In China, a combination of weak consumer demand and fierce competition has led to a continued winter for the catering industry. Data shows that nearly 3 million catering outlets closed last year, setting a new record. Analysts predict that the first half of this year may see another wave of even more intense closures.
According to reports from the Chinese catering industry media “Hong Can Net,” the types of restaurants that closed over the past year ranged widely, including regular dining, tea drinks, coffee, bakery, hot pot, desserts, buffet, and barbecue, among others. Many restaurants have been reported bankrupt, absconded, defaulted on wages, or chased by debts. Statistics show that nearly 3 million restaurants closed in China over the past year, including well-known brands.
One prominent case is Opera BOMBANA, an Italian restaurant in Beijing that used to attract celebrities but closed after 11 years of operation last April. L’Atelier 18 in Shanghai, run by a Michelin three-star chef, shut down shortly after its opening last year. The famed Steak House Rump Room in Shenzhen, known as “the most difficult steak restaurant to book,” was also reported closed, with some customers claiming they couldn’t use over 1000 RMB in stored value.
Many brands have significantly reduced the number of stores or exited the Chinese market altogether. The peak period for the chain beverage store “Cuo Nei Xiao Juan Village” once had nearly 500 outlets but by early December last year, there were fewer than 50 stores left. The number of outlets for the hot pot chain “Ge Lao Guan” decreased from over 100 at its peak to just over 60. And the Japanese MOS Burger chain announced its withdrawal from the Chinese market in June last year, closing 6 outlets.
Analysts believe that due to increased uncertainty in the external environment and shrinking assets of the middle class, most consumption tends to be rational and practical, focusing on cost-effectiveness and essential dining experiences. With a noticeable decline in foot traffic and persistently high operating costs, trendy restaurants, upscale eateries, and non-essential dining establishments are gradually losing market competitiveness and facing difficulties.
On an industry level, statistics show that the ratio of the number of restaurants to the population in China is 1:7, ranking first globally. This figure indicates an oversupply of dining options in China, exacerbating industry consolidation and leading to inevitable eliminations.
Experts point out that regardless of whether businesses choose to exit completely or undertake large-scale closures, they face common challenges. Founder of “Minshi Zhi Ben” (the essence of the people’s diet) Oufeng stated that after a period of rapid growth, the Chinese catering industry is currently experiencing a downturn. A recovery in the industry might be possible by the year’s end if the economy improves this year. However, before that happens, a significant restructuring within the industry is inevitable, possibly leading to a more intense wave of closures in the first half of the year.
During the three-year pandemic, China implemented extreme prevention and control measures, leading to bleak business prospects for many establishments, resulting in numerous closures. Reports in 2022 indicated a surge in vacant shops exceeding warning levels in shopping centers in cities like Guangzhou and Shanghai, hinting at an impending wave of closures.
Since the beginning of 2023, the catering industry nationwide has faced even greater challenges than in previous years, with an increasing number of shops shuttering and transitioning to new tenants, reflecting the chilling atmosphere in the dining market.
In November of that year, the mainland’s professional catering website “Hong Can Net” conducted field visits to various commercial districts and interviewed catering professionals in Guangzhou, Beijing, Chengdu, Shenzhen, Shanghai, and other cities. The prevailing description of the dining market during that time was stark: an icy chill.
In Guangzhou, known for its “Tea Drink Street,” numerous tea shops on Tianhe Nan Road were either undergoing transition or seeking new tenants, with at least six shops available for lease and three to four stores temporarily closed off with fences.
A consumer in Guangzhou, known as Momo, mentioned her surprise at the swift closures in areas like Jiangnan West, a popular neighborhood with vibrant commercial complexes. Storefronts were seen vacating within days, with previously frequented eateries suddenly vanishing.
Along the Jiangnan West road for over two kilometers, a dozen or more businesses, including minced meat roll shops, fried chicken joints, Thai restaurants, pork congee stores, and barbecue spots, had closed down. Most closed stores were small independent outlets, with some belonging to chain establishments.
One striking sight was rows of adjacent dining outlets closing down, with cases like four neighboring eateries where only a single small snacks store remained open while the other three had shut their doors.
The market chill was not limited to Guangzhou but also visible in cities like Shenzhen, Beijing, Chengdu, Guizhou, and Changsha. In one instance, a braised meat fast-food store in Fujian closed in November 2023, with the owner expressing their struggle in the tough market conditions. The owner mentioned operating costs far exceeding profits, resulting in heavy losses and the eventual sale of equipment at a fraction of the original investment.