Little pizzas, big bucks

Nanjing Lu is the most crowded area in Shanghai, China, ever since the city government turned two kilometers of road there into a vehicle-free area three years ago.

Since then, the teeming area has become a popular tourist site that attracts more than 1 million people per day. In October, a small Korean-style pizzeria, Pizza Station, opened there. Within a month of its opening, the pizzeria, only 19.8 square meters in size, has gained wide popularity among Chinese customers. The draw is no doubt the cost, only 10 yuan ($1.20) for a personal-size pizza. Pizza Station's recognition even spread to prominent area newspapers, with a business daily running a story about the store in November, claiming that it was the only take-out pizzeria in Shanghai.

Soon Pizza Station was swamped with requests to open other outlets both in China and in Seoul, as well as investment offers.

A Chinese state-run company even proposed a major contract with the small pizzeria, and some Korean conglomerates in China dispatched their employees to Pizza Station to gain know-how on drawing customers.

"Since we started the store we have sold over 1,000 pizzas each day. Business is good and it is something we didn't expect," says Kim Deok-il, 47, the founder of Pizza Station.

Mr. Kim's success, however, didn't happen in just one single day. In fact, Mr. Kim is a 15-year veteran in the Chinese business world.

The Korean businessman started with a factory that sewed children's dolls and stuffed animals like teddy bears and bunnies.

He later on moved on to, of all things, film animation, and until recently he was in the business of goods trading. Before setting sail for China, Mr. Kim was a sales manager for a company that later changed its name to Lucky-Goldstar International Corp., today known as LG International Corp.

With his long struggle in China, Mr. Kim has forged a strong relationship with many Chinese companies. Mr. Kim started to think of opening a take-out restaurant two years ago. "Doing business with the Chinese for 15 years has helped me to observe carefully their eating habits and culture," says Mr. Kim. "The pizza business I have started was created by these observations."

Mr. Kim added that a few years ago he was so impressed with an Italian pizza that he ate when visiting Milan he tried to think of ways to create a convenient pizza that still preserves the delicious taste of the Italian pizza he had. Mr. Kim's problem was easily solved with the help of his older brother, a hotel restaurant chef in Seoul.

To create a miniature pizza, Mr. Kim and his brother borrowed the method commonly used by Korean vendors: metal plates with small round depressions.

Mr. Kim added that the secret to the taste of his pizza that draws such popularity among his Chinese customers is within the special sauce and the new kneading methods that the brothers have come up with. And that's all he will say about the special sauce.

Once the pizza was created, the next move the Korean businessman had to make was to find a way to produce pizzas in large quantity, but in a limited time and without ruining the taste. Mr. Kim designed an oven that could cook 12 pizzas in three minutes and 50 seconds. By June Mr. Kim had the basic preparations for launching his take-out business completed. He began with a $42,000 investment from the Korean consulting company HOM.

In China it usually takes three months in order to get permission to start a food business, but Mr. Kim used his strong business relations with the Chinese government to gain permission in just a month.

When all was set Mr. Kim only had to choose the location of his store. Since Nanjing Lu was a center of tourism with a large population of foreigners Mr. Kim thought there was no better place to start. The young, upscale atmosphere of the area, as well as the overflowing energy of its denizens, fit perfectly with his grand plans for innovative, inexpensive and delicious food.

In its first two months, Pizza Station earned an average monthly revenue of 470,000 yuan ($56,700). The sales record was especially impressive because the only food item the small store offered was the 10-yuan pizza. The actual cost of producing one pizza at Pizza Station is three yuan.

The store opens at 10 a.m. and closes exactly 12 hours later. It employs 25 people who take turns greeting customers and cooking pizzas. In good weather, one needs to stand in a line 30 to 40 people long just to get a bite of that miniature pizza.

With his success, Mr. Kim in mid-November opened a second store in another part of Shanghai. Mr. Kim's second store posted sales of 170,000 pizzas in its first month. Mr. Kim is planning on opening his third store within this month.

"There have been 56 requests to open up other Pizza Stations," says Mr. Kim.

The Korean businessman said he's nearing a deal with 10 department stores, and six more stores will be set up at retail stores in Shanghai, including a Carrefour. Mr. Kim said proudly that the subway corporation in Shanghai offered to let him open over 400 Pizza Stations within its stations.

Mr. Kim said he now receives business calls from Vietnam, Thailand and even Taiwan. The Korean businessman is planning to open 50 Pizza Stations this year, and once that is completed he will be concentrating on promoting Pizza Station.

But Mr. Kim's success has never stopped him from improving his store. Mr. Kim plans to introduce several items to be added to the pizza next year. "It'll be an entirely new fast food item that the Chinese have never tasted," boasted Mr. Kim.

"I have seen a lot of Koreans invest in China and go back to Korea without fulfilling their dreams," he says. "In order to be successful in China a businessman should choose a competitive item that can be launched with a small investment. That person should approach the Chinese market with patience. Koreans are too impatient and hurried in trying to make large amounts of money in short periods of time. China is not a country that should be taken lightly."

Mr. Kim adds that although it is a problem for most Korean food businesses to launch into the Chinese market quickly, it always bothered him that Koreans only dealt with Korean customers in China. "In order to be successful in China in the food industry, one needs to deal with the mainstream of Chinese society," stresses Mr. Kim.

Benchmarking McDonald's, which sells an average 2 million hamburgers a day in China, Mr. Kim hopes to have sales of 1 million of his pizzas and to own at least 2,000 chain stores in China within the next three years.

by Kim Hong-gyoon