Healthy food concepts; more casual dining; a shift from glamour to comfort; from bling to value. Alan Hepburn FIH makes some predications for Shanghai’s F&B scene this year.
China is every bit as diverse as Europe and my adopted home town, Shanghai, is a city with the same GDP as Thailand and a larger population than Australia. Its citizens attitudes and behaviours have been shaped following more than 150 years as a busy, deep-water port.
People here are curious, creative, open-minded and international in their outlook and although many foreign companies and brands use Shanghai as an entry point into China, most fail to realise, that each city in China will require another market entry as language, customs, food, attitudes and purchasing patterns are very different.
For example, Most under-thirties urban professionals in Guangzhou (population 13m) live with their parents whereas most in Shenzhen (population 10m) just 30 mins away by train, don’t.
The Chinese economy slowed in 2018 and consumers are more cautious and thoughtful than before. There are real fears about potential trade wars with the US. But hospitality, tourism and F&B continue to grow. Shanghai is awash with great chefs, cool restaurants and world-class cocktail bars. Many successful restaurant operators are now halting further Shanghai expansion and either looking elsewhere in China, or to growth cities in Asia such as Saigon and Manila.
The value of food imported into China rose 11% last year to US$60 billion and liquor imports topped US$ 5 billion. The world’s biggest international brewing companies and multiple craft beer makers, both local and international, are flooding into China, the world’s largest beer market, vying for a slice of the growing opportunity. They are learning that beer, particularly craft beer, is almost exclusively drunk with food and therefore the UK-style pub concept has limited appeal in a market which is ever-increasing and happy to pay for service.
Successful non-local F&B operators here are Taiwanese, Korean and Japanese, with a few ‘locally-grown’ western players making headway, but only after spending considerable time operating in this market. A famous international name does not necessarily translate into sales or profits in China (ask Jamie Oliver, Marco Pierre White, Marks and Spencer’s, Tesco’s etc ). It’s all about laser-focused customer acquisition, quality execution and local knowledge.
Even the biggest global operators work as local companies here. McDonald’s only retains 20% of its China business. Yum broke away from the parent company and created a completely separate Chinese company and Starbucks only took full control of its China business in 2017 after they had allowed local companies to open 2,000 stores over a period of 16 years.
So what’s coming? Food concepts with a healthy, organic message will multiply; more casual dining; a shift from glamour to comfortable dining; from bling to value. More and more Chinese are travelling overseas for tourism. Close to 150 million outbound trips were made in 2018. Palates are becoming more worldly and experiential holidays will translate into demand at home. I also expect growth in regional ethnic foods.
The Chinese will continue to want the real deal, but positioned and marketed for them. Everyone is a blogger here, so operators sink or swim on the experiences they deliver every day to each customer. Shanghai is fast-becoming the Artificial Intelligence capital of the world and locals love change, innovation and disruption. Expect a few surprises in hospitality and F&B.
Alan Hepburn FIH is director of The Hepburn Group, a Shanghai and Singapore-based consultancy.
The above article is taken from Spotlight on Hospitality 2019, the Institute of Hospitality’s annual industry report on what’s happening in the UK and around the world. Spotlight on Hospitality 2019 is a complimentary benefit for members.
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