China’s restaurant industry is booming and could soon overtake the U.S. as the world’s biggest market
September 17, 2019 Category China News Round-up, Weekly
China’s food and drinks sector is booming and will become a trillion-dollar industry in the next few years if it continues on its current trajectory. It could soon displace the U.S. as the world’s biggest catering market. The growth engine is the increasing numbers of young professionals heading out for a late dinner or ordering home delivery after a long day at the office, according to analysts. Jacky Wong, hospitality and services sector lead partner at Deloitte China, said people born in the 1990s contributed just over half of catering sales in 2018.
“They usually work overtime, stay up late and thus require instant gratification, leisure, and a trending lifestyle. Restaurants, F&B outlets or online to offline (O2O) F&B delivery services are becoming their first choice,” said Wong. Data from the National Bureau of Statistics (NBS) in July showed that catering revenue for the first half of 2019 rose 9.4%, having climbed by a similar amount to USD628 billion in the whole of last year. Food and beverage accounted for 11.2% of China’s total retail sales of consumer goods. It is expected to grow into a USD927 billion a year industry by 2023, according to Dr Neil Wang, Greater China President for Frost and Sullivan.
The growth of restaurant chains in China is creating new investment opportunities. “It is likely that an increasing number of China-based restaurant chains will seek listings,” said Wang. “Though the market for catering in China has reached CNY4 trillion in 2018, there are not too many listed companies in the market yet.” Since Haidilao’s HKD7.6 billion initial public offering (IPO) last September, the stock has doubled, giving the Beijing-based hotpot chain HKD182 billion in market capitalization. Founder Zhang Yong’s wealth is now estimated by Forbes at USD13.8 billion.
Hong Kong-listed Xiabuxiabu Catering Management is on a growth path that resembles Haidilao’s. Taiwanese Founder Ho Kuang-chi brought the chain to mainland China in 1998 and had an estimated net worth of USD670 million last year. In 2012, private equity firm General Atlantic took a 19% stake in Xiabuxiabu, which has seen its revenue grow 30% in the past year and more than double from 2014 to 2018, while profit margins have stayed around 10% or more, the South China Morning Post reports.
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