China's Food & Beverage Industry Rebounding Amid Anti-Corruption Drive

Revenue at Beijing’s high-end restaurants continue to struggle because of a slowing economy and spending curbs, but it’s not all bad news elsewhere in the industry. The Chinese capital city’s casual eateries and fast-food restaurants have seen their revenue spike as government officials are forced to be frugal.

The food and beverage industry in China’s center of government booked losses in revenue after Xi Jinping launched his trademark anti-corruption drive in the first few months of his presidency, when his austerity policy targeted excessive spending by political figures. Hotels and restaurants were among the victims of this policy as banquets and meetings were canceled in the name of austerity.

Now, a new China Hotel Association report cited by the South China Morning Post indicated the food and beverage industry as a whole rebounded in 2014 after three straight years of slowing growth, with revenue rising 9.7 percent last year. Year over year, the number of people served at high-end restaurants rose by about 10 percent, but the average amount they spent in such establishments fell by about 20 percent, the report showed. It suggested that this mixed bag is likely the result of a changing clientele. In the past, Chinese government officials represented the majority of high-end restaurant diners, but, at present, members of the increasingly wealthy and upwardly mobile middle class are filling the seats vacated by those officials in the wake of Xi’s anti-corruption initiative.

The growth of China’s middle class has been beneficial not only for luxury-retail sales but also for culinary tourism. Like the acquisition of designer goods, fine dining has become a status symbol in the country as the nation’s taste buds become more refined. High-end restaurants abroad have observed influxes of Chinese customers, but a similar phenomenon can also be seen at home.

At the same time, the China Hotel Association report suggested the food and beverage industry is in a “period of profound transformation” as it attempts to broaden its customer base in an effort to increase revenue, adding that the focus is shifting from “big and high-end to small and delicate.”

Although the high-end dining segment appears likely to recover, China’s traditional hot-pot eateries and nontraditional fast-food outlets already did well last year, as the report showed their revenue rose in 2014 by more than 16 percent and 11 percent, in that order. Meanwhile, hot-pot restaurants constituted the most profitable segment because of their low overhead costs.