"let prices return to 2008": the catering industry is looking for a way out
2024-09-11
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ordinary people's catering consumption has undergone significant changes.
"in the past, two people might order 5 to 6 dishes, and they wanted to order more dishes to try. now more people come to the restaurant to eat a bowl of huaxi beef noodles, or add another dish, and try to finish it without wasting it." the manager of a guizhou restaurant near weihai road in shanghai has clearly felt this change. consumers have become more cautious about spending money, customers are ordering fewer dishes, and the average customer spending has also declined.
this is a microcosm of the catering industry. this ever-growing industry is now shrouded in a haze. consumers are tightening their wallets, and many catering companies have lowered the prices of their dishes. li hong, chairman of the chain catering company country style, called for "returning prices to 2008." she told the reporter from china business network that the reason for benchmarking against 2008 was that after the global economic crisis at that time, the catering industry also experienced hardships, and now it also needs patience and perseverance to get through the downturn.
falling down
the pressure on catering companies can be seen from the unsatisfactory performance reports of many catering groups in the first half of the year.
on august 29, shanghai xiao nan guo issued a profit warning, and the group expects to record a loss of no more than rmb 30 million in the first half of this year. one of the reasons is that the group's revenue has decreased by 20% to 30% compared with the same period in 2023. as for the reasons for the decline in revenue, xiao nan guo stated in the announcement that the global economy continued to be affected by geopolitical turmoil, interest rate hikes and inflation in the first half of the year, and economic growth slowed down.
tang palace china, a restaurant group that mainly provides high-end restaurants, reported revenue of 527 million yuan in the first half of the year, down 10.4% year-on-year. profit attributable to shareholders was 3.38 million yuan, down 91.9% year-on-year.
tang palace china said in its financial report that the overall consumer market has been weak since the beginning of this year. after the effect of the long lunar new year holiday, the trend of insufficient consumption in the second quarter gradually emerged, and consumers tended to be cautious in their daily consumption. therefore, the number of customers and per capita consumption of the group's restaurants in the mainland have both declined.
although haidilao has maintained its growth momentum, the average customer spending has declined, and the scale of its restaurants has shrunk. haidilao's first-half financial report shows that the number of restaurants has decreased by 43 from 1,382 in 2023 to 1,343, including 7 in first-tier cities (beijing, shanghai, guangzhou and shenzhen), 12 in second-tier cities (all municipalities and provincial capitals except first-tier cities, plus qingdao, xiamen, ningbo, dalian, zhuhai, suzhou and wuxi), and 21 in third-tier and below cities. haidilao stated in its financial report that the company opened 11 new restaurants in the first half of the year, and at the same time closed some restaurants whose operating performance did not meet expectations and had insufficient growth potential, and some other restaurants stopped operating due to other business reasons such as property adjustments.
in terms of per capita consumption, haidilao's per capita consumption in the first half of this year dropped from 102.9 yuan in the same period last year to 97.4 yuan, mainly due to changes in the consumption structure of dishes and increased discounts. the decline in haidilao's customer unit price also occurred in all cities, with the first-tier cities' customer unit price dropping from 110.3 yuan in the same period last year to 104.1 yuan in the first half of the year, the second-tier cities' customer unit price dropping from 101.8 yuan in the same period last year to 96.8 yuan, and the third-tier and lower cities' customer unit price dropping from 96.1 yuan in the same period last year to 91.4 yuan.
practitioners believe that the industry is at a low point. an industry insider told china business news that the decline of the catering industry had already begun last year. "after a short-lived burst of growth in april and may last year, the catering industry has been falling. a common phenomenon is that it is difficult for dine-in restaurants or stores in shopping malls to make a profit due to cost issues."
according to the data disclosed by meituan at the 2024 catering industry conference, from the catering turnover data observed by the platform (including takeaway, in-store, cashier saas and other businesses), in 2024, compared with 2023, same-store sales are declining, high-tier cities are declining, and customer unit prices are declining. however, the overall passenger flow (national passenger flow) has not declined, but has increased. in this regard, meituan believes that residents' consumption demand still exists, but it has begun to control prices.
a relevant person in charge of meituan said that unless it is a banquet, under normal circumstances, when individuals or small families eat out or have a meal together, consumers have strict meal standards in mind.
industry data also shows that practitioners lack confidence in the industry and hold a conservative attitude. the china cuisine association released the china catering industry performance index report in august, showing that the catering industry performance index in august was 46.98, a decrease of 7.77 points from the previous month. the catering industry status index in august was 47.70, a decrease of 2.44 points from the previous month. all indicators of the catering industry status index in august were below the neutral level, showing a state of contraction.
the china cuisine association believes that the above data is largely related to the combination of multiple factors such as rising operating costs, intensified homogeneous competition, weak consumer demand, and increased uncertainty in development expectations. in addition, the sales index is higher than the profit index, which also reflects the recent "increase in revenue but not in profit" in the catering industry.
in response, the association stated that catering companies need support from preferential policies and should respond to current market conditions through measures such as innovation, cost control, and market strategy adjustments.
“back to 2008"
when faced with stress, finding a solution to the problem is key.
judging from the measures taken, many companies have unanimously chosen to adopt a multi-pronged approach. lowering prices, reducing costs through digitalization, and embracing new media have all become strategies for businesses.
li hong, chairman of the country style cooking group, told china business news that affected by the overall economic downturn, country style cooking has made some adjustments in its strategy, one of which is price adjustment. this year, country style cooking announced price cuts for four products, including "kung pao chicken rice" and "mushroom chicken rice", with the slogan "prices return to 2008" to make the prices of the four products consistent with the same period in 2008. as for the reason for benchmarking prices with 2008, li hong said that because of the economic crisis in 2008, the company also went through several economic fluctuations, so the prices were benchmarked with 2008.
the country style restaurant group currently has about 1,300 chain stores. after prices returned to 2008, country style restaurant has become more attractive to consumers and its performance pressure has eased. in this regard, li hong said that this move is in line with the trend. "when consumption is upgrading, prices can be raised. when economic growth slows down, we can adjust it to improve efficiency and reduce the average customer price."
some businesses also predicted the price reduction trend in advance. a person in charge of a grilled fish brand told china business news that long before the industry's price reduction trend, the company carried out a round of price reductions based on strategic adjustments, with a price reduction range of about 10%. the effect after the price reduction was significant, with the turnover rate increasing by nearly 20%.
lowering prices or launching low-priced meal packages have become a powerful tool for catering companies to attract consumers. for example, burger king launched the "1+1 as you like" in september. previously, mcdonald's also launched the "10 yuan burger" activity, and kfc recently launched the "buy one get one free" activity. on social platforms, some consumers have summarized the "poor man's meal" eating methods for a week: mcdonald's 13.9 yuan as you like on monday, tustin crazy tuesday on tuesday, burger king 9.9 yuan meal on wednesday, kfc crazy thursday on thursday, 711 pasta meal on friday, and luckin coffee 9.9 yuan coffee coupons, etc.
the high-end catering industry has gradually put down its airs and become more "people-friendly". last year, xin rong ji launched two single-person lunch sets at 398 yuan and 598 yuan per person, with per capita consumption exceeding 1,000 yuan. some consumers shared on social platforms that "with per capita consumption of 300 yuan, people can eat and drink well at xin rong ji."
as of now, topics related to "poor man's meal" have been played 830 million times on douyin, mostly by working people sharing how to find cheap and delicious food.
although the prices of some products of country style cooking have returned to the level of 2008, the costs cannot be restored. li hong said that this is the challenge currently faced by the catering industry, and businesses need to control the overall operating benefits.
faced with the three great challenges of rent, labor and supply chain, merchants are trying their best to reduce costs and increase efficiency. li hong said that the price of ingredients is relatively stable at present, and the rent has not dropped significantly, but it may improve next year. in terms of labor costs, country style adopts digital transformation to reduce costs through measures such as scanning code ordering, self-service checkout and chef robots assisting chefs.
actively embracing new marketing methods has also become a compulsory course for established restaurants. tang palace china stated in its financial report that the group expects that the catering market in mainland china and hong kong will still face challenges of weak consumption and high costs in the second half of 2024. therefore, it will continue to flexibly adjust its operating model with a strategy close to consumers, continue to work hard to improve operating efficiency, and actively adjust its marketing strategy to increase revenue. tang palace continues to cooperate with large platforms such as meituan and dianping, constantly updating promotional activities that can maintain a high exposure ranking; it also launched a "collection check-in" gift event, recruited xiaohongshu influencers to visit the store, and boosted the brand's popularity on different platforms.
zhang yi, ceo of iimedia research, told china business news that, judging from the comprehensive data, the frequency of consumers dining out has not declined significantly. large chain or single-store brands are facing the situation of "it's hard to turn around", and it is difficult to adapt to local in-store consumption and new marketing methods from social media. in this context, flexible companies will actively think about ways to attract customers to stores, and on the other hand, they will try to attract offline consumption online, as well as provide relevant matching and services for white-collar workers, students and other groups who do not want to dine out.
“fly legs are meat too”
many businesses have turned their attention to food delivery and online sales channels.
in terms of open source, the most successful case is yum china. when many restaurants were worried, yum china reported a financial report that showed growth against the trend. yum china's second quarter financial report showed that total revenue in the second quarter increased by 1% year-on-year to us$2.68 billion, setting a new record for the second quarter.
takeout has become a new driving force for performance. in the second quarter, parkson china's takeout sales increased by 11% year-on-year, maintaining double-digit growth. in this regard, parkson china's ceo said in the financial report that kfc has successfully seized the market share of the takeout platform by expanding the price range and reducing delivery fees.
haidilao's takeaway business also performed well in the first half of the year, with revenue of 580 million yuan, a year-on-year increase of 23.3%, which is much higher than the 13.8% year-on-year growth of haidilao's restaurant revenue. haidilao has also actively innovated in the takeaway business, and previously launched the "one-person meal" for the takeaway group.
li hong told china business news that in the past, country style only provided lunch and dinner, but now it provides three meals a day, as well as takeout, to increase consumption frequency.
from the perspective of the industry, the food delivery industry still has a large room for growth. according to imedia research, the market size of china's online food delivery industry will be 1,525.4 billion yuan in 2023, and it is expected that the scale of china's online food delivery industry will further increase in the future, reaching 1,956.7 billion yuan in 2027.
in the eyes of food delivery practitioners, more and more businesses are flocking to the food delivery industry, and even new formats have been born. since last year, meituan has cooperated with major catering brands to launch satellite stores, which are located around dine-in restaurants like satellites and are stores that only provide food delivery.
the person in charge of meituan satellite stores revealed to china business news that initially the platform only provided reasonable site selection services to brands based on big data. since the takeaway business of some stores was better than the dine-in business, they gradually transformed into stores specializing in takeaways. this also made restaurants consider the possibility of opening takeaway stores with the help of the platform's capabilities to save costs. subsequently, the platform provided stores with services such as site selection and menu transformation, achieving "proactively helping brands open a calculated store based on the power of big models." stores under this model were eventually named "satellite stores."
the above-mentioned person in charge said that currently only satellite stores are opened in cooperation with chain brands, because satellite stores require a sufficiently mature supply chain, adopt clean vegetables to the store and standardized production processes, and have very high requirements for quality control. in addition, satellite stores pursue cost-effectiveness, but cannot pursue absolute low prices. from the current average customer price, due to the brand effect, the average customer price of satellite stores is higher than the average customer price of the entire platform.
merchants are not without concerns about this new format. according to china business news, brand merchants have three main concerns when considering whether to open satellite stores. merchants will first consider whether satellite stores that only provide takeout will affect the brand image of large stores that mainly provide dine-in services in the past. secondly, merchants will worry about whether their supply chain can support satellite stores. in addition, merchants are also worried about management issues. satellite stores are both online and offline, and merchants need to make a decision on whether to manage them by offline business or online operations.
however, concerns are no match for industry trends. in the past, many brands believed that the takeaway business was a small profit, but as consumer trends change, many businesses believe that even a small profit is worth a lot of money, which has given satellite stores an opportunity to develop.
the person in charge of satellite store business said that after calculation, the initial opening cost of satellite stores is about 200,000 yuan, which is much lower than that of dine-in stores. compared with dine-in stores, satellite stores occupy a small area and have lower monthly turnover. but on the other hand, low cost means a short payback period, and the density of brand store openings can be very high.
currently, catering brands such as xibei, waipojia, green tea, and lao xiangji have opened satellite stores. relevant data show that compared with dine-in takeaway stores, store rental and decoration costs have been reduced by 60%, and exposure has increased by more than 30%. in addition, the order conversion rate has increased by 5 percentage points, and the single-store orders are 1.74 times the number of new store orders in the same period, with an average profit margin of 14.8%. xue bing, general manager of meituan's takeaway business unit, said that "brand satellite stores" have become a new type of store for takeaway growth, and are being opened at a rate of 100 per week. as of the end of august, there were more than 900 satellite stores.
li hong also said that currently xiangcunji's satellite stores are operating well and the model is completely different from dine-in services.
in addition to meituan, short video platforms such as kuaishou are also options for merchants to try to bring goods and traffic. the relevant person in charge of the above-mentioned grilled fish brand said that in the second quarter, the brand's gmv on kuaishou exceeded 50 million, of which the gmv generated by live streaming exceeded 35 million, which is already a leading brand.
at present, catering businesses are still facing challenges. the china chain store association believes that although consumers are less willing to spend money than before, their requirements for quality and dining experience have not decreased. on the one hand, catering companies need to maintain their competitiveness through low prices, and on the other hand, they still need to maintain the original quality, quantity and dining environment. increasing the degree of chainization, increasing the number of stores, and achieving higher economies of scale can achieve stable profits and long-term development, which has gradually become a consensus among catering companies.
zhang yi believes that the catering industry is currently in an iterative period, during which all opportunities will not be left to the companies that were previously in an advantageous position. therefore, when consumer groups and consumption patterns change, how catering companies adjust and adapt to the changes is a huge problem.
(this article comes from china business network)
