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23 Apr, 2014

China’s frugality policy slows catering industry to 20-year low


Beijing, 2014-04-21, (China Daily) – China’s catering industry registered its slowest growth in 20 years in 2013 as the country’s anti-corruption campaign targeting official excess took its toll on high-end businesses, an industry report shows.

According to the report, released on Saturday by the China Cuisine Association, the total revenue of the country’s catering sector grew by 9 percent to a total of 2.56 trillion yuan ($410.75 billion) last year, its weakest growth in more than 20 years.

The association’s figures also show that the top 100 businesses in the catering industry grew by only 5.7 percent last year, down 10.8 percentage points from 2012.

Among those, 42 enterprises saw their net profit decrease and six suffered major losses in 2013.

“Mid-range and high-end enterprises generally reported severe losses,” the report said.

“This is a sign that the central government’s anti-graft campaign against waste and extravagance has been well-implemented,” said Feng Enyuan, deputy chairman of the CCA.

Feng said the association’s figures show that the high-end cuisine industry has experienced sluggish growth since the end of 2012, when the central government first launched the anti-extravagance campaign.

The total revenue of enterprises above designated size (2 million yuan in annual business volume) in the catering industry decreased by 1.8 percent, to 818.2 billion yuan, in 2013, down 14.7 percentage points year-on-year. It is the first time that figure dropped since the statistics have been tracked.

Among the hardest-hit enterprises are the China Quanjude Group and Beijing Xiangeqing Co Ltd.

The Beijing Quanjude Group, famous for its roast duck and accompaniments, reported a 2.13 percent decline in business income and a 27.6 percent drop in net profit in 2013, according to the company’s annual report. The company’s catering arm saw its revenue drop by 5.64 percent, the report said.

To cope with the situation, the company said it shifted its focus toward banquets for families, friends and business banquets and it further adjusted its menu to cater to the mass market.

Beijing Xiangeqing Co Ltd reported a loss of 564 million yuan in 2013, mainly due to a change in the business environment and a sudden slump in customers’ consumption amount, the Beijing Times reported.

The company closed eight restaurants in Beijing in July and shuttered five more restaurants in other Chinese cities due to severe losses.

The CCA’s report said other factors, including rising costs of labor, rent and water, electricity and fuel also contributed to the slump in growth.

The sluggish business performances have also resulted in weak employment demand in restaurants, with only 25 of the top 100 enterprises in the industry increasing worker numbers in 2013. Twelve enterprises cut back on staff to cope with the change in business environment.

Feng said the key for a transformation of high-end businesses to cope with the change is to cater to the general public.