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How a Hong Kong heiress triggered a Starbucks backlash

A vandalized Starbucks coffee shop stands during a protest in Hong Kong on Oct. 4, 2019.

JUSTIN CHIN/BLOOMBERG

By BLAKE SCHMIDT AND VENUS FENG | Bloomberg | Published: October 19, 2019

Sweeping up broken glass and scrubbing graffiti have become regular chores for workers at the various businesses of Maxim's, the 63-year-old restaurant and catering empire founded by a Hong Kong billionaire clan.

This isn't just random vandalism. Protesters have relentlessly targeted the company after the daughter of Maxim's founder, Annie Wu, criticized Hong Kong demonstrators at the United Nations Human Rights Council last month.

It was a rare public appearance from a member of a billionaire family that founded a restaurant group with $2.6 billion in annual revenue, and that operates more than 1,300 outlets in Hong Kong and other parts of Asia, including Starbucks. In the mainland, Wu received praise from state media, but in Hong Kong, fallout was swift.

Activist Joshua Wong tweeted that Starbucks should drop its deal with Maxim's, and a petition collected more than 59,000 signatures. Fast-food chain Maxim's MX, Genki Sushi and Maxim's Cakes – all part of the clan's empire – were sprayed with graffiti or had windows smashed. At two of the city's leading universities, students held boycott rallies.

Beijing's allies in Hong Kong, for their part, have tried to counter the campaign, with one pro-Beijing party calling for supporters to spend more at Starbucks and Maxim's while lawmaker Starry Lee posted photos of herself nibbling on Genki sushi.

Maxim's Caterers Ltd. has sought to distance itself from Wu, the eldest daughter of co-founder James Wu, saying the 71-year-old doesn't hold a position in the company. She does, however, have a stake of less than 1%, activist investor David Webb said in a Twitter post, citing company documents. Chairman Michael Wu, the grandson of Annie's uncle, runs the company.

As Beijing resorts to corporate arm-twisting to influence the narrative in Hong Kong from the National Basketball Association to Cathay Pacific, protesters have largely taken aim at Chinese state-owned companies they view as complicit, including banks and their ATM machines, and China Mobile Ltd. The case of Maxim's, one of a few private companies being targeted, shows that protester anger isn't just reserved for China Inc. Activists called for protests at Apple stores after the company pulled a live-mapping app that tracked deployments of police, though there have been no attacks yet on the fresh target.

The months-long protests have already caused the closure of 100 restaurants across Hong Kong, with about 2,000 employees affected as a result, Financial Secretary Paul Chan said in an Oct. 13 blog post. For the survivors, turnover could drop by as much as 30% from August to October, according to Alice Leung, an analyst at KGI in Hong Kong.

The impact could be more pronounced for Maxim's, which analysts say has most of its business in Hong Kong. Maxim's revenue grew 16% last year to $2.6 billion. The shares of its Hong Kong-listed peers Fairwood Holdings Ltd. and Tsui Wah Holdings Ltd. have dropped by more than a quarter since June.

"Given the magnitude and that most of its costs are fixed, the impact on profits will be significant," she said. "Maxim's Group has exposure in fast food, Chinese restaurants and western dining in Hong Kong."

Annie Wu didn't respond to an interview request sent through the Hong Kong Federation of Women, which she was representing at the U.N.

"Regarding the current social events, we genuinely hope all parties will resolve their differences and our community may resume normal operations again soon," Maxim's said in a statement, declining to provide further comment.

Maxim's might seem like an unlikely target for Hong Kong protests, given its long history in the city. But ever since China's economic opening under Deng Xiaoping, the Wu clan has deepened ties with China, with Annie leading the way as a member of the Communist Party's political advisory body.

The establishment dates to 1956 when, brothers S.T. and James Wu were indignant about poor service from staff at western restaurants in Hong Kong. Among the slights, detailed in the company's history pamphlet for its 60th anniversary, was regularly being given a table near the bathroom.

"Just because we're Chinese, we're not fit to dine at a western restaurant?" the brothers asked in the official document.

So they opened their own French restaurant and nightclub with salmon flown from Norway and strawberries from Japan. They hosted rock bands and Hollywood stars. In the 1980s, their proficiency with western culinary techniques was key to establishing partnerships in China. Former leader Deng even asked whether they could make French bread, according to the company.

As big hotel groups started offering more grandiose designs and larger live bands, the brothers changed course. They carved a niche with smaller restaurants, opening 20 cafes in two years. By the 1980s they had the backing of Jardine Matheson, one of the city's biggest conglomerates (its Dairy Farm has a 50% stake).

In the 2000s, the business opened its first Starbucks store in Exchange Square in Hong Kong. In 2011, Maxim's acquired full ownership of Starbucks in Hong Kong and Macau.

The Wu clan now has a fortune worth at least $1 billion, derived mostly from their stake in the company, according to the Bloomberg Billionaires Index.

Annie Wu's business success is due partly to China. She first visited the mainland in 1978 with a visit to Sichuan province.

She was a founder of the joint venture Beijing Air Catering Ltd. after Deng demanded flight catering services be introduced to the mainland by May 1980. The service didn't exist in Beijing at the time, which meant international flights had to stop in Tokyo to get meals onto airplanes.

"For years, I had been like a lone traveler, leading a rootless wandering life and looking for long-lost treasures," Wu told China Daily in a Sept. 7 interview. "I found my roots."

She also rose politically, serving as a member of the Standing Committee of the Chinese People's Political Consultative Conference National Committee, a top advisory body. It was at the UN council alongside fellow heiress Pansy Ho of Macau casino wealth, that Wu most publicly criticized the protesters.

She then turned to Chinese state media to chide protesters as representing a small minority and blamed international media for bias against the "silent majority."

"A lot of those peaceful protests have become violent like riots," Wu said. She called for punishments for faculty and students who boycott.

After her showing, Beijing expressed its gratitude. The Central Political and Legal Affairs Commission, a Communist party organ, posted on its social media account that netizens had sent 650 Maxim's mooncakes – delicacies enjoyed around the lunar festival – to Hong Kong police.

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Bloomberg's Pei Yi Mak contributed.
 

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