Intense competition and costs drive innovation in Hong Kong restaurants

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Hong Kong’s vibrant restaurant scene is under threat – and not just from traditional rival food destinations in Asia like Singapore and Seoul. It’s not a noodle war, per se, but challenges in the way those noodles and other restaurant foods are prepared and served.

Meanwhile, competition in the always-intense Hong Kong dining market continue to grow, with competition from both locals and new foreign brands.

The costs of labour and logistics are forcing companies to change the way they run restaurants in Hong Kong. According to a survey on the food and beverage industry conducted by ANZ, nearly nine in 10 respondents said the cost of key business inputs have risen faster than inflation.

To tackle rising costs, restaurateurs are automating and centralising more food preparation and even customer service, including systems such as remote-control ordering.

“Innovation and automation are becoming critical across the entire food and beverage supply chain including food processing, consumer packaging, inventory management and traceability,” ANZ Head of Emerging Corporates Arnab Bhattacharya said.

Respondents said the Hong Kong industry faces further challenges in the future, with constant changes to regulation creating confusion and requiring a greater allocation of existing labour.

Just under 20 per cent of respondents to the survey said they have begun to invest in new manufacturing technologies which will allow existing staff to focus more on customer service and reduce the amount of staff required in the kitchen.

Many restaurants are also investing in technologies that will automate how customers order their food and are allocated to a table.

“The food and beverage industry is responding to these changes by using technology and automation to ensure they maintain market share and optimise margins while reducing downtime, operational costs, and waste,” Bhattachyara said.

There are some bright spots. Customers are more willing to spend on higher-quality food. Higher-margin premium foods and healthy cooking methods are becoming key drivers of the industry.

Even that trend, however, requires change in the industry. Restaurants must source food directly from manufacturers or general agencies to minimise the number of middlemen.

That in turn requires better certification of suppliers and closer relationships. Staff will also need to be better trained in hygiene standards.

“These trends are expected to grow with stronger purchasing power by consumers,” Bhattacharya said.

The survey, conducted in conjunction with the Hong Kong Productivity Council, interviewed 200 companies between April and May of 2014.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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