China’s Catering Industry Bouncing Back After COVID-19 Lockdowns

August 29, 2022

Eating hotpot in a Chinese restaurant

 

As Beijing and Shanghai have recently resumed outdoor activities after months of lockdowns and tight restrictions, China’s catering industry, including the restaurant sector and bar sector, is roaring back to life.

Dine-in Curbs Ease

Unlike neighboring countries, China committed to a Zero-Covid strategy with strict movement restrictions to curb the outbreaks. Its capital city Beijing imposed travel controls and shut down various public facilities, including dining-in restaurants, gyms, and cinemas. Chinese citizens in Shanghai faced an even more severe situation with lockdowns that lasted for a few months.

At the beginning of June 2022, the restrictions have been loosened in both cities, paving the way for the increase of domestic food consumption as well as for food services operators to revive their sales. Indoor dining is now allowed, however with a cap of 75% of restaurants’ capacity as set by authorities. Customers are expected to be back in flocks, especially in hotpot restaurants which are not a convenient takeaway option.

The Catering Industry

Following the easing of dine-in curbs is a long line of customers eager to experience diversified restaurant experiences. In fact, the trend started even before the restrictions, greatly fueled by the growth of China’s middle class.

According to China’s National Bureau of Statistics, China’s food and beverage industry bounced back in 2021 from the initial hit of the pandemic in 2020, with a revenue of 704.83 billion USD, an increase of 18.6 % compared to a year earlier. The sector accounted for 10.6% of the total retail sales of consumer goods in the same year. It is a significant improvement from the year 2020, in which the revenue of China’s food and beverage industry was down 15.4% compared to 2019 due to the impact of the global pandemic. A report from Research & Markets estimated a 7.9% CAGR for the Chinese food services market during the 2021-2027 period.

Due to recent lockdowns and restrictions in Beijing, the total consumption of the catering sector in one of the biggest metropolises in China decreased by 1.2% (YoY) in the first quarter of 2022. However, experts are still optimistic about the growth of this sector.

One of the growth drivers is stable consumer demand. In a recent survey conducted prior to the major lockdowns, 84% of Chinese catering customers responded that they would maintain or increase their consumption frequency in 2022. The overall market demand is relatively strong.

Demographics and income levels are closely related to food and beverage demand. In general, citizens from megacities spend more on dine-in services. For example, the consumption capability of Shanghai has seen rapid growth year-on-year, with its expenditures per capita up 14.91% from 2020. The growing middle class in China is seeking a healthy and high-quality eating culture as well as more diverse dining experiences.

Chart showing Chinese consumers' consumption frequency

Another growth factor is the increase in quantity and size of Chinese food and beverage operators. The number of restaurants in China reached 9.3 million in 2021, of which 41,641 are chain restaurants. In 2022, the number of outlets in the catering market is expected to continue to increase with a 10% average growth in every sub-sector, compared to 2017 data. Among all the sub-sectors, full-services restaurants will continue to be the biggest contributor, accounting for around 70% of the total outlets this year.

Graph showing number of catering outlets in the Chinese market

Large food and beverage services groups have kept expanding their market presence. Notably, Haidilao, a chain of hot pot restaurants known for its service and innovative marketing methods, emerged as one of the most lucrative hot pot enterprises in China, with a 43.7% revenue growth in 2021. Additionally, there is a growing interest in fast food from residents, especially the young generations, leading to the increasing market share of key players.

The international reputation of Chinese restaurants is also growing, as four restaurants in China made it onto Asia’s 50 Best Restaurant 2022 list, a renowned global ranking that began nearly a decade ago. This marked the biggest number of Chinese entries ever, and experts believed that even more Chinese restaurants can be expected to make it on the list as China starts to open its borders to international travelers.

Moving Forward

After a temporary halt due to lockdowns and the pandemic, the resumption of outdoor activities and dine-in services in Beijing and Shanghai buoyed hope for catering businesses in the world’s biggest consumer market. The comeback in full swing of catering services is expected to happen very soon in China’s megacities. Subsequently, the development of other supporting industries, including food processing and transportation, will be greatly stimulated as well.

With the growth of the Chinese economy, the pursuit of a more healthy and cultured eating experience for Chinese citizens, and the governmental focus on the food and beverage industry as one critical economic engine, China’s catering industry is one of the ideal investment targets for both local and foreign investors. To reap the advantages of the sector, businesses are recommended to watch out for the latest local movement regulations and prepare contingency plans to adapt their operations to the everchanging COVID-19 restrictions in the country.


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