China's catering industry set to rebound in H2 after Q2 sales slide for restaurant giants: expert
Published: Aug 05, 2022 12:54 AM
Starbucks Photo: VCG
Starbucks Photo: VCG

In the second half of this year, China’s catering industry is expected to rebound from the difficulties of April and May due to the COVID-19 epidemic, experts said, with a number of catering giants including Yum China and Starbucks having seen their sales slide in the second quarter in China.

Yum! Brands, parent company of KFC and Pizza Hut, released its financial results for the second quarter on Wednesday, revealing that operating profit slumped 65 percent year-on-year to $81 million. 

KFC's same-store sales fell 1 percent in the second quarter of this year, compared with a 30 percent increase a year earlier. The company’s sales in the Chinese market fell 15 percent.
Pizza Hut's same-store sales declined 3 percent, compared with a 10-percent increase in the same period the previous year. Sales declined 14 percent year-on-year in China.

In addition to Yum China Holdings, other foreign giants like Starbucks and McDonald's also saw weaker-than-expected financial performance.

Starbucks announced on Tuesday that in the second quarter, its revenue in China declined 40 percent year-on-year to $540 million and same-store sales revenue fell 44 percent. 

“The financial reports of the catering giants indicate a bottoming-out in the second quarter. They will see an upturn in the second half of this year, as the pandemic across the country has been brought under effective control,” Dong Dengxin, director of the Finance and Securities Institute of Wuhan University of Science and Technology, told the Global Times on Thursday.

Despite the sales slide, these foreign firms still see the potential in China’s large consumption market. Media outlet reported that KFC has opened 342 new stores in China this year, while McDonald's aims to reach 4,500 restaurants. 

Dong added that these food giants should also innovate their business model, as domestic restaurants are emerging with products that better meet Chinese tastes and that have strong competitiveness in the country’s market.

Data from the National Bureau of Statistics showed that in the first half of 2022, China’s total retail sales of consumer goods amounted to 21.0 trillion yuan ($3.1 trillion), down 0.7 percent year-on-year. Restaurant revenue stood at 2.0 trillion yuan, down 7.7 percent.

Central and local governments have ramped up support for affected industries with measures such as distributing consumption coupons. Dong believes that in the second half of the year, the country’s total retail sales of consumer goods will see a rapid recovery with growth reaching about 4.5 percent.