Eateries seek digital edge after lockdowns

Insiders predict increased digitalization in the food and beverage industry driven by the COVID-19 crisis and changing consumer demographics, with technology titans getting in on the action.

China's F&B industry generated 3.95 trillion yuan ($610.84 billion) in revenue last year, down 16.6 percent from 2019 levels, according to data released by the National Bureau of Statistics.

"About 90 percent of (F&B) brands posted operating losses last year, and 50 percent had store closures," said Bai Yu, who heads the smart F&B solutions unit of Weimob, a Shanghai-based provider of cloud-based commerce and marketing solutions for businesses, National Business Daily reported.

Even industry heavyweights such as Haidilao barely managed to get back in the black by the end of 2020 despite strong growth in the second half of the year, Bai added.

"Consumer profiles are changing," Bai explained. "Take the hotpot business as an example. Nowadays, 40 percent of hotpot restaurant diners were born in 1995 or later and they have different spending habits (than that of older age groups). Only by attracting this consumer group through digitalization can F&B businesses give themselves a head start."

F&B businesses gradually realized the importance of going digital as home delivery services ate away at dine-in traffic during the COVID-19 outbreak last year, Shen Hongguang, president of the Sichuan Hotpot Association, told National Business Daily. "Digital capabilities will be a core competence of F&B businesses in the future," Shen noted.

Canyin88.com, which specializes in reporting and analyzing news and trends in the F&B industry, foresees a similar trend.

"In the future, digital applications are set to become a new competitive edge that sets an F&B business apart," says a report by Canyin88.com. "Whoever knows more about digitalization will have a better chance of leading the pack."

F&B businesses, says the report, have achieved greater operational agility since the adoption of increasingly sophisticated digital tools, such as QR code-powered self-ordering systems, which are becoming a common sight in F&B stores.

"With the advent of the digital age, Chinese F&B businesses may be able to expect to easily resolve some of the problems they have been wrestling with for a long time, such as high rent, high cost of labor and a low gross profit margin," the report says.

Tech giants including Alibaba and Tencent are seeing opportunities in the F&B industry.

Last year, Alibaba completed the acquisition of Meiweibuyongdeng, a smart F&B solutions provider that serves more than 300,000 restaurants, National Business Daily reported.

In May 2020, Tencent-backed Weimob established a company to provide smart solutions for F&B businesses.

Even property developer Country Garden has trained its sights on the F&B sector. It set up Qianxi Robotics Group in 2019, which operates nearly 100 robot restaurants and offers equipment such as robot greeters.

The ability to build and maintain a loyal customer base through digital engagement has emerged as another metric to appraise an F&B company. "Given the rising price tag of online traffic, it's necessary for F&B companies to amass enough private traffic and foster the ability to manage it professionally," Bai with Weimob told National Business Daily.

He cited Nayuki as an example, which posted annual revenue of more than 3 billion yuan last year and a market capitalization of over HK$23 billion ($2.96 million).

"Nayuki has 35 million members, whom are well managed…" and this becomes a reason for its outstanding performance in market capitalization, Bai said.