The Catering Industry in China I Daxue Consulting

20Jan2016

The Catering Industry in China: A Flourishing Market

Companies in the Catering industry worldwide supply single-event food. As Chinese consumers increasingly enter the middle class, they are more likely to organize special events and book a catering service for those events such as holiday parties, business meeting, wedding receptions, and graduation dinners etc.

The catering market is a specific industry where food service contractors such as hotel and restaurants are not included in the catering industry. The demand is usually driven by consumer income or corporate profits. The profitability of individual companies depends on cost controls and effective marketing. Indeed, large companies have numerous advantages and could afford to offer extended services such as facilities management, entertainment, and room rental. On the other hand, small companies can also compete successfully by adapting their services to small groups and offering personalized service.

China’s economic growth diminish in 2014 with a structural transformation on the economy. Yet, consumption has played a more significant role in driving economic growth. Chinese consumer market is expected to develop steadily in 2015, but the growth rate is likely to be somewhat lower than that in 2014 as Chinese consumers continue to
become more rational. As the second largest consumer market in the world, businesses at home and abroad are increasingly focusing on China.

The Rise of the Catering Industry

The catering market in China is under huge transformation and upgrading; Indeed, mass dining is total a new trend In view of with the slowing growth of China, A lot of catering enterprises companies have started providing new structures and services such as “experience dining” or wedding banquets, while some other companies have upgraded central kitchen facilities to lower operating costs. The rise of O2O in ChinaChina, has also prompted more restaurants to engage customers with mobile apps. Mass dining has also become a tendency with loads of new high-ends restaurants, the Chinese government has also provided its support for the development of mass catering. Indeed, a recent study shows that the government has pushed the increase of 16% annual rate during a five years period between 2011-2015 the sector has indeed, reached 3.7 trillion Yuan by the end of 2015.

With the growing demand for business entertaining, many people are going to restaurants, pubs, tea houses and other eateries for everyday meals and gatherings with friends. This has urged development of catering services. As the spending power of households of middle-income and above increases, the frequency of eating out also rises. People now consider eating out as an important leisure activity on weekends or holidays. And with the rapid urbanization, good catering services, and restaurants of unique character have become one of the major selling points of businesses.

Chinese Consumer’s behavior

The Chinese traditional catering information channels include recommendations by close relatives and friends, newspapers/magazines, TV commercials/gourmet food programs. Furthermore, middle-class consumers tend to access such information primarily via online websites, including mobile web and Smartphone apps.

Generally speaking, the middle-class consumers have a good impression of Hong Kong-style catering services. In particular, the ratings on the environment, service standard, food quality, and management are quite high and adapted to Chinese Consumers.

Catering enterprise in China has their own brand, unique dishes, and exclusive cooking skills, which are all trademarks and resources according to international investment theory.

For example, last year, LVMH spent USD 1 billion to buy more than 90 % of the stock of Crystal Jade Group, a Chinese restaurant with good reputation overseas, through private equity. The Crystal Jade Group, established in 1991 and headquartered in Singapore, mainly boasts Cantonese cuisine, including various dim sum, handmade pastries, and bakery products, with more than 100 locations in Asia.

At present China’s catering industry has registered a rapid growth. According to statistics, the industry is growing at a rate 10 percentage points higher than other industries and China will undergo a great development in the industry; and potential in this sector is large and will grow rapidly.