China’s restaurants on survival mode as African swine fever fuels costs, dents business ahead of Lunar New Year
Pork prices are set to climb again between now and Lunar New Year in January, according to Nomura
China is seen importing a record 4.6 million tonnes of meat in 2020 to plug supply shortfall, Rabobank forecasts
Daniel Ren, South China Morning Post
25 Nov, 2019
A doubling in pork prices since the outbreak of deadly African swine fever in August 2018 is pushing the domestic inflation rate in China to the highest in almost eight years. For some of the nation’s small entrepreneurs, it’s approaching a breaking point.
“We are not able to make a profit due to the higher costs of buying pork meat,” said Wang Xuliang, owner of the Yi Mian Qian restaurant chain in Shanghai. “It is becoming more difficult to sustain our business after having to pay higher rent and labour costs.”
Wang purchases about 1,000kg of the meat every month for his chain, which serves small dishes including dumplings, noodles and rice. Over the past one year, he has had to pay an additional 30,000 yuan (US$3,550) a month after prices doubled to 58 yuan a kg, he said.
Pork accounts for up to 60 per cent of total meat consumption in China, and the outbreak of swine fever has caused a devastating impact at a time when the economy is growing at the slowest pace since at least 1992 amid a heightened trade war with the US.
Consumer prices rose 3.8 per cent in October, a level not seen since January 2012, official data showed. Wholesale pork prices surged to 52.30 yuan per kg on November 1, before easing to 47.60 yuan, according to the Ministry of Commerce, up from about 20 yuan before the outbreak.
The crisis has forced the government to cull 41 per cent of its hog population, creating a potent brew on both ends of demand and supply. Pork prices could rise to about 65 to 75 yuan per kg between now and Lunar New Year in late January, according to Nomura.
Pork prices could remain elevated through the first half of next year, given the worsening contraction in hog and breeding sow stocks, Nomura said in a report published on November 20. Analysts at Rabobank have predicted China will import a record 4.6 million tonnes in 2020 to plug the supply crisis.
At least 80 per cent of small restaurants in Shanghai are affected by the rising pork prices, according to Chen Xiao, chief executive of Shanghai Yacheng Culture, which provides marketing and branding services for small companies such as local eateries.
“This is a serious issue given the big number of employees in the industry,” Chen said. The restaurant catering sector employs about 1 million workers in Shanghai, he estimated.
Ken Xia, another restaurant owner in Shanghai, said higher pork prices had exacerbated his bearish sentiment on the business outlook as customers tightened their spending belts.
“I am thinking of closing down my restaurant because it is no longer profitable,” he said. “Small restaurants are the main victims of a weaker economy and food inflation. But we can do nothing to overcome the higher costs.”
For the Yi Mian Qian chain, the profit margin has compressed this year, as collection has dropped by about 10 per cent. Wang, the restaurant owner, feels the supporting measures introduced by state authorities are not enough for him and his peers to overcome the challenges...
more, including chart, links