In 2020, the Chinese catering market suffered a significant decline under the heavy impact of the pandemic. Many stores could not withstand the blow and closed down, while those that persevered were also affected in terms of revenue due to various policy restrictions. The following year, 2021, was a year of recovery for the Chinese catering market, with both revenue and customer flow showing a clear upward trend. Many enterprises seized the opportunity of the pandemic's recovery to rekindle their spirits and strive to find the best business model for their operations.
Among them, China's noodle market saw rapid recovery in 2021. The continuous innovation of established noodle brands and the strong entry of many emerging brands have revitalized this catering segment with a long history in China. Since 2022, affected by repeated outbreaks of the pandemic, enterprises have slowed down their expansion pace. However, in the long run, the characteristics that favor standardization and chain operation, coupled with a massive consumer base, make the noodle market one of the most capital-worthy tracks for attention and investment.
Introduction to the Chinese Catering Market
China has a huge catering market, which has become the world's second-largest, second only to the United States in terms of scale. In 2021, the scale of China's catering market was approximately 4.7 trillion yuan, an increase of over 18% compared to 2020, which was affected by the pandemic.
China's catering market size, 2016 - 2026E
Source: Compiled by Frost & Sullivan
According to service methods and meal durations, the catering industry can be divided into full-service dining, fast food, casual dining, and other types of catering. In China's catering market, full-service dining is the main type, accounting for more than half.
According to the business model, the catering industry can be divided into direct-operated, franchised, and independent restaurants. The catering industry in China is extremely fragmented, with a chain rate of less than 20%, including both direct-operated and franchised operations. Compared with developed countries such as the United States, where the chain rate exceeds 70%, and Japan, another developed country in Asia, where the chain rate is over 37%, there is still significant room for development in China's chain catering market.
China's catering market is richly categorized. Based on cuisine, the catering industry can be divided into Chinese cuisine, Western cuisine, and other cuisines.
Chinese cuisine is rich in variety, including multiple regional cuisines such as Sichuan cuisine, Cantonese cuisine, and Huaiyang cuisine. Chinese cuisine has clear concepts of staple and non-staple foods. The mainstream staple foods include rice, noodles, dumplings, etc., among which rice and noodles are the mainstays of daily diet. Noodles originated in China and have a long history of thousands of years. They are simple to make and convenient to eat, and are deeply loved by the Chinese people. Chinese dishes are rich in cooking methods, complex in preparation, diverse in form, and come from a wide variety of raw materials, with a relatively low degree of standardization.
Image source: Internet
Western cuisine mainly includes American fast food, French cuisine, Italian cuisine, etc. Western cuisine does not have a clear distinction between staple and non-staple foods; staple and non-staple items are interchangeable, with bread, noodles, etc. often used as side dishes and in smaller quantities. Western cuisine uses relatively fewer ingredients, has a more rigorous and digitalized production method, and the processing of ingredients is not complex. Typically, ingredients are cut into several pieces and then simply processed through methods such as frying or grilling. In comparison, Western food is highly industrialized and standardized.
Image source: Internet
In recent years, although Western cuisine has achieved rapid development in China, Chinese cuisine still occupies the mainstream position in the Chinese catering market, accounting for about 80% of the market share.
Other catering refers to Asian cuisine other than Chinese cuisine, mainly including Japanese cuisine, Korean cuisine, Thai cuisine, etc. Japanese cuisine emphasizes form and color, with seafood accounting for a major portion of the raw materials and having high requirements for the freshness of ingredients; Korean cuisine values staple foods, paying attention to five colors and five flavors, which are harmonized from the five colors of red, white, black, green, and yellow, and the five flavors of sweet, sour, bitter, spicy, and salty; Thai cuisine has a typical tropical country style, mainly consisting of seafood, fruits, and vegetables, with flavors represented by sourness, spiciness, and sweetness. Asian cuisine mainly consists of rice as the staple food.
Image source: Internet
In response to the entire catering market, China has promulgated a number of laws and regulations in recent years to regulate the development of the industry. For example, in October 2015, the 'Food Safety Law of the People's Republic of China' was enacted, which established relevant departments under the State Council to manage and supervise restaurant food safety information and assessment results. Subsequently, a series of decrees and regulations such as the 'Measures for the Administration of Food Business Licenses', 'Measures for the Classification Management of Food Production and Business Risks', 'Measures for the Supervision and Administration of Online Catering Service Food Safety', and 'Measures for the Administration of Sampling Inspection of Food Safety' were issued to ensure that the catering industry is reasonably and efficiently controlled. Therefore, China's catering market has maintained a relatively stable growth trend.
Introduction to the Chinese Flour Market
In China's catering market, noodles are one of the staple foods most frequently consumed by Chinese consumers, enjoying a broad popular base and a rich variety. Currently, the number of noodle restaurants in China exceeds 400,000, with the overall noodle market size approaching 200 billion yuan.
In China's noodle market, it is generally believed that consumers in the northern regions prefer noodles as a staple food. However, in fact, there are also representative noodle categories in the southern regions that mainly consist of rice, such as Suzhou-style soup noodles in East China, Shanghai-style mixed noodles, and Sichuan-style satay noodles in Fujian.
Source: Compiled by Frost & Sullivan
In the post-pandemic era, the previously mainstream catering categories have a strong social attribute. Affected by the pandemic's centralized control measures, the frequency of dining consumption has significantly decreased, putting many catering enterprises under significant survival pressure. Enterprises in the Chinese noodle market also need to have strong operational capabilities to navigate the period of market stabilization.
Development History of China's Flour Market
China's flour market has only recently entered a stage of rapid development.
Before 2005, the main function of noodle restaurants was to provide sustenance. During this period, noodle restaurants were mainly regional specialty shops catering to couples and families, meeting consumers' basic dietary needs.
From 2005 to 2015, the noodle market underwent a standardized upgrade. Catering companies mainly focusing on northern cuisine, such as JiuMaoJiu and XibeiXiaoMian Village, expanded their operations, making one of their offerings, noodles, develop towards nationalization.
After 2015, new brands entered the noodle market, and catering that primarily serves noodles was upgraded. There are more varieties of noodles to meet consumers' increasingly high dietary needs. Looking at the current Chinese noodle market, almost every region has its own unique taste preferences for noodles. In different regions, the preparation of noodle dishes varies greatly; in the north, more emphasis is placed on the chewiness of the noodles, while in the south, the focus is on their delicate texture.
Nevertheless, noodles, as one of China's main staple foods, have a large consumer base and a relatively high consumption frequency. Compared to other new types of dining, consumers of noodle-based foods do not need market education or change in consumption habits. Consumers already have a clear understanding of noodle-based foods such as spicy and sour noodles, beef noodles, and knife-cut noodles. Therefore, consumers are more receptive to the updates and iterations of various noodle-based dining options.
Introduction to the Industrial Chain of China's Flour Market
The supply chain of the flour market is similar to that of the catering market. The upstream mainly consists of ingredient suppliers, the midstream involves ingredient processing and store production, while the downstream targets consumers in different scenarios.
The main suppliers of ingredients include flour, meat, vegetables, and other seasonings. The main difference in noodle catering lies in the toppings; most of the materials for vegetables, noodles, and soup bases can be interchangeable, thus reducing the demand for raw materials and allowing companies to maintain relatively stable cost expenditures.
The midstream of the flour market includes e-commerce platforms, central kitchens, warehousing and logistics, and offline stores. Among them, central kitchens have developed rapidly in recent years. Many catering enterprises choose to build their own central kitchens or use third-party ones in order to expand their business coverage and pursue unified services and dishes. This pre-processing model can ensure the consistency of food taste and also reduce the demand for kitchen staff and restaurant space per restaurant store, thereby reducing operating costs.
The downstream of the flour market is consumers in various consumption scenarios, mainly including dine-in, takeaway, and ready-to-eat meals.
Financing situation of the pasta track
In 2021, the Chinese noodle catering market erupted with new momentum and gained favor from the capital market. The noodle market completed dozens of financings throughout the year, with its fervor rivaling that of equally popular tea and coffee sectors. During 2021, Hefu Lao Mian received nearly 800 million in financing, Wuyie Mian received nearly 300 million in Series A financing, Bamban Rice Noodles completed B+ and C rounds of financing, accumulating over 100 million in total, and emerging noodle brands such as Chenxianggui, Maji Yong, Zhanglala, and Niujia Dabou Beef Noodles also completed their respective rounds of financing.
Entering 2022, Sichuan's chain brand 'Yangqi' received tens of millions in financing, demonstrating the continuous attention of the capital market to the flour sector, which remains as popular as ever.
Source: Compiled by Frost & Sullivan
In recent years, China's noodle market has become increasingly vibrant amidst fierce competition between traditional players and new entrants. Many leading enterprises are developing multiple channels to enhance their competitiveness in the rapidly changing noodle market. Healthy competition will contribute to the long-term and stable growth of China's noodle market.
