with profits plummeting, who gets a share of the catering industry’s “cake”?
2024-09-08
한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina
image caption: taiwan's din tai fung announced the closure of 14 stores in north china. the picture shows the din tai fung store in beijing century golden resources shopping center on august 27. (visual china)
our reporter chen zishuai
recently, two pieces of news about china's catering industry have attracted widespread attention. according to singapore's lianhe zaobao, beijing's catering industry profits fell 88.8% in the first half of this year, with a profit margin as low as 0.37%; taiwan's well-known catering group din tai fung announced on the 26th of last month that it would close its 14 stores in north china. some analysts said that this shows that the chinese catering market is facing difficulties, but more professionals pointed out that this is a "big wave washing away the sand" under full market competition. so, what are the deep-seated reasons behind the decline in profits in china's catering industry? how can restaurant operators withstand the "storm" and achieve long-term brand success? global times reporters conducted interviews and investigations.
“growth is not reflected in profits”
on a weekday evening, a global times reporter visited the din tai fung restaurant in china world mall. the letter announcing the upcoming closure was posted in a prominent position at the entrance of the restaurant, but the restaurant was full. the clerk told the reporter that after the announcement of the closure, many more customers came to check in in recent days. according to taiwan's united news network, yang bingkun, general manager of din tai fung in beijing, said that the main reason for the closure of the north china store was that the board of directors failed to reach a consensus on the renewal of the expired business license. the overall situation of the catering industry is indeed not good recently, and many businesses are losing money.
two official data show that the profits of china's catering industry are being affected - beijing municipal bureau of statistics recently released data showing that among the accommodation and catering units above the designated size in beijing, the catering industry's operating income from january to june 2024 decreased by 2.9% year-on-year, operating costs decreased by 1% year-on-year, and total profits decreased by 88.8% year-on-year. at the same time, data from the shanghai statistics bureau showed that in the first half of 2024, the revenue of accommodation and catering enterprises above the designated size was 75.288 billion yuan, a year-on-year decrease of 2.6%, and the operating profit was negative 770 million yuan.
do the declining profits and the closure of chain stores represent the shrinkage of china's catering industry? in fact, according to data from the national bureau of statistics, from january to july 2024, the national catering revenue increased by 7.1% year-on-year, exceeding the 2.7% growth in total retail sales of consumer goods. "(it's just) that this growth is not reflected in the profits of restaurants." said the hong kong south china morning post.
ni yuefeng, director of the marketing department of the school of management and economics at beijing institute of technology, told the global times that the entry threshold of the catering industry is relatively low, and many people in china easily think of opening a restaurant when starting a business, which leads to very fierce competition in the chinese catering market. under such circumstances, the entry and exit (closure) of a large number of catering companies or stores has become a common occurrence. faced with fierce competition from other companies or brands in the market, many catering companies are forced to attract customers by lowering prices or offering discounts, which naturally leads to a decline in total profits.
some people in the catering industry said that the current problem of homogeneity in the catering market is very prominent, and the dilemma of competition among peers has also led to unsustainable profits. in addition, the main business of many restaurants is takeaway business, and the income has to be shared between the takeaway platform and the delivery business, which will naturally affect profits.
a "shuffling" process
"this is a 'reshuffle' process." zhu danpeng, a chinese food industry analyst, told the global times that starting from the fourth quarter of 2023, a very obvious change will occur in the entire chinese catering industry, that is, cost-effectiveness has become a rigid demand on the consumer side, and high-end catering has been greatly affected. however, in the long run, the overall catering consumption dividend still exists objectively.
a report jointly released by consulting firm kpmg and the china cuisine association pointed out that young consumers have become an important force in the catering market. young people who grew up in the internet age have increasingly sophisticated and comprehensive requirements for catering consumption. a young consumer told the reporter that she would not choose restaurants with high brand premiums, and would rather look for cost-effective stores on social networking sites or rating platforms.
"indeed, chinese consumers' demand for dining out has increased. they not only emphasize food safety and reliability, but also take into account the innovation of dishes, cost-effectiveness and even the environment and geographical location of the restaurant. this will also push chinese catering to develop to higher standards." an analyst told the global times reporter.
extensive management is no longer applicable
"the decline in profits or even losses of catering companies actually reflects that some catering companies are not fully prepared in terms of investment and management." ni yuefeng said that on the one hand, many catering entrepreneurs are relatively blind and have not conducted sufficient market research or consultation; on the other hand, they adopt an extensive management model and do not recognize customer needs. "therefore, the old extensive management model of china's catering industry is no longer applicable."
hong kong's south china morning post reported that many catering giants are now launching "small store models" in china, such as kfc's snack stalls in shenzhen. analysts pointed out that the cost of such small shops is much lower, and even if the sales of a single store are lower, it is profitable in terms of indicators such as profit margins and cash returns. in addition, zhu danpeng mentioned that in order to cope with the survival dilemma, many restaurants have launched packages to suit different customer groups, such as business and family packages. "most of the brands that are cutting prices now are head brands, because they have brand effect, scale effect, fan effect, and the integrity of the entire supply chain is relatively strong, so there is room for price cuts, the ability to charge a premium, and the possibility of reducing costs."
at the same time, chinese catering brands are also accelerating their overseas expansion. according to a kpmg research report, the percentage of the chinese catering market in the international market is expected to increase to 10.8% in 2026. ▲# hundreds of reviews#
