Catering Industry Transformation Driven by Consumption Upgrade

The Report

Catering Industry Transformation Driven by Consumption Upgrade was jointly developed by Deloitte Travel, Hospitality and Services Sector and Deloitte Research, providing insights on the development and challenges of China catering industry. The report pointed out that stable consumption growth has strengthened the long-term development of the catering market and has attracted more and more capital and cross-border competitors. We believe that China's catering industry will enter a new era of diversified development and competition in the next couple of years.

Viewpoints / key findings

Key finding of this report:

• Consumption upgrade leads a rapid recovery in catering. In the trend of consumption upgrade, public catering has become the pivotal force in boosting the industry growth, as consumers are more willing to dine out. Meanwhile, the rising next generation of consumers bring more diversified demands, creating scope for growth in different types of catering categories.
• Chain catering enterprises drive the entire industry to scale up and develop effectively. In recent years, chain enterprises with efficient operation and rapid expansion are taking center stages. Based on the findings of studies on these enterprises, business format/ brand innovation, digital transformation, industry chain extension and capital market operation will be the major development directions. Such measures will facilitate the industry transformation and upgrade in terms of product, service, quality and efficiency. Although the concentration of China’s catering industry remains low with a lack of enterprises at ten-billion level, there is much development space for chain catering groups and the industry is expected to see further expansion and integration.
• The rise and adoption of technology promote the digital transformation of catering industry. Technology adoption, represented by the Internet, provides new channels for catering enterprises to connect with consumers and strong support for enterprise management. And thereby digital transformation proves to be one key development direction for catering enterprises. The application of emerging technologies, including big data and Internet of Things, also helps drive up the operation and management of catering enterprises.
• Catering industry is more active in capital market. Catering enterprises have gained increasing attention from capital market and started engaging more actively in the capital operation. The approved IPO application of Guangzhou Restaurant puts an end to the absence of catering enterprises listing in the A-share for years, expecting to open up a new door for A-sharing listing of catering enterprises. Smaller catering enterprises have listed in NEEQ to obtain attention and support from capital. PE/VC investment for catering enterprises has also increased constantly with a sizable percentage invested in enterprises in angel rounds, reflecting investors’ optimism for catering industry.
• Policy guidelines shall not be overlooked: tax compliance and food safety have become the regulation focus in catering industry. As the impact of policy guidelines on the industry is a major systematic risk for its development, catering enterprises need to develop prior planning with full attention to compliance issues to be not affected. Recent policies indicate that food safety has become the regulation focus while supporting the healthy industry growth; and relevant laws and regulations have been improved, tightening restrictions on enterprises. Tax and other issues caused by VAT reform also require sustained attention. For successful listing, enterprises shall advert to compliance in various aspects in early stages and avoid being impacted by non-compliance on listing progress.