01 A Slice of History in a Small Bun

The development story of Babi Food is a unique reflection of China’s consumer society.

In 1982, early stall owners at Andingmen became the first wave of pioneers in China’s post-reform consumer market.

In 1990, the first McDonald’s in mainland China opened in Shenzhen, with customer traffic that day setting a global single-store record. The popular saying at the time, “I spent $10 to go to America,” captured McDonald’s heyday. The West was seen as the trendsetter—a cup of coffee in one hand, a burger in the other, savoring an American flavor.

In 2001, a “Master Liu’s Bun Shop” opened on Nanjing Road in Shanghai. The owner had failed twice before in the bun business—the heavy, salty, and oily taste of his native Anhui-style buns clearly didn’t suit Shanghai palates. This time, he chose bustling Nanjing Road, sourced quality pork from his hometown, hand-chopped the filling, and made lighter Shanghai-style buns.

This time, he succeeded. Three months later, lines began forming outside his shop.

In 2003, Master Liu renamed his shop “Babi Food.” Founder Liu Huiping registered the “Babi” brand trademark, becoming the first bun shop owner in Shanghai to do so.

Today, it’s been 30 years since that first store opened. McDonald’s now has over 3,000 outlets in China. It took Babi nearly 20 years to reach a similar store count.

This rapid expansion was driven by Liu Huiping’s business vision.

After establishing the “Babi” brand in 2003, Liu began learning from McDonald’s. In 2004, he invested 800,000 yuan to build a central kitchen, standardizing filling production and distribution to stores. To quickly utilize the central kitchen’s capacity, Babi launched its franchise model in 2005. Today, the company operates 2,931 stores nationwide—16 directly owned and the rest franchised—a store count comparable to McDonald’s China.

From the steaming breakfast stalls at Andingmen to the orange Babi stores now lining East China’s streets, buns have continued to fuel the stomachs of tens of millions. Our consumer confidence has shifted from Western trends to national pride—there’s a big world hidden in small products.

02 Big Business in Small Buns

Some ask, how much business can a 2-yuan bun really do? Many find it hard to believe Harvest Capital invested in such a company.

Let’s break it down.

By the end of 2019, Babi’s parent company reported revenue exceeding 1 billion yuan and nearly 3,000 stores (2,799 in H1 2019, approximately 2,931 by year-end). According to its prospectus, the average annual revenue per mature Babi store has remained stable at around 300,000 yuan for three consecutive years, with monthly revenue between 20,000 and 30,000 yuan. Based on the catering industry’s net profit margin of 10–15%, a single Babi store generates roughly 3,000–4,000 yuan in monthly profit.

However, since most Babi stores are husband-and-wife operations where the owners are also the employees, excluding labor costs (about 20%), each store conservatively achieves a monthly net profit of 6,000–9,000 yuan—or 3,000–4,500 yuan per person per month.

What does this mean?

As noted, over 600 million people in China still earn less than 1,000 yuan per month. A small bun business can already provide a relatively high standard of living within China’s circular economy. In other words, Babi uses its products to support Shanghai’s mornings and two decades of brand-building dedication to sustain millions of ordinary Chinese families.

This is why Harvest Capital chose to stand with Babi.

From a business perspective, Babi also ranks among China’s top consumer goods companies.

With annual revenue exceeding 1 billion yuan, direct store gross margins of 60%, franchise store gross margins of 30%, and a group net margin nearing 15%, Babi’s financials are robust. Beyond the numbers, its nearly 3,000 stores make it a pioneer, firmly securing some of Chinese commerce’s scarcest offline real estate.

Babi stores in parts of Shanghai, photo source: Red Meal Network

In terms of business model, Babi is effectively a supply chain company that locks in channels through product and brand strength.

Whether serving franchise stores or corporate group meals (launched in 2010, group meals accounted for ~10% of revenue in 2019 and are expanding), product remains the core strength of any consumer goods company—especially in the catering sector, where a single misstep can mean losing everything.

On this front, Liu Huiping has steered Babi to high marks.

Investing in a central kitchen barely a year after founding the brand demonstrates Liu’s keen sense for catering supply chains. The “central factory + cold chain distribution” model has enabled nearly 3,000 stores to bloom nationwide.

Babi operates two large modern production bases in Shanghai and Guangzhou (with smaller South China volumes currently outsourced). For pastry companies, frozen dough technology in standardized central factory production is critical. Before this technology, bun companies had to steam buns before delivery, reheating them in stores—compromising flavor and texture.

In 2009, Babi pioneered frozen dough technology. Now, the central factory distributes pre-fermented raw buns to stores, where they are proofed and steamed on-site, preserving a freshly steamed taste. Some stores receive fillings for hand-wrapping and steaming in-store.

A flexible, scalable supply system—enabled by refrigeration tech, central factories, and logistics—has been key to Babi’s rise as a breakfast market leader.

The lighter the asset model, the stronger the need for systemic capabilities.

With this strength, Babi Food led the way in chain standardization, reshaping public perception of breakfast businesses—often seen as limited by short operating hours, low ticket sizes, and weak customer loyalty—to achieve 1 billion yuan in group revenue and billions in terminal sales. These billions weren’t driven by ads, marketing, or traffic; they came from selling one 3-yuan bun at a time.

Even more impressive: while the Chinese habit of eating buns for breakfast is centuries old, every consumer product has a lifecycle. Stagnation can dim a brand’s shine.

Yet Master Liu and his nearly 20-year-old bun enterprise remain dedicated to product excellence, rooted in detail, innovating within existing pasta categories to enhance consumer experience and ensure franchisees benefit from continuous improvement and sustainable store operations.

Seasonal limited-edition buns, new steamed bun varieties refreshed quarterly, and instant-fried dumplings have helped Babi shed the “bun shop” label to become a more beloved national breakfast brand. Whether at a steaming Babi store or on a home kitchen table, Babi comforts the Chinese stomach, quietly nourishing day by day.

In August 2020, the “Top Three Brands in China’s Food & Beverage Sub-Categories” list was released, with Babi Food, Qingfeng Steamed Buns, and Good Garden ranking top—Babi leading in scale and volume.

03 The Strategic Partner Behind the Bun Champion

The prospectus for Babi’s parent company runs over 500 pages. Only one external investor and director appears: the veteran consumer fund **Harvest Capital** and the man behind it—**Alan Song**.

“The consumption investing we do isn’t easy. It often takes years to see results. The partner behind a champion is never idle, so Harvest must keep learning and refreshing itself to keep pace with the champion.”

It’s been 13 years since Alan Song founded Harvest Capital. A finance veteran with over two decades of experience, he has grown alongside China’s capital market since the early 1990s. For 13 years, Harvest’s investment cases—like Babi—have been defined by **high-frequency necessity, steady growth, low profile, and soaring potential**.

Harvest invested in Babi in 2012, when revenue was just a few hundred million yuan and stores were far from today’s widespread presence. The Chinese breakfast scene was still dominated by humble bowls of porridge and pickles. The breakfast cart project, launched in 2002, had seen varied formats over nearly a decade.

For Babi, reviewed among hundreds of annual projects, two strengths stood out: **craftsmanship and system**.

Craftsmanship is the strongest soft power for product-driven consumer goods companies. The breakfast market is essential, and urbanization inevitably fuels demand for fast-paced living. Demographic shifts toward single and small households—and corresponding consumption habit changes—seen in Japan will likely mirror China’s future.

Babi Food’s parent company, Zhongyin Co., Ltd., is about to go public and ring the bell. As Babi’s sole external investor, this marks the eighth year Harvest Capital has accompanied the company, and we have also harvested the first fruit of the golden autumn season. Taste it—sweet, with a hint of flour fermentation.

On the eve of the listing, let Harvest share with you the story behind this national breakfast leader.

Thus, companies that truly excel in product will earn strong consumer recognition—a major opportunity in the food, clothing, housing, and transportation sectors. With 1.4 billion Chinese, if 100 million people eat three buns a year, a company can achieve 1 billion yuan in revenue. The key is accurately reaching those 100 million bun buyers and keeping their stomachs—and wallets—loyal with delicious products.

Clearly, Babi has done this.

Moreover, while Babi operates like a supply chain company, its foresight in building a franchise system was prescient. From his first 1 million yuan earned at “Master Liu’s Bun Shop,” Liu Huiping invested 800,000 yuan in a central kitchen—a key reason Babi continuously improves production, supply, and stabilizes its franchise system through scale and efficient distribution.

Standardization remains an endless pursuit in chain catering.

There are many reasons for investing in Babi. It almost embodies the philosophy of “supporting the private economy and empowering Chinese consumption.” It also reflects Harvest’s deep roots in the essential consumption tracks of food, clothing, housing, and transportation—finding truly valuable Chinese products and brands for the Chinese people.

As Babi’s sole external investor, Alan Song often says: “Liu Huiping is a good man.”

Few may know that Master Liu plans to donate most of his company’s wealth in the future, rather than passing it to his children. Some may see this as ordinary, but perhaps it can inspire something more.

Who truly knows all this? Just as Master Liu in 2001 likely never imagined that nearly 20 years later, his company would become the first listed bun enterprise in China, nourishing more and more Chinese people, Chinese stomachs, and Chinese hearts.

Harvest Capital continues striving to find more such outstanding enterprises and entrepreneurs.