China Could Offer Opportunities for Growth
By Ethan Gibble
Research suggests that as foodservice equipment dealers and manufacturers explore new avenues for growth no market may provide more opportunities than China. A Research Nester report projects a compact annual growth rate (CAGR) of 6.8 percent from 2016-2023 in the Asia-Pacific region, with China leading the way at a projected CAGR of 6.4 percent. To put that number into perspective, total revenue for foodservice equipment manufacturers based in China was $2.5 billion in 2015 and is expected to reach $4.3 billion by 2023. Understanding what is spurring that optimism is key to deciding what steps, if any, should be taken to capitalize on it.
A major factor is the area’s rapid urbanization and a corresponding surge in tourism.Busy working schedules and reduced leisure time has led to a rise in the number of quick serve restaurants. The burgeoning tourism sector has restaurants, hotels, and other establishments throughout the region investing in new equipment to keep up with increased patronage while accommodating menus that are diversifying to appeal to tourists. A growing emphasis on health and hygiene also has created a demand for equipment that helps maintain sanitation.
“Recently, the government has passed regulations for stricter quality control,” said Alex Lu of the dealership Restaurant Equipment Market. “It creates a butterfly effect that ripples through and eliminates the less than superb factories.”
Lu travels to China two or three times a year, staying anywhere from a week to a month at a time. He often attends trade shows, scouts new factories, or visits existing factories and suppliers, so he has witnessed some of these developments firsthand. “Within the last 20 years, the economy improved dramatically. In our sector, franchise and chain restaurants are capitalizing the most,” he said.
When asked how he envisions manufacturers and dealers capitalizing on this growth, Lu prefaced his response by noting he is relatively new to the industry but still shared some interesting thoughts.
“I've had a lot of ideas on how we could take advantage of the low labor costs from China,” he said. “Dealers and manufacturers combining purchase orders to create larger volume, buying groups creating a house brand for its members, and the formation of an importing ‘union’ to simplify the procurement process.”
Lu’s observation of dealer logistics in China paints a portrait of a much different setup than we are accustomed to seeing in the United States.
“There's typically a large central location in major cities,” he explained. “It is almost like a mall. There are stalls of dealers focusing only on one category of product—plates, refrigerators, knives, chairs. They are right next to each other and a restaurateur would go down the aisle, almost like shoppers getting clothes and specialized items for every aspect of the restaurant.”
Is greater expansion into the Chinese market worthy of further discussion? One is reminded of the Chinese proverb: “Be not afraid of growing slowly, be afraid only of standing still.”