Sizzling growth in catering segment powers recovery of consumption

With the January-September sales revenue of China's catering segment growing by nearly 19 percent year-on-year to 3.7 trillion yuan ($517.2 billion), the recovery momentum of the overall consumption sector is expected to carry forward into the fourth quarter, industry experts said.

Signs of that, in the form of long lines of diners waiting to be seated, were visible on a recent Saturday evening outside restaurants lining Wangfujing Street in downtown Beijing. The restaurants specialize in a variety of local favorites like hotpot, Peking roast duck and Sichuan cuisine. They were all rife with noisy chitchat of eager diners.

Boosted by the incentives from consumption promotion policies, China's catering market has thrived in the first three quarters. There is still significant room for growth in the fourth quarter, experts said.

According to the National Bureau of Statistics, in the first nine months, total consumer retail sales, including that of the catering segment, increased 6.8 percent year-on-year to 34.2 trillion yuan.

"Starting this year, the country's catering segment has been witnessing a robust recovery. Its sales revenues had accounted for more than 10 percent of total retail sales for many consecutive years, overtaking the automobile category to become the largest," said Zhu Guangyao, deputy head of the Department of Trade in Services and Commercial Services at the Ministry of Commerce.

According to the latest report on the top 100 catering enterprises in China, published by the China Cuisine Association, in 2022, although the catering segment was affected by the COVID-19 pandemic, the top 100 still demonstrated their significant brand development advantage and resilience in the face of potential financial losses.

Their total sales revenues dropped only 2.4 percent year-on-year to 347.6 billion yuan, lower than that of the whole industry, said the report.

Their raw material and labor costs increased by 28 percent and 17 percent, respectively, in 2022, pushing them to accelerate research and development efforts for innovative solutions. Their R&D expenses increased by 7.5 percent year-on-year, said the report.

Yang Liu, president of the China Cuisine Association, said, "They continued to increase R&D investment, innovate in the pre-made food track, create new consumption scenarios, explore the market at full time and multiple scenarios, promote platform construction, accelerate the integration of online and offline sales, and develop emerging business formats to offer new impetus.

"According to our observation, the concentration of the industry continued to rise, and emerging business formats, such as group meals and casual dining, had performed well."

Peking roast duck chain Quanjude's third-quarter sales revenue grew 93 percent year-on-year to some 1.1 billion yuan, yielding a net profit of 71.75 million yuan, up 141 percent.

Naixue, a beverage chain listed in Hong Kong, said the number of its outlets increased significantly in the first three quarters on the back of the marketwide recovery, turbo-charging its expansion. In the third quarter alone, Naixue started 166 new direct stores.

By November, Naixue had over 1,400 direct stores in over 100 major cities in China. It is now intensifying its expansion into low-tier cities, the company said.

"More efforts are needed to promote the high-quality development of the catering segment, which is critical to satisfying the needs of consumers for a better life, expanding domestic demand and building a new development paradigm," said Zhu from the MOC.

"This is not only about the growth of scale, but innovation and quality. Joint efforts have been made possible by market demand, technology innovation, policy support and industry collaboration. But the high-quality development of the catering segment is going to be a big challenge as it covers procurement, production, retail and consumption, which require more accurate solutions," said Zhang Haitao, president of the food nutrition business at Unilever Food Solutions North Asia.

"By establishing a sustainable procurement system, digital production system and lean supply chain management system, we strictly control our own products and services. Meanwhile, by conveying scientific nutrition concepts and healthy consumption concepts to catering partners and end consumers, we guide the public to actively choose more sustainable lifestyles."