China's catering industry looks to beat the slump

With the government cracking down on wasteful expenditure on lavish restaurant banquets and the like, restaurants have had to re-orient their businesses, which is not proving easy.

Top-end restaurants in China have seen a fall in their revenues over the past year. With the government cracking down on wasteful expenditure on lavish restaurant banquets and the like, restaurants have had to re-orient their businesses, which is not proving easy. However, the catering industry as a whole is eager for more growth and eagerly looking forward to guidance the Ministry of Commerce is preparing for.

Hungry for customers.

One of Beijing's most renowned restaurants offering promotional items on the menu.

Something this restaurant never had to do. Its reputation proving enough to draw in the crowds.

But times are tough. And customer discounts and changes to popular dishes are one way of boosting flagging revenues.

"In cities like Beijing and Tai Yuan where there are lots of luxury restaurants, the competition is fierce. Our first-quarter financial losses may reach 55 to 70 million yuan, when compared to the same period last year," said Meng Kai, Chairman Of Beijing Xiang E Qing Group Co., Ltd.

The perpetual costs in the food business are also proving a heavy burden.

"Costs pose a great challenge to the catering industry. Raw materials, rental fee, fuel prices and labor costs are all increasing. As a result our profit margins are falling," Beijing Technology & Business Univ. Prof. Feng Jun said.

Official data show that in the first four months of this year, sales revenue for the industry reached over 770 (771.2) billion yuan - that's 126 billion US dollars, a 37.6 percent drop from the same period last year.

Moreover, the growth rate for the top 100 restaurants in China stood at 16.8 percent in 2012, down 11.52 percentage points.

"Traditionally in China, the first two months of the year are supposed to be the golden period for the catering industry. But the last four months have seen the slowest growth since 1991," Secretary-general of China Cuisine Association Bian Jiang said.

Industry experts say that compared to other markets worldwide, the catering industry in China has a problem with its structure. High-end restaurants take in too much of a market share leading to irrational competition among the large and medium-sized catering businesses.

But they argue here is where the opportunity is to correct course. Restaurants can use the tough times to get back to the basics. Focus on quality, re-work cost-revenue ratio and the customers may still make a beeline for good food.

"Since late last year, the slump in China's catering industry has become more evident and some large and medium-sized restaurants even posted negative sales growth. However analysts say China's catering industry has entered a new era of steady development after 20 years of dramatic expansion. It's a good time for restaurant operators to try out new menus, improve efficiency and service levels, " CCTV reporter Xie Sisi said.