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MADE IN CHINA: International Brands Home-Grown in Shanghai
Two Shanghai restaurant chains, Wagas and Element Fresh, show what it takes to develop an international brand in China

From CHINA INTERNATIONAL BUSINESS August 1, 2008 Print & Web Edition

 

By Mina Choi


Michelle Garnaut is familiar with crises, especially those of the financial kind. When she decided to open her landmark M on the Bund Restaurant in Shanghai in 1998, the Asian Financial Crisis was in full swing, and every single person advised her against the idea. “Everyone, with the exception of two people, told me NOT to do this restaurant,” says Garnaut. “They said it was too far, the Bund was dead, that Shanghai was not ready for fancy dining.”

This January, Australian-born Garnaut defied all the naysayers by celebrating M on the Bund’s ten-year anniversary, in the style that M has become internationally renowned for - stunning cocktails, sophisticated canapés and glamorous guests, all against the spectacular backdrop of the Shanghai waterfront. More than 500 individuals attended the party, many of whom flew in for the occasion. “If we were going to have a celebration, then I wanted to make it a great big bash and go all-out,” she says.

Since M on the Bund opened ten years ago, the Bund has become one of the most touted, must-see destinations of Shanghai, not only for its historic past, but for the huge crop of luxury venues that have started to line the waterfront, otherwise known as the Bund.

Many of these restaurants, ironically, were spawned by the success of M on the Bund: buildings such as Bund 18, 3 on the Bund and Bund Five. All boast top restaurants that rival the best of New York and Paris and feature top chefs such as Jean-George Vongerichten, Paul Pairet or the three Michelin-starred Pourcel twins. But the recent global economic crisis has dimmed the lights on some of these luxury venues: Sens & Bund closed at the end of last year, and many celebrity chefs have found themselves playing musical chairs.

Garnaut flat-out admits that at the end of last year business was down 50%. “Everyone was talking-up what would happen to China in the year of the Olympics, but everyone in the hospitality trade saw their business drop significantly in 2008.”

Rather than despair, Garnaut has used this recent crisis to fine-tune her restaurant. “There was a point at the end of last year when my staff were looking depressed. I held a meeting and told them: ‘Get out there and give people good service, give them good value for money; don’t push the bottled water on them, and make sure they have a good time.’” Following this talk, Garnaut also dropped the most expensive items on the menu and redesigned the wine list to introduce a lower-priced selection. One thing she did not do was shrink the staff. “I told [them] that nobody will be fired for economic reasons. But if people leave, then we just won’t replace them.”

Garnaut admits that due to the current economic situation the average spending has gone down, but not by very much. “Our average bill (per head) is RMB 500-600 (USD 73-88). That means for every person spending RMB 1,000 there’s also someone spending RMB 300.”

Lest anyone should wonder about the long-term viability of M on the Bund, Garnaut is quick to point out, “you have to remember that when I opened my first restaurant, [Hong Kong’s] M at the Fringe, in 1989, I was knocking on the doors of the bankers.”

Garnaut arrived in Hong Kong from Australia and initially dabbled in the business by cooking and working in numerous restaurants. As a young lady and a restaurant newcomer 20 years ago, Garnaut found it next to impossible to find funding for her own place in Hong Kong. Nonetheless, with a team of shareholders and backing from a French bank, Garnaut eventually managed to get M at the Fringe off the ground. Her first restaurant was an instant success, and is celebrating its 20th birthday this year. “I always go with my gut instinct and I never do something for the money.”

But money is important, too. Although Garnaut herself says that she never obsesses over the balance sheet or figures, she understands the most important thing: “You deliver the right product and profit will follow.” M on the Bund, Garnaut’s second restaurant venture, turned out to be an instant success, but there have been failures too, such as a low-priced Italian restaurant in the same No 5 Zhongshan Road building. She shut it down within six months of its opening. “I could see right away that it wasn’t working. It was the wrong concept with wrong prices at the wrong time.”

And it hasn’t been easy operating M on the Bund. “For the first five years, we were here on the Bund by ourselves.” There were other challenges too: local staff and customers who didn’t understand fancy dining; government regulators who didn’t understand why she had to have international managers or chefs, and the difficulty in accessing key food ingredients. “It was a bloody nightmare getting the food,” Garnaut admits.

There were also certain expectations that had to be adjusted for the local Chinese clientele, such as keeping a few signature dishes permanently on the menu. Consequently, 20% of the menu hasn’t changed since M’s opening ten years ago. “Nowhere else in a fancy restaurant will you see steak and chips, but we have it, and we cannot take these off the menu without disappointing some of our top customers,” says Garnaut.

Mick Ryan

When asked about the secret of her success, Garnaut says, “At the end, it’s all about management.” And about M’s role in Shanghai: “We’re not Element Fresh. We’re not Jean-George. When Jean-George opened, their prices were the same as ours. That’s ridiculous. They’re [a] different kind of restaurant - more fancy, more exclusive, fewer tables.”

ADDING VALUE

The one event that M on the Bund has become famous for is the Shanghai Literary Festival. Started six years ago as a series of successful literary lunches spiked with martinis, the idea developed into what is now the most established regional literary festival in East Asia featuring top international writers and the annual presentation of the Asia Man Booker prize winners.

This past March, the Festival brought over 50 authors from 16 different countries. From philosophers to popular cookbook writers, some of the festival’s renowned guests have included Simon Winchester, John Banville, Amy Tan, Pankaj Mishra, Gore Vidal and Kiran Desai.

But what might seem like a fantastic marketing and branding campaign for M actually started out as a personal passion. “I was a literary groupie. People would ask me about meeting Tom Cruise or Sigourney Weaver at my restaurant, but I didn’t care about the famous actors. I wanted to meet the authors.”

The Literary Festival also addressed one problem that plagues many successful venues. “We were losing touch with our community. We became a must-do spot for tourists or visitors, but we weren’t connecting with the people who lived here.”

Although Garnaut won’t disclose restaurant traffic at this year’s festival, she did say that 353 tickets were sold for the James Fallows session alone. Four other sessions were completely sold out, meaning at least 250 tickets priced at RMB 65 were sold for each of these sessions (RMB 16,250).

Despite the traffic it has created for her restaurant, Garnaut insists that M, to a large extent, still underwrites the festival; it doesn’t generate a profit for the restaurant.

GARNAULT’S ANSWER TO THE FINANCIAL CRISIS

What is the next move for the Grand Dame of the Bund, who likes to wear red and pink, and who is known by thousands of international jet-setters by her first name? Staying true to her conviction, Garnaut is opening yet another restaurant. “We’re opening in Beijing,” Garnaut declares firmly. The Beijing restaurant will open later this year on the historic Qianmen Road, on the south side of Tiananmen Square.

Garnaut says she knows when her instincts are right. She is backed by a team of 20 silent shareholders but knows when to say no. “I don’t believe in shareholder rights. They put in the money and let us do the work. They cannot tell us what color to paint the walls, no way.” But at the same time she remains fair. “We deliver; we pay on time; we pay the 8% interest.” She also gives her most loyal staff shares in the restaurants.

And, at least in the opinion of Garnaut, there are some positives to be taken away from the current economic crisis: “At least the current crisis will clear out some of the luxury crap in Shanghai."

For a complete list of Business Articles by Mina Choi click HERE