China’s embattled restaurants, embroiled in price war, struggle to stay afloat
Restaurant owners and operators in China’s biggest cities are facing challenges to remain profitable, with some lowering prices to tempt consumers
Facing a sustained decline in profits, 32-year-old Liao Hui was forced to close four of her five Sichuan-style restaurants in Shenzhen earlier this year.
“I am also cutting food prices of the remaining outlet I have, as the entire catering industry is currently embroiled in a forced price war,” said Liao, who had run her restaurants for more than three years.
In Beijing, profits of the catering companies with annual revenues exceeding 2 million yuan (US$280,750) fell to 180 million yuan (US$25 million) in the first half of the year, marking an 88.8 per cent year on year decrease.
Profit margins, a gauge for the company’s profitability, have also dropped to as low as 0.37 per cent, according the Beijing Municipal Bureau of Statistics.
The price war reflects the broader trend of consumer downgrading
The situation for Shanghai’s catering operators is even worse, as companies with annual revenues exceeding 2 million yuan saw a loss of 770 million yuan in the first six months of the year, compared to profits of 1.7 billion yuan during the same period last year.
