Beyond the 'Shared Kitchen' Boom, Huang Xiao Di Is Boosting the Catering's Digital Upgrade

Consumer Staples, Technology Author: Yingwei Fu, Yue Liu Editor: Luke Sheehan Dec 22, 2020 06:02 PM (GMT+8)

The growing vacancy rate among shopping malls in operation across China and catering's high initial costs have yielded a market for shared kitchens – but now kitchens have become catering business accelerators.

Huang Xiao Di store

The black swan of COVID-19 has caused a severe setback in China's catering industry. According to iMedia, the national catering revenue in the first quarter of 2020 reached CNY 602.63 billion, a year-on-year decrease of 44.3%. Facing drastically shrunk traffic and heavy financial pressure, 91.6% of catering merchants have launched food delivery services.

The obstruction of brick-and-mortar sales channels in the catering industry has also accelerated the boom of the food delivery market, projected to reach CNY 664.62 billion in 2020, accompanied by a CAGR of 36.55% in 2016 – 2019. Moreover, this sector only accounts for 14% of the overall catering market, indicating a high growth potential.

Food delivery's blossoming has directly driven the rise of shared kitchens. China welcomed the first birth wave of shared kitchen brands around 2016; Huang Xiao Di (HXD), Jike Alliance and Panda Selected gradually stood out. Thanks to digital life development, the surging food delivery business attracted numerous catering companies. Still, many of them (most are small- and medium-sized catering companies) were hampered from the beginning, given the high fixed costs (including rent and kitchen alliances) in first-tier cities.

Besides, commercial property managers are eager to flatten the increasing vacancy rate caused by the pandemic and the new food delivery norm. The shifting patterns of the catering business and property management is pushing practitioners to change their mindset. Shared kitchens alleviate pain for catering startups’ heavy initial input by providing a fully-furnished place and helping commercial properties to optimize the use of assets. Based on the successful sitting experience, shared kitchens evolved to be more capable with data-driven comprehensive services to serve catering and commercial property business.

Shanghai-based HXD intends to transform the catering industry digitally. With years of practical experience, the company can provide a featured service based on its big-data platform – a restaurant sitting selection platform. The service implies a business upgraded from version 1.0 (pure shared kitchen: self-built venue) to version 2.0 (asset-light model: cooperation with venue owners and brand owners to provide franchise services). Its self-developed big data platform can provide business partners with accurate location-sitting services and real-time sales data of various catering stores, helping merchants, especially chain brands, improve online operations and achieve digital upgrades.

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HXD has invested and managed around 80 centralized catering properties with 1,000 shops, distributed in Shanghai, Hangzhou, Suzhou, Wuhan and Beijing. In 2020, HXD achieved GMV CNY 1.2 billion and revenue of CNY 100 million, of which rent and service fees accounted for 60% and 40%, respectively. This rising star plans to achieve CNY 50 million revenue in 2022 and upgrade the platform to version 3.0 in three to four years, providing a comprehensive industry Internet service platform ranging from the supply chain, BI and financial services, and other services. To reach the goal, HXD plans to set its footprints in an extra 44 first- and second-tier cities with 16,000 shops in China.

In the post-epidemic era, scenario-based catering solutions will be the mainstream in the future as high costs in rent, labor and raw materials and squeezed profit margin have long hurdled the development of the catering industry. With the assistance of data-driven solutions, the catering industry is expected to achieve extensive, refined management, accompanied by a substantial re-imagining of the catering ecosystem.