China's Restaurant and food service
Many restaurants remain closed or are not operating fully across many of China's major cities. For example, as of mid-March, some estimates suggest that in-restaurant dining is still running at only 10% in Beijing, but recovery is higher in Shanghai and Guangzhou. Customers are concerned about dining out and some local authorities have been restricting in-restaurant dining but are allowing takeaway and food delivery services. There are provisional guidelines for the food service industry during the Epidemic Control Period, not permitting venues to hold banquets or large-scale group dining.
Restaurants are also not back to normal operations for commercial reasons, particularly from a lack of foot traffic due to people working from home or lack of staff. This situation has been easing and will continue to do so over coming weeks and months. However, some in-market contacts are predicting that it may not be until the third quarter of 2020 before the food service industry fully recovers.
According to the China Culinary Association, total national food and beverage sales in January and February were RMB 290 billion (NZD 70 billion), which was down 60% year on year. Takeout income was approximately 60% of turnover during this period, compared to a normal level of 10-15%.
During February, examples emerged of some restaurants quickly evolving their business model to work with e-commerce platforms to sell semi-prepared meals to consumers, or even supermarket-style retail, to increase the utilisation of their kitchen and dining space.
Using Guangzhou as an example, since 21 February there has been a gradual resumption to normal restaurant operation across 11 districts in this southern Chinese city. However, there are still eight districts that have retained some restrictions such as not allowing diners to remove masks until they start eating and asking for masks to be worn again upon completion of the meal. In addition, in some cases no more that 50% of tables in the restaurant can be used for dining and the distance between tables needs to be at least one metre.
Reporting in early March does now show signs that hotels are returning to operation, but most likely still with limited services and suffering from low guest booking levels. Some reporting suggests that the number of hotels open in Guangzhou and Shenzhen has returned to January levels and that Shanghai and Chengdu may be as high as 95%. For hotels now open, gyms and banquet facilities may not be operating, and in-house restaurants will likely be offering scaled back services (such as not serving buffet food) or may even be closed in some cases.
Starbucks reports that more than 90% of its stores are now open in China but operating within strict safety protocols, such as limited in-restaurant seating, and on reduced operating hour because of low foot traffic. The company hopes to have the remainder of stores back in operation before the end of the quarter and is forecasting a 50% drop in same-store sales for its second quarter.
Advice to exporters
Companies should continue to maintain regular contact with their importers, distributors and other channel partners to keep up to date on their state of operation, understand any specific challenges they are facing, and offer support during this difficult period. These companies will have first-hand insights into how the local market is currently shifting, including what channels are working and how to manage logistical constraints.
Have open and empathetic dialogue with partners. Whilst there may be immediate pressures it is important to not only discuss the short-term but also the mid-term picture for the market.
Consider working with your importers and distributors to tailor products to the change in consumer behaviour driven by the outbreak – this includes the increasing use of online ordering and food delivery, and some restaurants diversifying into semi-prepared meals.