On September 6, the China Cuisine Association released its August performance index report for the restaurant industry. The report indicates that the performance index for China's restaurant industry in August was 46.98, a month-on-month decline of 7.77. This reflects that the performance index for the restaurant sector fell below the neutral level, indicating a contraction in the industry.
Regarding the expectations for the restaurant industry in September, the report suggests that with the end of the summer travel peak, the outlook for the industry over the next month has shifted from optimistic to more conservative.
Amid changing consumer demands, China's restaurant industry is undergoing significant transformation. Many Chinese restaurant brands are shifting their focus away from store aesthetics and excessive service, concentrating instead on cost reduction and reallocating savings towards product quality, ingredients, and overall excellence.
A survey on China's fine dining revealed that consumers opting for restaurants with an average expenditure of over 300 yuan ($42) primarily focus on "quality ingredients" and "the chef's cooking skills." This trend indicates a shift in Chinese consumers' priorities from luxurious dining experiences to a greater emphasis on food quality.
In this context, some leading Chinese restaurant brands are facing challenges from price wars and intense competition within the industry. Outdated pricing and operational models are proving inadequate in the new environment.
In first-tier cities, high rent and labor costs have led to an almost saturated restaurant market, prompting many new brands to emerge in second- and third-tier cities and lower-tier markets. In these areas, a growing number of young mainstream consumers have emerged, many of whom are returning from first-tier cities with new consumption habits and expectations. Additionally, consumption downgrading has led some consumers from first-tier cities to seek out experiences and dining options in lower-tier markets. This shift not only boosts consumer spending in these markets but also attracts many first-tier restaurant brands to explore new opportunities.
At the same time, the trend of Chinese cuisine expanding overseas is becoming increasingly evident, with more restaurant brands turning their attention to international markets. In recent years, many Chinese restaurant owners have investigated the Chinese dining markets in Japan, Singapore, and the United States, discovering that many overseas Chinese restaurant brands still operate under outdated models. Compared to the rapidly developing domestic restaurant industry, Chinese brands venturing abroad have the opportunity to achieve higher profit margins in international markets.
However, the international expansion of Chinese cuisine also faces multiple challenges. Brands need to carefully consider their target audience, determining whether to primarily cater to overseas Chinese or local consumers. Misaligned positioning can lead to insufficient customer flow and hinder brand growth. Moreover, establishing a robust supply chain is another significant challenge for Chinese restaurants going global. Given the diversity of Chinese cuisine, a lack of adequate supply chain support can complicate international ventures. Thus, sourcing alternative ingredients or leveraging import supply chains will be crucial for brands seeking success abroad.