(Yicai Global) Dec. 29 -- 2022 has not been a good year for China’s restaurant sector, which has been battered by recurring outbreaks of Covid-19. Many smaller restaurants have gone out of business and bigger chains are struggling to make ends meet. However, the pandemic has been good news for the ready-to-eat meals sector, which has experienced growth.

And the prepared food sector continues to do well even now that the Covid restrictions have been lifted, as more people are opting to stay at home amid a big surge in cases.

“The pandemic has triggered a shortcut for the development of the ready meals industry in the consumer-end market,” said Wang Lin, boss of snack brand Lixiangguo.

China’s ‘eating-at-home’ sector is expected to jump 21.5 percent to CNY3.5 trillion (USD502.4 billion) by 2025 from 2020, according to a white paper by US consultancy firm Frost & Sullivan.

Hard Times

For other players in the catering sector, though, it is a different story. Even leading restaurant chains have struggled this year. Hotpot chain Haidilao logged losses of CNY266 million (USD38.1 million) in the first half, largely due to fixed expenses such as employee wages that had to be paid even when the outlets were shut or dine-ins suspended, it said.

Another hotpot chain Xiabu Xiabu hemorrhaged CNY280 million. And restaurant operator Jiumaojiu International Holdings’ net profit plunged 69 percent to CNY57.7 million (USD8.3 million).

Trending brands such as Diantaixiang Hot Pot and Xianhezhuang Hot Pot have almost disappeared from sight. Diantaixiang Hot Pot, which used to have 3,000 people dining in each day, now has fewer than 30 stores while the number of Xianhezhuang Hot Pot’s outlets has halved to 400 as of the end of November.

More Obstacles

But the year has been even more difficult for individual-owned restaurants which have problems with high employee turnover and poor cash flow causing many to shut down.

“We used to have 20 employees but several left after the lockdown in Shanghai as they were afraid of another outbreak,” Zhu Yu, who owns a restaurant in Putuo district, told Yicai Global.

In the second half, business at Zhu’s restaurant picked up, only to hit rock bottom again in December after the country relaxed its pandemic prevention measures, leading to a sharp rise in infections.

Out of 10 catering firms who applied to go public this year, only pizza chain Domino’s has passed the Hong Kong Stock Exchange’s application review. The others all failed to achieve their goals this year for various reasons.

There will be more difficult days ahead as the market recovers from the recent flare-up, but things should get better next year, industry insiders said.

Editors: Tang Shihua, Kim Taylor