Dining giants look to transform amid frugality campaign

Beijing Xiangeqing Co. Ltd., a renowned Chinese restaurant company, will restructure its business by refocusing its customer base after being hit hard by the government's frugality campaign.

"High-priced dishes will disappear from Xiangeqing after predicted big losses in the first quarter following the government's drive against banquets at the public's expense," said Meng Kai, chairman with the Shenzhen-listed catering giant.

The company's first quarter performance forecast is for losses of 55 to 70 million yuan (8.79 to 11.18 million U.S. dollars).

This is in sharp contrast to the 46.23-million-yuan profit in the corresponding period last year.

The firm has decided to transform and meet the needs of the majority of the public by providing them with affordable food in an atmosphere which is suitable for family and friends, Meng said.

Xiangeqing was the country's first private catering company that listed in A-shares. It was listed on Shenzhen Stock Exchange in November 2009.

Xiangeqing is representative of the sluggish high-end restaurant sector around China.

In the first two months of 2013, China's catering sector reported 403 billion yuan in revenues, up 8.4 percent year on year, National Bureau of Statistics data showed.

But sales at medium- and large-sized restaurants logged a decline in the first two months, down 3.3 percent year on year, partly as a result of the central government's anti-extravagance drive.

To meet the government's call and the changing market, Xiangeqing is altering its menu, by not providing expensive seafood, but creating and promoting fair-priced dishes, said Meng.

The company has said it will stop serving dishes priced at 200 yuan (31.9 U.S. dollars) and promote meals that cost 50 to 60 yuan (7.99 to 9.58 U.S dollars).

As much as 60 percent of restaurants, mostly upscale ones, said they have seen reservations canceled after the Communist Party of China (CPC) Central Committee promulgated a package of rules calling for frugality from officials, according to a survey conducted by the China Cuisine Association (CCA).

The first half of 2013 will mark a key period of adjustment for restaurant businesses, the association said.

Xiangeqing has started to change its positioning by development in its restaurants, fast food, group meals and processed foods.

"Group meals will be the company's No.1 business," said Meng. Xiangeqing is striving to create a renowned brand in providing trustworthy group meals for schools, hospitals and companies.

The upscale restaurant brand will also look to "liberate the mass from their kitchens" by providing processed and fast Chinese food for communities and convenience stores.

Faced with the same dilemma as Xiangyueqing, upscale restaurants in cities such as Beijing, Shanghai saw revenues fall by 35 and 20 percent, respectively, year on year in January, the Ministry of Commerce said last month.

China Quanjude (Group) Co., Ltd., famous for its roast duck, is likely to see a slight decline in its operating revenue in the first quarter of this year, said Wang Zhiqing, the group's chairman.

Established nearly 150 years ago, Quanjude is one of the country's well-known restaurant chains.

The group plans to expand into the popular catering and retail food markets, looking to reduce the impact of changes in the sector, said Wang.

The dilemma for most high-end restaurants is responding to the social climate, said Dai Bin, president of the China Tourism Academy.

The country's upscale restaurants were born from the unconventional demand in consumption of official banquets, which irrationally pushed prices out of the common people's reach, said Dai.

"The new transformation trend of high-end restaurants is a return to rational consumption. Of course, this is not an easy task," according to Dai.

They can only successfully transform by squeezing extravagant profits and paying more attention to the demands of mass customers, Dai added.