The Yins have a conundrum.
Regulars at their local branch of Din Tai Fung – a renowned chain of restaurants originally from Taiwan – the Beijing residents, both in their 70s, will soon have to find another option.
“My granddaughter loves the dumplings here, so we always come for lunch,” said Mrs Yin, gesturing towards the 4-year old as the family waited for a table at the national capital’s China World Mall. “We still haven’t figured out where else to take her. We are expecting a tantrum when she finds out.”
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They may be out of luck. The chain’s announcement it would close all its shops in northern China – no alternate Beijing locations for the Yin family – marks the end of a 20-year engagement between the wildly popular restaurant and a consumer base once flush with discretionary income and hungry for new places to spend it.
The region’s 14 stores will be closed by October 31, the company said last week in a written statement which attributed the decision to the expiration of a business licence and disagreements over renewal. However, the 18 shops in southern China will remain open, as they are operated by a separate franchisee.
Din Tai Fung, founded in Taiwan in 1958, has built a global brand on its dumplings and beef noodles. By 2021 it had over 160 branches around the world, including the United States and United Arab Emirates. Its first mainland China outpost was established in Shanghai in 2001.
“These were times when the Chinese economy was experiencing a boom, with an expansion in international exchanges, the middle class and expat populations,” said Wei Wei, a researcher at Beijing-based think tank Anbound.
Though consumer spending as a whole has been sluggish, food and drink has been one of China’s top performing subcategories this year.
According to the National Bureau of Statistics, total spending on catering was 3 trillion yuan from January to July, increasing 7.1 per cent over the same period last year and outpacing the 3.1 per cent registered in overall consumption growth.
But this uptick has not manifested in restaurant profits.
Beijing’s statistics bureau reported overall catering revenue of 74.4 billion yuan in the first half of this year, a year-on-year decrease of 4.2 per cent. Restaurants in the capital with annual revenues of over 2 million yuan reported a total profit of 180 million yuan over the same period – a 88.8 per cent year-on-year drop that has slashed margins razor thin, as low as 0.4 per cent in some cases.
This steep decline has proven impossible to weather for many establishments. According to Chinese corporate database Tianyancha, 1.35 million food and beverage companies were registered in the first half of this year, but 1.06 million were delisted or suspended their business over the same period.
Data from Chinese food and beverage platform Hongcan 18 showed 1.36 million restaurants severed their licences in 2023, more than double the 519,000 closures reported in 2022.
“Data shows that 30 per cent of [Din Tai Fung’s] price comes from the cost of food and 30 per cent comes from labour, so they are not competitive in lowering prices,” Wei said. “When the economy is in a downturn, there is not much room to make such a transition.”
Din Tai Fung’s partial closure on the mainland does not appear to be unique – other restaurant brands from Taiwan have scaled back their operations or pulled out entirely.
Bafang Yunji, another popular chain specialising in dumplings, entered the mainland market in 2014, running 110 shops at its peak. By 2022 it had thrown in the towel, closing its last 17 outlets in the southern province of Fujian. At the time of its exit, the company pointed to indigenous competition and uncertainties regarding pandemic lockdown policies.
These brands’ struggles reflect an overall decline in Taiwanese investments, with the mainland’s Ministry of Commerce reporting a precipitous drop – from US$124.3 million in 2014 to US$70.9 million in 2023.
The correlation is less clear-cut for overseas firms. While China’s overall foreign direct investment has fallen, the performance of food and beverage companies has varied.
American coffee giant Starbucks’ sales in China fell 11 per cent during the second quarter of this year, but Burger King – a US brand which sold its China franchise rights to a Turkish company – has announced plans to open at least 200 new restaurants in the country each year.
While Din Tai Fung may only represent one of many trends in China’s food and beverage industry, Wei of Anbound said it is symbolic of a consumer market more cautious in its spending, creating more hurdles for restaurants in the upper strata of prices.
“There is an overall transition towards a lower-price market. It is therefore difficult for higher-end brands, because their customers are regular and they depend on repeat visits,” Wei said.
“However, this could just be temporary, as the company said itself that there is a problem regarding the license. When the economy is better, they could come back again.”
More from South China Morning Post:
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- China’s humble consumers embrace down-to-earth lifestyle, rising ‘poor man’s meal’ trend
- Can mainland Chinese restaurants break into Hong Kong’s dining scene amid changing tastes?
- Chinese restaurant chain Xiaocaiyuan makes another attempt to list in Hong Kong
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