The Chinese mainland and Hong Kong’s catering market is on track to rebound from the coronavirus pandemic — with the potential for long-term growth, an industry analyst says.
Alice Hui, an analyst with the Hong Kong and mainland consumer sector at DBS Bank Hong Kong, said mainland catering sales would start to pick up from the second quarter. They may only record a slight drop in the second half of the year, she told a video conference on Thursday.
Hui said Hong Kong’s market might see a significant improvement in the fourth quarter if the city continues to record falling coronavirus cases.
Hong Kong’s market might see a significant improvement in the fourth quarter if the city continues to record falling coronavirus cases
Alice Hui,
analyst with the Hong Kong and mainland consumer sector at DBS Bank Hong Kong
The catering market fell by over 40 percent from January to April on the mainland while the decline narrowed in April to 30 percent, DBS research showed.
Traditionally, catering businesses on the mainland show considerable seasonal fluctuations; the peak season is in the second half of the year, Hui said. She expects a recovery in the second half, but it will take time for the sector to return to normal.
To get through such a challenging time, catering companies first need to implement control measures, DBS advises. These should include proactive labor scheduling, rent negotiations and cash preservation.
In the past six years, the mainland’s catering market outperformed its GDP growth at an average rate of 10 percent, said DBS.
In the long term, Hui is optimistic about the development of the mainland catering sector as the pandemic has accelerated changes in food-delivery services and consumption patterns of mainland residents.
DBS research shows that people on the mainland spent $500 per person on average each year on food and beverages — far lower than the average spending in developed countries.
Hui believes the mainland's catering market has considerable future growth potential.
Mainland catering companies listed in Hong Kong have seen their shares rebound slightly since April. This may also reflect the impact the pandemic has been having on catering businesses in the region.
Recently, Hong Kong-listed restaurant chain Jiumaojiu International closed 22 of its chain restaurants on the mainland because of the impact of the coronavirus on business.
Hui said decisions to shut down restaurants would depend on the company’s cash flow and whether or not the chain is making a profit. She believes large catering companies will use this opportunity to optimize operations and improve supply chains to control costs.
DBS is also bullish about Yum China, the largest mainland food company listed in New York, as the company is now focusing on the mass market with a strong cash flow.
