On March 20th, health officials in Beijing linked an outbreak of at least 11 cases to a group of customers at a roast duck restaurant which failed to properly contact-trace their customers.
Customers visiting restaurants are required to scan a QR code that generates a green health code granting access for entry. However, some of these customers failed to do so.
There were 830 customers who dined at the restaurant over a 5-day period, and local authorities had to track down those customers for testing and isolation to prevent further spreading.
This is likely to exert more pressure on restaurants and catering industry in China that has been deeply impacted by the ongoing Covid outbreaks.
Covid transmission at public dining places has been a key driver behind weaker food demand and less restaurant visits in the country, and it will continue to deter consumers’ willingness to eat out.
China reported 4,790 new covid cases on March 24. Cases in Shanghai reached a new record of 1,609, up 64% from the day before.
Even if consumers are not in lockdown, many are going to avoid visiting restaurants or public places due to worries about either the virus or quarantine requirements if they were in a space where a case is later detected.
The struggle of restaurant industry reflects the accelerated trend of consumers opting to eat at home post-Covid.
Recently, Laowang, a Shanghai hotpot chain announced plans for an IPO in Hong Kong and the financial disclosures illustrated the current struggling growth rate of the restaurant industry.
In 2019, their average daily sales per restaurant were 36,100 yuan ($5,700 USD), but it fell to 31,000 yuan in 2020, and weakened further to 27,300 yuan in 2021.
Their rate of table turnover also dropped from 3 in 2019 to 2.5 in 2020 and hit 2.3 last year.
The vast majority of their restaurants are also in eastern China including Shanghai, Jiangsu, and Zhejiang.
Despite not having any lengthy or harsh lockdowns in these areas last year, revenue fell compared to 2020.
As previously analyzed by Sitonia Consulting in January this year (How omicron could dramatically change commodity demand in China), the current wave of Covid cases can have profound implication on China’s food demand.
“Previous experience has shown that consumers are likely to stock up on staples such as wheat and rice, and flour prices have traditionally increased following worries about covid. Meat demand is typically weaker as previous studies have shown that consumers tend to consume less meat per meal when eating at home. China is entering a new stage of the pandemic, and this could pose a serious threat to its current zero-covid policy. If omicron takes hold in China, it is likely bearish for meat consumption, and by extension, soybean demand while being supportive to wheat and rice demand.”
As the current outbreak in China unravels, consumer demand for products including pork will remain weak. This ultimately translates into worse margins for hog breeders and could continue to weigh on demand for imported soybeans.
On the grocery front, even if stores are well-supplied, the delivery sector creates a bottle neck for consumers who are in lockdown.
This week, state media in Shanghai put out a guide for the specific times each grocery delivery services opens for daily orders.
Due to robust demand, most of these daily delivery slots are taken within minutes after becoming available and consumers have to use a different service or try again the next day.