Austerity movement spoils flavor for XE

A restaurant belonging to Beijing XE Flavor Group Co in Wuhan, Hubei province. Provided to China Daily

High-end restaurant chain Beijing XE Flavor Group Co has closed more stores following "severe losses" in 2013 amid the government's campaign to curb luxury spending with public funds.

Five restaurants in Hohhot, Nanjing and Wuhan were closed, while the floor area of one outlet in the Xidan area of central Beijing was reduced to cut costs.

The company has closed 10 restaurants so far. It said in a statement on Thursday night that it's posted "severe losses" since 2013.

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Business has slumped at the six stores involved in the latest cuts, with the Beijing outlet having lost 14.69 million yuan ($2.4 million) and a restaurant in Hohhot, Inner Mongolia, losing 447,000 yuan.

In 2012, the year before the crackdown, the Beijing outlet made a net profit of 21.26 million yuan. The figure was 1.71 million yuan at the Hohot outlet.

In 2012, the company's total revenue reached 1.37 billion yuan, with net profit of 120 million yuan, a year-on-year increase of 29.35 percent.

In a January statement, the company mentioned a net loss of 500 million to 580 million yuan, 200 million yuan more than its previous forecast. XE Flavor has had to change its menu to attract ordinary customers, instead of the high-end banquet guests it formerly served.

"It's good that they're closing money-losing stores," said Bian Jiang, a deputy director of the China Cuisine Association.

"Closing is the right decision. Change is inevitable for luxury and high-end caterers."

Bian noted that the growth rate of the catering industry slowed to 9 percent last year from 13 percent in 2012 and 16 percent in 2011. Last year was the first time that growth slipped below double digits in 23 years.

Luxury restaurants in first-tier cities have borne the brunt of the crackdown, said Tang Qingshun, a deputy director of the CCA.

Restaurants recorded their weakest growth for the Spring Festival in six years as the austerity campaign hit sales, the CCA said on Monday. From Jan 31 to Feb 6, retail and catering industry sales totaled 610.7 billion yuan, up 13.3 percent - the slowest growth rate since 2009.

Li Jianchao, who runs a dumpling restaurant in Beijing, said the frequency and number of gatherings of colleagues and even relatives and friends fell during and after the Spring Festival holiday.

"Eating out is a habit," said Li. "If you don't eat out often at work, it is less likely you would go to restaurants with your family or friends after work."

But Bian said that eating out is "a lifestyle" that will continue to thrive amid urbanization, offering opportunities for restaurants that serve the mass market, despite high rents and rising food costs.