Three years of incubating (mostly) good food ideas in Beijing
The low down on the highs and near misses in China's fast lane
Early days sippin' pisco
We started Hatchery in Dec 2015 in Beijing with the intention to test and help grow more interesting food ideas in China.
The idea for Hatchery came about from a Pisco and Ceviche pop-up concept we launched in Beijing’s Dawanglu CBD district mid 2015. We were several international friends interested in testing a new concept idea but not yet committed to dropping several million RMB to set up the Peruvian concept from scratch.
We were fortunate we had options to start small to test our idea. Our friend owned a growing coffee chain, Café Flatwhite, and he allowed us to take over his Dawanglu coffee container in the evenings when there was no traffic in return for subsidised rent. We had six months to test our pop-up before winter arrived; from hiring and training staff to working out our seafood supply chain to managing COGs and keeping the brand Buena Onda (good vibes in Spanish) on point. The pop-up was a summery success and fueled us to test another concept – this time an Antipodean take on a Belgian mussels and craft beer concept, coinciding with the developing craft beer scene in Beijing and the idea of shared mussel pots between groups of friends. Our Kiwi food director at the time even brewed his own citra ale drop with Nelson hops in collaboration with local brewery, Arrow Factory, to match the notes of the New Zealand mussels.
...we saw an opportunity to create a food platform to help
up-and-coming entrepreneurs like us to leanly test their ideas...
Building on momentum in Beijing, we tested a third concept idea focused on healthy, no-fuss brunches in the heart of Sanlitun called Soul Bowls. This is where we had our first ‘aha’ moment. Instead of being the entrepreneur we saw an opportunity to create a food platform (we coined it a culinary incubator) to help up-and-coming entrepreneurs like us to leanly test their ideas with the support of food experts, a supportive community and licensing and financial support to grow. This was the breakthrough for Hatchery as a business.
Relying on friends to find a run-down hotel space and help paint and refit the interior, we pooled together enough RMB to launch our first Hatchery location in Tuanjiehu. We tapped into a Beijing millennial and foodie community hungry for new food concepts – and were blown away by the initial buzz and response. Amongst the hype, pollution and 9-9-6 working culture, those who could afford to eat better in Beijing increasingly wanted to do so. Taking advantage of the Chinese tourism boom where city inhabitants, after travelling abroad, wanted to take their local friends to experience similar cuisine, we focused on validating international foods for Beijingers. From oyster pop-ups to back alley blockparties to beer festivals to weddings on the Great Wall, we worked nonstop to test and validate tens of food business ideas, extending these through a growing community network and catering hundreds of events and parties across Beijing and Shanghai.
The highs and lows of growth
On the surface everything was going well – topped off by winning Beijing’s best new food concept in a number of annual city awards, as well as being recognised as China’s best expat startup by Technode in early 2017. Yet despite all the publicity, in the background we were having issues with our financial partners around understanding the needs of an incubator business model, where a higher management team cost and overlay sucked out the cash that was expected by investors in normal restaurant businesses. We also hadn’t solved the service fee versus equity ask for our incubator to fairly charge incubees for our services – and instead opted to validate more of our own concept ideas to build up our management know how of what ugly, good or great looks like (we call our incubation process HatchTrack). Fundamentally, we weren’t willing to take shortcuts and wanted to ensure we could offer entrepreneurs real value before we asked anybody to pay.
Our first local partnership came abruptly to a head in Sep 2016 where we were forced to vacate the Tuanjiehu incubator premises within 48 hours of notice, after failing to agree to pay nearly double the monthly rent. Thankfully, we had been in talks with a much larger Beijing-based property company, focused on co-working and co-living developments, who saw our Hatchery model as a key offering to their working and living community in the central lobby within any of their developments.
Grateful for their financial and strategic support (including a three million RMB seed fundraising round alongside friends and family) we bridged the team salaries and set up our second incubator location in the heart of the Dongsi hutong in our partner’s first co-living showcase. We used this transition to focus more on what we could offer entrepreneurs, as well as international companies, seeking to validate concept and product fit by offering focus groups and lean means to test packaging and flavour insights within our community of 4000+ millennials. From craft cider to biodynamic wine companies to premium seafood and free range chicken suppliers to global ingredients favourhouses and even government agencies, we were helping validate a variety of partners using firsthand insights and dodging the more traditional (and expensive) marketing and advertising agencies.
Flush with funding for growth and naively assuming the worst was behind us, we kicked off a new location development in Beijing’s CBD district Guomao targeting a late 2017 launch targeting office worker food models. Alongside our Dongsi incubator HQ, this second Beijing location was planned to showcase two of our of self-incubated food concepts, Common Burger and Canteen, to prove how to run and launch concepts coming off our incubator as a pathway for fundraising and franchising - working with VCs and connected property developers.
We also had ambitiously set our sights on launching a Shanghai incubator HQ and found a potential location in a new Blackstone development in Xuhui below a WeWork location. We invested in a larger management team to help us deliver these projects and develop the infrastructure to support our incubee and community offerings across multiple locations and cities. In hindsight, this was all too ambitious and exposed us to greater risk. It also wasn’t the right end of the market to be focusing on, there’s enough properties and developers in Shanghai, yet there’s not enough content and experiential learning allowing offline, physical retail to attract new consumers (away from their phones).
Along with many from the wider Beijing food and beverage industry, our Dongsi incubator location was caught in the Beijing municipality-backed ‘gentrification’ of the historic hutong areas in late 2017– where they pushed out over a million city inhabitants that operated small shops and were living in the capital without formal hukou (residency permits). Our co-living partner had to abruptly pull down twenty-four apartments above of our incubator, forcing us to close once again. Caught in a major cash flow pinch with no other venue open to us, this triggered a salvage operation to keep Hatchery alive – where we first reneged on our planned Shanghai location and lease, as well as having to painfully let go half of our founding management team. We clawed through this period only with the help of our co-living partner and supportive community, and managed to launch Arcade by Hatchery in Guomao in early 2018 under a cloud of financial pressure.
What was supposed to be an extension of our incubator network suddenly became our sole location. We had to sadly say goodbye to some of our core team (mainly foreigners with solid experience in China) to reduce overheads, and began to rebuild a local Chinese team that better understood local consumer needs and service offerings. It was a difficult time for Hatchery but fundamentally forced us to get leaner and more bottom-line, Chinese customer focused.
Looking towards the next phase of growth
Despite all the pain across the first half of 2018, we have become much clearer about our purpose, our Beijing roots, our business model, driving sustainable cash flow and keeping entrepreneur needs at the heart of everything. In a way, we’ve forced ourselves to go back over our Hatchtrack process and truly validate our reason for being, as well as opportunity to grow in the changing Chinese landscape. Hint – it’s being as asset light as possible! We are much clearer today how we can support the next generation of entrepreneurs and product ideas worth growing from our base in Beijing and online.
We’ve transitioned our focus from validating international food concepts for Chinese market adoption to a greater emphasis on readying Chinese food products and concepts for wider China and global growth. Beijing trends, along with most things in China, have changed enormously over the past few years where nationalism and international appreciation of various Chinese food cultures has enabled everything from Sichuanese and Yunnanese mash ups to Western-friendly Baijiu brands to Chengdu hip hop to be appreciated and profiled globally. Chinese urban culture, with food and beverage as a key pillar, is increasingly promoted and profiled by millennial circles across Beijing, Hong Kong, New York, London and back.
Whilst we may have been slightly ahead of our time in 2016, there are now a number of different food incubator ventures around the world, including new co-kitchen and ghost kitchen models that target direct-to-delivery food disruption. There's even a Hatchery food incubator launched in Chicago that encouragingly mirrors much of our learning. This growing food ecosystem, if activated in collaboration and partnership, can help validate new ideas efficiently and fund the right food concepts to be the next big play for China, wider Asia and the world. An incubator like Hatchery helps with the initial 0-1, as well as attracting capital, partners and media to support the 1-5 growth phases.
Next gen food in and outside of China
China has always been a global benchmark for cuisine, and now with increasing tech, VC and channel interest, it’s increasingly on trend to be a food entrepreneur - just like calling oneself a banker or programmer in 2008. Beijing and other big tier Chinese cities are blowing up their food cultures – challenging what good, sustainable food needs to taste, smell and look like. Many across the value chain (that can afford it) are concerned about health, wastage, packaging, clean-additives and sensory trends – even more than LA or San Francisco-based city counterparts. This progress that we’ve witnessed firsthand in Beijing is what continues to drive our optimism in what we were and are still trying to build and grow at Hatchery.
It’s increasingly on trend to be a food entrepreneur - just like calling oneself a banker or programmer in 2008
Three years on we feel we’ve accomplished an enormous amount, with our fair share of road bumps and humbling (and painful) ‘This is China' moments along the way. We’ve now an increasingly simple, validated business model focused almost completely on the next generation of Chinese food entrepreneurs who want to take on the big food challenges facing our generation – and do a little good in the process. From additive free dumplings to healthy, affordable meal plans for Beijing’s schools, we are consistently blown away by the food ideas coming through the pipeline and are hugely thankful for everybody’s confidence in Hatchery to help test and validate the next big food idea.
To keep updated with our pipeline of entrepreneurs and food ideas, make sure to follow us at @hatcheryincubator on WeChat or @hatcheryasia on Instagram.
Here’s to the next three years at Hatchery with friends.
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