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  • Faculty & Research

    Knowledge creation on China, from proven China experts.

    386
  • Faculty & Research

    Knowledge creation on China, from proven China experts.

    386
Tuesday, February 25, 2020

How will COVID-19 affect the catering industry in China?

By Zhao Heng

The catering sector is indeed facing severe challenges because of the COVID-19 epidemic. Jia Guolong, Chairman of Xibei Catering, caused widespread concern when he remarked that his business may go bankrupt in three months if the situation continues. To some extent, the situation described by Mr. Jia reflects the prevailing situation in the industry. To reduce physical interaction with customers and protect our employees, multiple brands under Dahui Group have chosen to suspend business activities.

Looking back at 2003, the catering market experienced a boom after the SARS epidemic. Although revenue declined in the first half of that year, the overall impact on our business throughout the year was less significant. Nevertheless, we are not optimistic about the impact of the current epidemic on the catering sector.

With the transformation and upgrading of China’s economy continuing in 2020, the growth rate of the entire catering sector may slow further. At the same time, pork price increases starting at the end of last year have in turn led to price increases for other products, further squeezing profit margins in our sector. Due to near-term supply shortages, the current epidemic may push prices of raw materials to new heights. Although some firms are trying to shift to a home delivery model, consumers remain wary of such door-to-door services due to the risk of infection. Under these circumstances, catering companies may have to prepare for a prolonged difficult period.

On the other hand, the epidemic is also driving changes across the sector. China’s catering industry has benefited greatly from the country’s reform and opening up over the past four decades, and these changes have led to greater diversification of the industry.

With China accelerating the transformation of its economy, many catering sector participants now realise that they should learn how to perform well in both good times and bad times.

Zhao Heng (CEIBS Hospitality EMBA2020) is the Managing Director of Nanjing Dahui Group.