mouth.

Benjamin Patin: Yeah. With customers in France and Mexico in Latin America. So yeah, in Sailang, this year, we’re going to focus a lot on eco-products because it becomes something very interesting.

Matthieu David: Eco?

Benjamin Patin: Yeah. Ecological… like systems or products.

Matthieu David: Okay. Ecological. Okay.

Benjamin Patin: It’s something that goes well with beliefs, something that I believe is very important. There are some new laws in Europe that have been for it.  So, it’s something that we want to focus on.

Matthieu David: Yes.

Benjamin Patin: And it’s going to be something that we want to achieve. So, we are looking for good suppliers and good products, and hopefully, we can be ready, I think, by September with a new line of products.

Matthieu David: I see. Actually, I’ve seen other players shifting in terms of import, helping to find cheap products to helping to find accurate products with certification or products that are actually good for the planet, which is ecological. And China, I feel, is not that badly positioned because no other country has so many factories and so good infrastructure to be able to switch to more ecological and different organic products in China.

Benjamin Patin: Yeah.

Matthieu David: I understand. Okay. Then this business, Sailang, helped you to start another business, which is Wheat Co. Totally different. Four years ago, actually. But in between, actually, there is something else I wanted to ask you. It’s that four, five years ago, you came to me for research about selling products from Provence, I remember if I’m not mistaken.

Benjamin Patin: It’s a pending project.

Matthieu David: Okay. Are you able to talk about it or it’s confidential?

Benjamin Patin: Can we talk about it a little bit? Not really, because the pattern of consumer habits of China changed a lot, the way of people selling everything and from everywhere. To change people became something huge, and we just want to make it right. I am from Marseille. I am from Provence, and it’s a range of products that we really like to use it for ourselves. And we want to make it right. So, let’s say it’s a good product. It’s something that we use every day in Provence.

Matthieu David: For instance? Could you be more specific about the products?

Benjamin Patin: No, not really.

Matthieu David: Okay. You can’t mention.

Benjamin Patin: Yeah. The branding is ready. The packaging is ready. The product is identified. We are going to import one pallet soon. When it’s done, we need to have the website ready. It’s one of  TMall shops, etc. So, we still have some work to do. I will let you know once we launch it a bit in advance if you want, but right now, I can’t.

Matthieu David: We will run another one. We will run another podcast once you launch it. Is it more cosmetics? Is it food? Could you give us a direction?

Benjamin Patin: No, sorry.

Matthieu David: No. Totally confidential.

Benjamin Patin: No. It’s been five years. Nobody knows. Only if you know what that’s it. If we need to check up some things from there, why not?

Matthieu David: So, when you have an export business in China, I feel you think about adding more value, checking more the products, and finding more ecological ways of producing quality. Okay. Another aspect is, as you said, importing products. A lot of people who have been exporting products to the West think they could import in China because China is very dynamic, and China’s healthy food market is very mature. As an export business in China, have you seen other people switching in your industry from export to import successfully?

Benjamin Patin: I know big companies that do both very well.

Matthieu David: Okay.

Benjamin Patin: I don’t really know exporters that have been importing yet. I don’t know. I don’t know anybody that did that.

Matthieu David: Everyone is talking about it, right?

Benjamin Patin: Sorry?

Matthieu David: Everybody’s talking about it. It seems like it’s not difficult. The only thing that’s difficult is…

Benjamin Patin: To import one pallet is something that anybody can do. You don’t need to have a company for that. You just need to pay the taxes when they arrive and then you can sell it however you want. However, import business with a warehouse in the free trade zone, yes or no, to have trucks in China to bring the product from A to B, B to C, or C to D, is something different. So, it’s something that if you want to make it, you need to make it right. It takes time and manpower. It takes planning. You just can’t import it. You can meet just the importer. So just like with the paperwork for one container or one pallet, but to actually import for yourself and do all the procedures and everything and then distribute is something completely different.

Matthieu David: I feel one of the difficulties is that when you want to import, you want to be the brand. You want to do it very right with branding, positioning, and so on. When you export, that’s the job of the other guy. That’s the job of the company which is importing. You can see the most difficult thing because importing as a process is not that difficult. As you said, a free trade zone and so on. But it’s to actually find the positioning, creating the brand and so on. Do you agree with the analysis?

Benjamin Patin: Completely. When you see our customers in France, they are importing, but they are buying for themselves or their customer. So, they know what they are buying, and they know what price they want to buy it, and they’re going to use it anywhere in Europe. What we’re doing as an importer is like we like the product and we want to try to send it to China. Are Chinese going to buy it? Maybe, but can we be sure about it? Nobody can know. We need to try. So, it’s completely different. We don’t know if someone is going to buy the product we are going to import. We have many importers that come to me every two or three months with a lot of like close-to-expiring-date products, and they want the product for like a quarter of the price and if we can take it. But for them, it means they don’t make money. They lose money. So, it’s something to be careful about. The shelf life for other products in China is very important. Even for wines, it’s shelf life. So, you need to be careful. You can’t just have anything you want in your restaurant business in China. You need to be careful about this.

Matthieu David: Yeah.

Benjamin Patin: And be careful of what you import, because if you don’t sell it within two years, the product will go bad and then you can’t do anything about it.

Matthieu David: Yeah. There is Farine Bakery we had to shut down in a dramatic situation because of expired flour. Okay. I now understand what you’re thinking, “I have an export business in China. I want to import or export products which are more organic products in China “. But finally, you decided to do something very, very different, which is the restaurant business in China.

Benjamin Patin: Yes.

Matthieu David: How come?

Benjamin Patin: So, the Wheat Co. story is a funny story. When you came to my office, I was learning Spanish at that time with somebody. I just met through the Internet. He is a Spanish guy, and he used to teach me Spanish. And during our classes, we talked about nutrition, sports, many things related to health and self-improvement, let’s say. And I was telling him like, “Look, I’ve been working out. I feel good about myself, but I don’t see any difference in my body. How come?” And he was telling me, “But what do you eat?” I’m like, “I don’t know. I go to that restaurant. I order Burger King. I order this. I eat, but I work out. So, it’s okay.” That was five years ago. Four years ago.

And he was telling me, “Yeah, but you will never see results with your diet. You need to eat healthily. I’m like, “Okay, what can I eat? Like, tell me where to go, and I will go.” He’s like, “No, you cannot. You absolutely have to cook for yourself. So, you have to plan your meals and cook your breakfast, your lunch, and your dinner in advance and then stick to the plan and just eat every day.

And I was like, back then when we sat down, I was really busy. I was traveling all over China. I’m like, I don’t have time for that. Like no way. And we started thinking about how to make it—because I was not the only one—how to make it available for busy businessmen to be able to eat healthily every day without thinking and without cooking and without doing groceries. And we came out with Wheat Concept. There was a diet lab at the beginning. And then we switched to Wheat to help people to eat better and healthy food and to try to educate on what healthy food really is and just for people to eat well, to work well in China’s health food market.

Matthieu David: Okay. I think the idea is very attractive. I think as foreigners in China or people who have been living abroad or people who are building families, we all think about this healthy way of living. Why do you think it’s not yet mainstream? That China’s healthy food market is not that mainstream? Why don’t we see those healthy restaurants all over the place or very easy to order online and so on?

Benjamin Patin: There is, already.

Matthieu David: There is?

Benjamin Patin: People think there is, but in fact, there’s not that many. There’s a misconception in China thinking that eating salads is healthy. So many people are like, “I ate salads for lunch. But the sauce is full of sugar. So, they will enjoy the salad because the sauce is sweet. Many of my customers requested, even though they didn’t know that we serve the sauce on the side all the time. Many restaurant businesses in China serve the sauce directly on the side. And this customer will request to have the sauce on the side because they know it won’t be healthy. This is just one example of miscommunication of what is really happening in the world in general, not even in China. China’s healthy food market is quite difficult to understand. Chinese people will think that eating meat is not healthy.

Matthieu David: Really?

Benjamin Patin: The secret is not eating meat or not taking meat. It’s just the way you cook the meat. So, we just try to make good, a great recipe like well prepared, tasty, and with good organic products in China so it doesn’t affect your body or it doesn’t make you gain weight or all these things.

Matthieu David: Okay.

Benjamin Patin: So, it’s just about educating Chinese, or even the world of eating healthily does not have the salad, but it’s about how to prepare the food.

Matthieu David: Okay. Let’s go a bit more into the numbers to give an idea of how it worked for you, for Wheat Co. with your restaurant business in China. You have because you haven’t called us yet, but I feel you’re pivoting to another model.

Benjamin Patin: Yes. Yes.

Matthieu David: Could you tell us more about every number that someone would like to understand the restaurant business in China needs to know? Price of leasing square meters and how to lease a space. Do you have to commit for one year? For two years? Do you put a deposit of two months? About the place, how does it work?

Benjamin Patin: Okay. In China, me for example, because I speak Chinese and I like to do things by myself, I found the locations by walking around. Walking or on a scooter or a bicycle, but just like looking at what I want. So, you look around. You see a place you like. There is a phone number. You call the phone number; you make an appointment, talk to the people, and you get the deal done. The lease is usually signed from five to ten years.

Matthieu David: Wow.

Benjamin Patin: A lease of five to ten years. Yeah, because you need to make renovations and you need to pay back the investment. So yeah, it’s five, ten, or fifteen years even. Also, there is a business license in restaurants. So, you are going to buy a transfer fee to the previous owner of that license. They can go from ¥50,000… I mean it can be from ¥0 to ¥1M. There is no limit on this. It depends on where you are.

Matthieu David: How come?

Benjamin Patin: People fix it like, “Oh yeah, I pay that much money for my license. I want that much money back

Matthieu David: I see. Secondary market. It’s not the administration. It’s a secondary market.

Benjamin Patin: Yeah.

Matthieu David: Okay.

Benjamin Patin: It’s like you already have a license related to that address, and if you don’t consider that license, you can transfer it from one person to another, from one Chinese to one Chinese, one Chinese to one foreigner, or one foreigner to one foreigner. So, you really buy the license. The cost of rent is tricky.

Matthieu David: For the location, right? For the specific location.

Benjamin Patin: Yes, yes, yes, yes.

China healthy food market

Matthieu David: Okay.

Benjamin Patin: The rent is per square meter per day, like offices in Shanghai. The price will depend on where you are. It can be from ¥22 per day to 50; I heard it is 50 right now.

Matthieu David: 22 to 50. Yeah, I got this number as well.

Benjamin Patin: ¥50 per day per square meter is huge. It is why I think today, many restaurants are closing down in Shanghai—because the price of the rent is very high. And that’s why we are switching to our new concept that we can talk more about.

Matthieu David: Yeah, you will tell us later on. Actually, I want to, through this interview, make you a KOL on opening a restaurant. I want to add all the numbers to make you a thought leader about it.

Benjamin Patin: Okay.

Matthieu David: So, if you can share, I believe that it will be very, very helpful for everyone listening. I understand that leasing is the biggest cost. Isn’t it?

Benjamin Patin: Yes.

Matthieu David: So, what’s the second cost you have?

Benjamin Patin: I would say the staff.

Matthieu David: Okay. Roughly, what’s the salary of a waiter or waitress?

Benjamin Patin: Sorry? One salary of a normal waiter, I will say, we pay them between 5000-6000 in their hands plus tax.

Matthieu David: Okay. Okay.

Benjamin Patin: For a normal waiter, it will be paid more. For the kitchen, it’s the same more or less; from 4000-6000 also.

Matthieu David: Okay. So the total cost for one worker with taxes?

Benjamin Patin: No, like eight.

Matthieu David: Okay. I see. Do you have to pay for the house?

Benjamin Patin: It depends. For me, I didn’t want to because you can be liable if something happens in the house. So, I always refuse to pay for the house. We give one staff house allowance as part of his contract, but usually, we try to find people that live in Shanghai that have a family. So, they live with their family, or they have already settled down. It is not part of the equation, but many people do. For me, it was never part of the plan. We do give them food. So, in the beginning, we are cooking in the restaurant for the food, but our food is healthy, no oil, no this or no that… and their food was a complete opposite. So, we decided that they needed to eat outside. So, we gave them a voucher of ¥X per day, and they just go during the break and eat wherever they want.

Matthieu David: I see. How did you find them?

Benjamin Patin: So, for the first restaurant, we hired a consultant chef to help us with arranging the menu. And he recommended one chef, like a Chinese chef that brought all of his Chinese team for the kitchen. And the service staff were the same, like asking some people in some groups that we wanted some stuff. And then, like a recommendation of one or two and then more and more coming.

Matthieu David: You never did it through online posting.

Benjamin Patin: Not in the beginning. When we opened, we knew that we needed to hire 50 staff. Yes, we did.

Matthieu David: Okay.

Benjamin Patin: Yes. We knew posting online is a really efficient way. You put one ad, and you have 50 CVs the next day. You need to spend a lot of time interviewing because some of them just apply for a job, but they’ve never done the service before. So, it’s kind of tricky. Shanghai is completely different. Also, it’s complicated because you need to know how much you are willing to pay for somebody and stick to that price. Some people would ask you crazy salaries because they have the experience, but at the end of the day, it doesn’t make sense in your business model if you raise the salary cost too much. So, we try to keep the same salary for everybody.

Matthieu David: Okay. The first location was Shanghai, which is known to be a very expat area with a lot of expats living there.

Benjamin Patin: We opened before the park.

Matthieu David: Okay. I see. So it is a place in Shanghai where a lot of restaurants have opened, which is not far from the location you had.

Benjamin Patin: Yeah. They drive all the traffic from downtown to this place. So many restaurants closed down after that. So we are always working well. No problem. With no program. But yeah, the foot traffic was very complicated.

Matthieu David: I see. I see. So, the second cost is staff. Then what other costs do you have to consider to start? You said renovation. You have to renovate when you take the lease. How much investment do you need to start for, let’s say, the first two or three months?

Benjamin Patin: Yeah, I would say from memory ¥10,000 to ¥20,000 per square meter of construction.

Matthieu David: Okay. So, in the USA, it will be $1500 to $3000.

Benjamin Patin: Yeah, more or less. Yeah. Depending on the quality you want to have and what kind of material you use, but more or less, it’s this. The biggest cost for restaurants would be kitchen equipment. Everything is stainless steel. Everything will be FDA-approved. And to have a logic of positioning, you need to have the kitchen drawings made. Before you start construction, then the FDA needs to approve it. To do it, usually, it’s not the way you want. Something weird will happen in your layout, but they need to approve it first. It’s a big cost. Extraction. Gas lines. All of these are costly. If it’s already installed, it is great. That’s why you pay the transfer fee. If it’s not installed, the cost of it needs to be considered.

Matthieu David: Okay. How much did you spend then to start?

Benjamin Patin: We spent around $100,000 in total for the first restaurant.

Matthieu David:  Okay.

Benjamin Patin: Land. Houses. Construction. Staff. The first month of operations.

Matthieu David:  And how big was it?

Benjamin Patin: 80m2

Matthieu David:  80m2 on your first location?

Benjamin Patin: Yeah.

Matthieu David: Okay. I thought it was smaller because I went to your restaurant.

Benjamin Patin: It was 80 but not made very well, so there is a lot of space.

Matthieu David: I see. Okay. So actually, had a pretty good price for the renovation because if I take 80 times $1.5K, we are around more than $100K.

Benjamin Patin: Yeah. It was okay. Good negotiation skills.

Matthieu David: Okay. Have you been cashflow positive in the restaurant?

Benjamin Patin: In the beginning. Yes. After six months.

Matthieu David: It’s pretty short, isn’t it? Is it normal as a restaurant?

Benjamin Patin: I mean, in Shanghai, they say you have one year to see if your business is going to work or not in restaurants.

Matthieu David: It takes one year to be cash-positive. Okay.

Benjamin Patin: It takes one year to be cash-positive. Yeah.

Matthieu David: Okay. When we say cash flow positive, basically, the revenue minus the cost is positive. It doesn’t mean that when you pay back your investment, it’s positive.

Benjamin Patin: No. Exactly.

Matthieu David: I see. Okay. I understand. And the second location was not.

Benjamin Patin: No. So, what happened is that the kitchen was around 20m2. So, it was a very small kitchen. We did a lot of deliveries, and we arrived at a point where the kitchen couldn’t keep up with the restaurant deliveries. And we were looking for a second location a bit bigger, around 150-200m2. We looked for it for six months, one year, something like this. So, we looked and looked and looked, but we never found what we wanted. All too expensive or not well-located or too small or too big. It was tough. And we found somewhere close to Jing’an Temple. For me knows or oh really nice trade, very famous triaged way like close to Jean and temper. So, we’re like, “Okay, let’s go for it.” It was big. In total, it was almost 500m2. So 470m2. 

Matthieu David: 500m2?

Benjamin Patin: Yes. 470m2. It was like 350m2 on the first floor and 120m2 of the kitchen.

Matthieu David: That’s huge. Okay.

Benjamin Patin: The rent was pretty high. And that’s why we didn’t keep it open for more than one year.

Matthieu David: Okay. So how can you stop a contract, because you said that most of the lease contracts are five, ten, fifteen years? Do you have to leave a deposit?

Benjamin Patin: When we knew we were closing, it was the day after we won the World Cup. So, I was lucky enough to switch. After six months, we knew that selling healthy food in that location wouldn’t work. So, we switched to more of a bar spirit in this area because it was a bar street trip and everything. And we got a contract with some people from France to be the official host of the World Cup for French supporters. So, we got a lot of traction from that. We hosted the World Cup and then, the day after, we said, “Okay, we are closing.” I told my landlord, “Is that okay if you find somebody to take over the lease, I can give you back your deposit.”

Matthieu David: Okay. And you found it…

Matthieu David: Yeah. So, I spent more than one month to find people, negotiate the transfer fee, negotiate the terms of the lease, etc. And when it was done, I just signed a paper with them and signed a paper with the landlord. And they paid me what they needed to pay me. And it was over.

Matthieu David: I see. Transforming Wheat Co. which is a healthy lifestyle restaurant business to a bar with a lot of alcohol and managing, maybe, people who are not sober or drunk for a few weeks even is a totally different business. Weren’t you scared to be in this business with bar, alcohol, and so on, which is different management? And in terms of lifestyle, does it require different licenses?

Benjamin Patin: For the licenses, it doesn’t require anything different, because any restaurant license in theory also has an alcohol license matched with it where you can fully sell alcohol except in some areas. But, usually, it’s not a problem for the alcohol license. And part of me switching to alcohol business, it was okay. I’m used to it. I had worked in restaurants when I was in Europe. When I was a kid, I was working in restaurants, so it’s not a problem. I also worked in Shanghai for some events, so I am familiar with it. It’s not a big issue. I know the right people in the industry. The biggest problem could have been drugged because, in this area, it’s very frequent. But we control it pretty well, so it was okay. It was okay.

Matthieu David: …which is a very big thing in China. You cannot do anything like this. Drugs. Okay. I see.

Benjamin Patin: I mean, it was a good experience. I loved everything about it. I will not do it again.

Matthieu David: What? The bar or Wheat Co.

Benjamin Patin: The bar.

Matthieu David: Okay. Okay.

Benjamin Patin: Working long hours very late at night, drinking with your customers every day, having people coming over only if you’re here is not something that anybody wants to do. If you have a concept of a bar with some nice music, nice area and, maybe, a normal alcohol provider. Not really.

Matthieu David: Okay. I see. When we went on your website, and Sophia prepared the interview with some information which has been  done on your website, we think that it was more than the restaurant. Because it’s also about coaching people on what to eat, how to eat, and building a community. Is it something which was a focus? Or is it just a way of talking about the restaurant?

Benjamin Patin: It’s a little of both. I think telling people what we think is healthy food and a healthy lifestyle is, is important. So, they can understand more why we sell what we sell.  But it’s also important for people to be able to learn healthy things in general and to make sure that… I mean, we try to be as sincere as possible in everything we write. It’s not easy because sometimes even we have different opinions. So, we try to keep the focus on what is Wheat’s point of view about healthy food, working about, and all these things. But yeah, we do it. We do it because it’s important to talk about all these things, and of course to have people talk about us now in China’s healthy food market.

Matthieu David: Okay. So, you have many restaurant businesses in China. And when you were talking about the coaches, we were talking about your product. It was a marketing tool, but not necessarily actually a business in itself.

Benjamin Patin: Yeah.

Matthieu David: Okay. Going back on the costs, there was a question I didn’t ask you. You said three P&Ls, so two restaurants and logistics service. Could you tell us more about logistics?

Benjamin Patin: It’s not really a logistics service. It’s like it’s still a restaurant we opened recently. I mean officially opened recently. It’s been running since August. So, the day I closed the former one, I opened that one.

Matthieu David: Okay.

Benjamin Patin: And since then, we are improving everything into it. We want to have customers having the same food every day. So, a lot of food processes, a lot of control on the costs, on production, and on all these things. So, a tough time in the kitchen. And we just want to be able to have one good business model that is easy to set up and easy to duplicate. So, we worked a lot on that. And it’s a small space. It’s 45m2, and it’s 40 m2 kitchen.

Matthieu David: So 40m2 for people to sit?

Benjamin Patin: No, 40m2 kitchen and 5m2 for people to sit.

Matthieu David: Oh. So just to pick up the food basically.

Benjamin Patin: Exactly. We have some chairs. If you want, you can sit down. There’s enough space to sit down and eat there if you want, but the point is we just want to have people picking up their food or doing advance and picking it up.

Matthieu David: When did you open?

Benjamin Patin: We opened last Monday officially.

Matthieu David: Wow. Very recent. Where is it?

Benjamin Patin: You need to find it.

Matthieu David: On your website, it’s written, right?

Benjamin Patin: No, what I’ve done is like we published an article that you need to find the place. We’re going to release the date in the next few weeks. I can tell you.  I mean if you don’t publish the video right away, I can tell you.

Matthieu David: In one week?

Benjamin Patin: Yeah. So, the address is in Xinzha Road 1990.

Matthieu David: Okay. It’s a good location.

Benjamin Patin: Foot traffic is good. Yeah.

Benjamin Patin: Do you care about the foot traffic if it’s 5m2?

Benjamin Patin: Not really, because we only do deliveries, but during times of advertisement and people seeing the brand every day, it’s interesting.

Matthieu David: Another thing is it may actually be a good investment because it’s so costly to do marketing online, to buy Baidu as well, to do WeChat…. and actually being offline. Just seeing the name may be quite efficient. I see. How are you going to deliver? Are you going to use the usual delivery like Meituan or you have your own way?

Benjamin Patin: We are already on Meituan and Sherpas. Sherpas. It’s an English version. S H E R P A S.

Matthieu David: Oh yeah. Sure. Okay. I see.

Benjamin Patin: Okay. So, we were working with them always three years ago. We have our own delivery service also. So, you can order from our website.

Matthieu David: Why?

Benjamin Patin: Sorry?

Matthieu David: Why? Why do you have your own? It’s costly.

Benjamin Patin: It’s more profitable for us if you order through my website directly because other platforms take a commission between 10% to 30% depending on the platforms.

Matthieu David: Depending on the weather as well, right?

Benjamin Patin: Sorry?

Matthieu David: Depending on the weather as well.

Benjamin Patin: The weather only impacts the customer. The customer is going to pay more of a delivery fee if it’s bad weather. But for the restaurant, they depend on revenue. The more revenue you make, the less commission you would pay.

Matthieu David: Okay, I understand.

Benjamin Patin: Whereas for me, if you order from me directly, we don’t have drivers. We outsource to a third party. Let’s say a DiDi of deliveries. So, you order with us. We book a driver. He comes and pick up the food and delivers it to you.

Matthieu David: I see. So basically, Meituan and make you pay. I mean Meituan because I think you didn’t mention So, let’s say Meituan actually makes you pay for finding the client. They make you pay for the affiliation for the affiliate whereas when they go to your website, you don’t pay for the customer acquisition. You just pay for the transportation, but you don’t do it on your own. Okay. I understand.

Benjamin Patin: So, for us, it’s more interesting if people can go to our website directly. Unfortunately, people are used to going to the same platform every day to order from different restaurants. That’s why we do promotions at different prices that are only available if you go through our platform. And we try to push people to order more and more with our website. So, we try to improve the website experience every day.

Matthieu David: Okay. When you say website, is its website or mini-program because now we talked a lot about mini-program.

Benjamin Patin: Right now, it’s a website. It’s a website also in China. There is WeChat Pay, and Alipay integrated, so not a problem for Chinese. We are working on a mini-program which will just be an interface of the website in a mini-program version. We’re working on it. It should be really soon, but it will take us a while to do it. But it’s in progress.

Matthieu David: Okay. Okay. I understand. Is it the same food? Same concept?

Benjamin Patin: Yeah, exactly the same food. Same concept.

Matthieu David: Same menu?

Benjamin Patin: Same menu. We’ve improved some menu, but yeah. We have some new dishes and some new recipes, but basically, it’s the same for three years.

Matthieu David: Okay. Do you think you aren’t familiar with healthy food? And you said it depends on how you cook it. So, you put oil. You put butter and so on. It also depends on how you source it. Where did it come from? How have you found a reliable source to choose healthy food from?

Benjamin Patin: Good question. In China, it is quite complicated. China’s healthy food market is quite complicated.

At the very beginning, we wanted to have as many organic products in China as possible. Yeah. And I went to many organic farms here and there to actually see the quality of the product. The certification of the land might be organic. The land was just recently transformed into an organic land, but deep down, you knew it was not that organic. And next to it was a factory, like rejecting… I don’t know what. So, you’re like it’s not that organic at the end. We import a lot of organic products in China, but they promised China that they don’t allow to have an organic level in imported organic products in China unless they have approved the factory. So, it’s kind of complicated to have organic products in China from overseas. We know it is. We market it. We can’t market what is organic.

So, it’s an issue. For China, we have good suppliers that give us good products. We trust them. We check the quality. Some of them are organic. Some of them are not. But we don’t focus on this because it will impact the customer to have a price way too high for the food they would eat. And we prefer to eat well and enough then just to pay for organic products in China that might not be.

Matthieu David: Okay. Okay. And you talked about the way on how to communicate to the end clients on how you source because you have done all this work; to the source, to bid it and so on. Is it something you have thought about communicating? I feel that a lot of restaurants say, “My meat is coming from Australia. My food is organic. ” But actually, as a customer, we have no way of checking. We have no way of getting some sense of what has been done and what is true and what’s not even true.

Benjamin Patin: With more manpower, I could do it. With more people in our team and more staff, we could think about it right now. We are, let’s say, a small team so we try to focus on what is important and important is to make people know us and order from us on a regular basis.

Matthieu David: I see.

Benjamin Patin: We try to communicate a lot into our meal plans. The meal plan is the main business. So, the restaurants order one salad a day. It’s good for us. The end product is our meal plans. Meal plans will be for me to deliver on a daily basis according to whatever requirement your body needs with different options as a vegetarian, ketogenic diet, gluten-free diet, and all these things. So, we meet a lot of needs for people that might not be able to find what they need on a daily basis.

Matthieu David: How did you get this knowledge? I learned on your website, regular diet, ketogenic diet, and detox diet.

Benjamin Patin: Yeah.

Matthieu David: How did you get this knowledge? Did you get certified? Did you follow some classes? Did you just watch a lot of videos and read blogs?

Benjamin Patin: For all of the menu, usually what happens is like we create recipes the way we think it would be great. And then with one of our partners, who is a nutritionist, we check everything.

Matthieu David: Okay.

Benjamin Patin: We check that everything actually follows the Wheat Co. guidelines. That way, we can make sure that everything is the way we want it to be and that it respects this much quality, this much calories, that much fat per meal and that much protein per meal. And then we just work around it to make sure that every meal is consistent for one person for one meal.

Matthieu David: I don’t think you communicate that much on the nutritionist, which is something I would be very convinced by—that you have designed with a nutritionist. Why don’t you communicate more on it?

Benjamin Patin: We’re kind of saying mentor, but I would point it out for the next time. We have a nutritionist form online, only if you can see on the website, where you can actually put your own information, and you get a free recommendation from us to know how much your body needs to consume.

Matthieu David: It’s a bit slow, but I will check. Okay. I understand. Could you be more precise about the meal plan? Does it mean that it’s a subscription business where I pay for every week or a month and then, I receive it at home? Could you elaborate more about it?

Benjamin Patin: No. In the world, this kind of meal plan business is number one. Like you pay a subscription. You pay for one month, and you raise your food daily. Say some other businesses in China will be like, you buy one week, you buy five days, ten days or 20 days and we will deliver to you. We really want to push into business people, busy people, that might not be able to have breakfast every day or can have a business dinner or can have a business trip or so. So, we really personalize the delivery in terms of you wanting one day of meal plan tomorrow; you can have it.

Do you want to have two days? You can have it. You want to have two days, but without one dinner? You can have it. So you are able to personalize your order according to what your schedule is, which is very important because if you have one office job that you do from 9-6 every day and by six, you are home, you can order from somebody else and have your food every day, the four meals, at home. I know that many people travel. I know that many people have a business dinner or a business lunch, or business breakfast even, but they might not be able always to have four meals. So, we really work into making a personalized solution for people to be able to adapt according to their schedule.

Matthieu David: But how can you have a meal plan if half of the food I eat is not from your restaurant? Then it’s not consistent, so I need to go every day.

Benjamin Patin: So, what we do is if you cannot have our breakfast from the meal plan, because you’ve been eating it for a few days, you know, more or less, what you need to do. Then it’s up to you to have a good omelet or croissant with butter and Nutella. We can’t force people not to eat what they see when they don’t eat with us.

Matthieu David: I understand. I mean my thinking was I might actually adapt my meal, what I need to eat depending on what I ate with you or what I ate with someone else. Is it something you’re also advising because I am on your website now, but I don’t see the advisors you are mentioning? I see ‘Order Now.’ Oh, ‘Nutrition Consultation.’ I see.

Benjamin Patin: So, the nutrition consultation is for you to get an idea of how much calories your body should consume on a daily basis according to what goal you want to achieve.

Matthieu David: I see.

Benjamin Patin: It’s just a recommendation. It just free tips. So, it’s according to how often you work out or whether you take protein every day or like all these kinds of questions. And from that, we can identify what’s the best meal plan for you or the best calorie consumption plan for you.

Matthieu David: Okay.

Benjamin Patin: Then, from that, you can either order online. We have all the calories on all the products, so you can see what you want to eat. Or if you don’t want to think, you can just order a meal plan, and you will receive four meals for the next day according to this number of calories.

Matthieu David: On your website, you have a very long list of partners. Why do you need partners? What’s the link between Dragonfly and you? What’s the link between Esthete Paris and you? What’s the link between Spinback and you?

Benjamin Patin: We have a cross-partnership. We promote them on our website and in our articles. We write articles about them. They do the same. Sometimes, we give discounts to their customers, and they give discounts to our customers. It’s just a win-win relationship.

Matthieu David: You share the same community, right?

Benjamin Patin: We try to make their customers know that we exist. So, we offer products to their customers and then we can reach out to new people and send for them.

Matthieu David: Yeah, because you share similar communities. You wouldn’t do that with KFC, which is not your community because people would go to Dragonfly. People would go to Z&B and others to improve their health.

Benjamin Patin: Yes. That’s right.

Matthieu David: Okay. I see. I understand. What’s the big dream now? What’s the big plan for the coming five years?

Benjamin Patin: Six months ago, we were like, “Okay, we need funding. We need to go to all the acceleration and see if we can have funding and stuff”. I had some funds, but I had a bad experience with it. So, we kind of backed off completely from that. And now we are focusing on…

Matthieu David: An accelerator?

Benjamin Patin: Yeah.

Matthieu David: Could you share the bad experience they had by not mentioning names? Could you share the types of experience to avoid?

Benjamin Patin: So, let’s say they got funded ¥X,000 and with advisors, right? So, you go to this program, and they help you to make your company better. So, they give you money, and then they help you to do this and that to make a better choice, better decision, and all these things.  What happened is that they were meeting with mentors and the mentors didn’t even know about the projects because they found so many companies that the mentors were so busy that they didn’t even remember what company was doing what.

So, they were spending that time telling the mentors what they were complaining about. Therefore, it was completely a waste of time for them because it was a weekly meeting with new people, and they never knew what the company was doing. So, for me to have this kind of support…. okay, you get some money, but if you don’t have actual input about your business and numbers and reflection in this, I don’t really see it could be of any added value for us.

Matthieu David: I see.

Benjamin Patin: So, we added some family investments. Right now, it’s tighter. We’re going to stick to that. We’re going to focus more on developing our one store strategy and then try to open one or two or three more stores with a very low investment because another concept is very low in terms of cost. And we will try to do a franchise business if it’s possible.

Matthieu David: Franchise business. Okay.

Benjamin Patin: Yeah. As in Shanghai.

Matthieu David: I see. Okay. But with franchising, how would it work for you? You would provide the brand. You would provide the menu. You would provide the sourcing, and the franchise would find the location and run it.

Benjamin Patin: Exactly. Literally, what we are trying to do is that the only thing we need to do is to rent the space, pay for the construction, and hopefully we can even train the staff in your restaurant. You don’t have to do anything. Like I said, today if I’m here or not, the restaurant is working by itself.

Matthieu David: Okay. It could be an investment for someone.

Benjamin Patin: Yes. Yeah.

Matthieu David: Maybe not only your main business. It could be an investment for someone. The sourcing would go through you. So, you will make some money out of the sourcing of the ingredients, the organic products in China.

Benjamin Patin: Yes, that’s the plan. That’s the plan of doing some franchisee strategy. Yes.

Matthieu David: More than paying for the brand because initially maybe the brand will not drive that much traffic, but sourcing organic products in China and writing the menu is an asset to run very quickly and very easily without thinking about that.

Benjamin Patin: We saw that in two weeks you could have the restaurant running. So, it’s very fast. It’s a small store, so renovation doesn’t require much equipment. It’s all basic equipment. So, in two, three weeks, you can be running. So, in terms of rent, it’s good because usually, it takes two to three months to completely renovate the place. And then it’s two months or three months of rent already with no revenue. So, we are going to do something great. It would take us time, but we are happy with all the struggle of the past year. That helped us reach this point today that we see we can do a great job and hopefully do a good business in that sense.

Matthieu David: I think you are very cool about everything. I mean, you are managing stress very well. What is stressing you out in this restaurant business in China?

Benjamin Patin: Last year, I was very stressed because we were not breaking even with a big store. So that was stressful. Today, it’s a small store — less risk. We lost money last year. Hopefully, we can make it up soon. It will take a while. But in terms of stress, it’s much quieter than next year. It stressed me. You can ask my partner. I don’t know. I’m stressed because I didn’t show it.

Matthieu David: You don’t show it.

Benjamin Patin: Yeah, probably.

Matthieu David: Okay. Thank you very much. Congrats for this thing you did. I’m looking forward to visiting your location or to order from your restaurant. To follow you on WeChat will be easier than the website. Thank you very much for joining me in this new episode of our China business podcast, China Paradigm, and I hope everyone enjoyed the talk. Thanks.

Benjamin Patin: Thank you for your time. Thank you for your invitation to China Paradigm. See you soon.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

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