Opportunity of Cantonese restaurant market

Cantonese restaurants serve tea, dim sum and simple Cantonese dishes during the day. In the evening, the Cantonese restaurants serve Cantonese dishes and/or banquets for events such as weddings.  

1. Cantonese restaurant market

According to the Hong Kong Census and Statistics Department, in 2015, there were a total of 1,810 Cantonese restaurants in Hong Kong, while 1,335 (about 73.8%) of them were non-chained restaurants and only 475 (about 26.2%) of them were operated by chained restaurant players. Around one fourth of Cantonese restaurants in Hong Kong were chained. The major reason is that once the operator has opened more than one restaurant, they start to enjoy economies of scale as some of the costs such as average cost of raw materials can be shared among several restaurants when they are procuring larger quantity. Besides the cost of raw materials, arrangement of staff resources will be more flexible for chained restaurant and hence it helps the operators to lower the labour cost which is considered as a significant component in the catering industry.

While in Shenzhen, most of the key players in the Cantonese restaurant industry are local restaurant groups, which operating around 5-12 restaurants at the same time.

2. Recent development 

Hong Kong

According to Ipsos Business Consulting’s analysis, the revenue generated from the Cantonese restaurants industry showed an overall increasing trend between 2010 and 2015, growing from around HK$15,746.8 million to around HK$17,047.5 million, at a CAGR of about 1.6%. After the announcement of the anti-graft campaign by the Chinese government, there had been lessened en

thusiasm on luxurious spending in high-end Cantonese restaurants. Some of the Chinese visitors had shifted their interest from fine-dining to casual dining or even Hong Kong style cafe as well as other popular local choices. 

The above factors lowered the revenue of the Cantonese restaurants and its percentage contribution to the total revenue generated from the catering industry. It is expected that the revenue of the Cantonese restaurants industry would increase from around HK$17,340.1 million in 2016 to around HK$17,605.4 million in 2019 due to the drop in rental prices since 2015 which would probably bring more opportunities for the expansion of Cantonese restaurants. 

The graph below sets out the revenue generated from the Cantonese restaurants industry in Hong Kong from 2010 to 2019:

Sources: Census and Statistics Department, HKSAR; Ipsos Business Consulting research and analysis 

Note: Cantonese restaurant includes all the restaurants under HSIC V2.0 code 561109

Shenzhen

According to the Shenzhen Catering Service Association, between 2010 and 2015, the revenue of the Cantonese restaurant industry in Shenzhen showed an increase from around RMB9,836.5 million to around RMB15,716.3 million, at a CAGR of about 9.8%. Between 2015 and 2019, it is expected that revenue of the Cantonese restaurant industry in Shenzhen would re-enter the phase of steady growth after the slowdown in 2013 and 2014, mainly fueled by increasing disposable income which will eventually lead to a larger market size.

3. Market Drivers 

Hong Kong

With the expected increase in the population of Hong Kong, the Cantonese restaurant industry is expected to grow continuously, especially with its popularity among the local citizens. On the other hand, with the steady growth of the Hong Kong economy, the average annual household disposable income also increased.

Before 2014, Hong Kong tourism industry has been growing fast in terms of inbound tourists. Despite the downward period of Hong Kong tourism market in 2015, the number of tourists visiting Hong Kong was still high with about 59.3 million arrivals, up by about 64.7% compared to that in 2010. Hong Kong tourism market is expected to enter its gradual recovery stage. The total catering expenditure of tourists is expected to follow the trend to recover gradually. As Cantonese cuisine has been recognized by tourists to be one of the most representable Chinese cuisines in Hong Kong, it is expected that the increasing number of both the local population and foreign tourists with increasing catering expenditure would drive the mild growth of the Cantonese restaurant industry in Hong Kong for the coming years.

The Hong Kong government has hosted multiple events to facilitate the growth of the Cantonese restaurant industry, such as the Hong Kong Wine and Dine Festival and Food Expo held by the Hong Kong Trade Development Council. In the past years, the Food Expo mainly focused on light refreshments sales. However, in recent years, with the increasing popularity of the event, especially within the younger demographics, more restaurants from the Cantonese restaurant industry began to participate in order to raise brand awareness of the general public.

Shenzhen

The number of tourists visiting Shenzhen increased from around 32.9 million in 2010 to around 49.9 million in 2014, and it is expected to remain on its uprising trend for the coming 5 years. Together with the stable number of mainland visitors visiting Hong Kong where over 60% of them will stop by Shenzhen, the expectation for the revenue of the catering industry in Shenzhen can be considered to be optimistic, at the same time facilitating the growth of Cantonese restaurant industry.

With an average age in the city being maintained at around 30, it is expected that there will be a sustainable demand for wedding banquets, benefiting Cantonese restaurants which have always been considered as the most popular venue for wedding banquets. Shenzhen has been viewed as a city of youth as there is a significant amount of non-registered residents (about 69.2%), together with the post 80s and 90s groups which are one of the major contributors to the catering industry in Shenzhen. It is expected that the revenue of the catering industry in Shenzhen, especially those casual dining restaurants or those serving Cantonese cuisine, will grow in the coming few years.

4. Opportunities

Hong Kong

Many large Cantonese restaurant groups have been extending their business to specifically attract the younger demographics. By having different lines of restaurants targeting different demographics with a large price range, the Cantonese restaurant groups can increase the public brand recognition and expand their customer base, which is beneficial to the Cantonese restaurant industry.

The rental price index has been increasingly high in the past years which has put certain pressure on the industry. Therefore, many of the Cantonese restaurants have moved upstairs for cheaper rent to lessen their financial burden. However, it is expected that the rental price index of Hong Kong would go down again. Therefore, it provides opportunities for Cantonese restaurants to move back to retail spaces with a better location where they can attract more customers. It can also help increase the profit margin and further growth of the Cantonese restaurant industry in Hong Kong.

Shenzhen

According to the “China Private Wealth Report 2015”, by the end of 2014, there were over one million high net worth individuals with investment assets of over ten million in China, where Guangdong alone has contributed about 10% of them and Shenzhen has the largest number of high net worth individuals in the province. On the other hand, during the change of consumer habit, post 80s and 90s generation have gradually grown to become the major consumer group in the catering industry supporting the growth of casual dining and restaurants serving Cantonese cuisine, such as Hong Kong style cafes, or Cantonese restaurants from Hong Kong serving dim sum. In terms of family consumption, an increasing amount of families in Shenzhen tend to dine out at weekends. Restaurants located in shopping malls, with a medium price range and serving Cantonese/Chinese cuisine are generally more welcomed by the family consumers.

5. Trends and Developments

Hong Kong

(a) Multi-branding

The multi-branding strategies have been adopted by many major players in the Cantonese restaurant industry. For the same type of cuisine such as Cantonese, the players tend to provide both high-end and mid-end restaurants, fitting customers with various budgets. As the customers of these Cantonese restaurants become more demanding, they tend to appreciate restaurants which are specialised. Therefore, those major restaurant operators in the Cantonese restaurant industry opened many restaurants specialising in specific regional dishes of Cantonese cuisine where the trend is expected to continue in the coming years.

(b) Shift from fine dining to casual dining 

Strong efforts have been made to attract younger demographics to the Cantonese restaurant industry. Cantonese casual dining restaurants allow gatherings for 2 to 6 people. By providing light refreshments with lighter portions, these restaurants are usually in a slightly lower price range when compared to traditional

(c) Importance of presentation

More efforts are now required to attract more people. It could be achieved by increasing attractiveness of the restaurant via visual presentation of dishes. The design of dishes is therefore becoming more complex. At the same time, there are more themed restaurants that offer unique and extraordinary style dishes. For example, the Hello Kitty Chinese Restaurant attracts people from all ages who are fans of the popular Japanese anime character. Another example would be Bo Innovation, the Chinese molecular gastronomy restaurant that uses scientific techniques to reconstruct dishes. Dishes with an outstanding presentation further encourage people to take photos of the dishes and upload to social media, which acts as soft marketing for the restaurants.

Shenzhen

(a) Cantonese restaurant can no longer rely on government spending or receptions

After the implementation of anti-graft campaign, there was a drastic change in China’s catering market. In first tier cities such as Shanghai, Beijing and Shenzhen, high net worth individuals with real demand have become the pillar for high-end Cantonese food, supporting the market to a certain extent. Regarding consumption related to government reception, it would be hard to see improvement in a year or two, which is anticipated to affect some Cantonese restaurants in Shenzhen, especially those focusing on high-end dishes such as seafood, abalone or shark fins. Nowadays, many restaurants offer a wide range of dishes and services to customers, in a hope to attract those with a demand for special events, which include all types of weddings, anniversary and birthday meals, and to satisfy customers’ need.

(b) Increasing number of restaurants with a more effective business model

In the future, the number of restaurants practising an effective business model is expected to grow. These kinds of restaurants generally involve lower starting cost, less space and manpower for cooking, as well as lower expenses on salary and renovation. Their business model allows them to build a production chain and capture the economies of scale easily. The expansion of hotpot restaurants in Shenzhen can be considered as an example, where its success is closely related to the high profit margin, standardisation and convenience to replicate.

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