A competitive environment in the dining industry has led to establishments offering greater value to budget-conscious customers amidst an economic downturn. While price cuts may help attract diners, businesses need to maintain service standards and food quality to protect their reputation. According to McKinsey’s Daniel Zipser, restaurants that adapt quickly to industry trends and consumer demands will come out on top.
F&B brands in China are slashing prices to attract budget-conscious customers. High-end restaurant chain Hefu Noodle and Taiwanese-style hotpot chain Xiabu Xiabu have both announced price cuts on their menus. Even international fast food brands like Burger King are lowering prices to compete in the market. The trend towards affordability is a response to shifting market dynamics brought about by economic and labour market challenges affecting consumer spending.
Consumers in China are prioritizing affordability when dining out, according to research by Daxue Consulting. The availability of specific dishes and the overall environment of the restaurant are also important factors for diners. However, consumer preferences in the F&B market can vary significantly based on age and individual preferences. Younger consumers may be more willing to spend on quality services with emotional value, while older individuals tend to be more conservative in their spending.
Experts caution that the current trend of discounts and promotions may not be sustainable in the long run for F&B businesses. Lower prices could impact brand loyalty and long-term profitability, especially if they result in compromising service quality. While customers are looking for value options, businesses must strike a balance between price and quality to maintain a positive brand image. Some restaurants, like Jiumaojiu and Haidilao, are focusing on enhancing the value-for-money ratio rather than solely chasing lower prices.
Despite the emphasis on affordability, some restaurants are pursuing a balance between quality and price to attract customers. Haidilao’s budget venture, Xiao Hai Hotpot, offers affordable yet high-quality hotpot options to customers. The company believes that providing value for money is more important than simply lowering prices. Maintaining portion sizes and food quality while offering competitive prices is seen as a more sustainable approach for long-term success in the competitive F&B industry.
