China’s foodservice profit sector is set to grow at a compound annual growth rate (CAGR) of 2.6% from CNY6,110.6 billion ($947.5 billion) in 2021 to CNY6,959.7 billion ($1,090.4 billion) in 2026, predicts GlobalData, a leading data and analytics company.

According to GlobalData, the foodservice profit sector revenue grew at a CAGR of 3.3% during 2016-21, led by an increase in the number of transactions and the number of outlets. Home delivery and take-away sales played a crucial role in 2021, supporting the sector to revive from the blow received during the COVID-19 pandemic.

GlobalData’s report, “China Foodservice Market Size and Trends by Profit and Cost Sector Channels, Consumers, Locations, Key Players, and Forecast, 2021-2026,” reveals that full-service restaurant (FSR) remained the largest foodservice profit sector channel in 2021. Accounting for 67.1% of China’s total profit sector revenue in 2021, the channel grew at a CAGR of 3.6% during 2016-21, driven solely by delivery and take-away sales.

Yum! Brands, Inc. (Yum China Holdings, Inc.) was the leading FSR operator in 2021 with approximately 2,500 outlets. The chain continues to strive to improve its menu offerings by introducing products, such as preserved egg, milk tea pizza, and spicy hot pot pizza. The operator recently repositioned its Pizza Hut brand as a family-friendly, modern, and affordable casual dining brand.

Srimoyee Nath, Consumer Analyst at GlobalData, comments: “The outbreak of the Delta variant of COVID-19 led to the implementation of strict public restrictions, including the closures of many tourist locations. Thus, operators turned to delivery, take-away, and drive-thru services in 2021 to survive another round of partial closures and restrictions.”

The leisure and travel channels recorded negative CAGRs of 3.4% and 2.2%, respectively, during 2016-21, due to a severe drop in the number of international tourists amid periods of lockdown. However, with the rebound in consumer confidence in the coming years, all profit sector channels are projected to register growth through 2026.

GlobalData forecasts all foodservice profit sector channels in China to experience growth in outlet count during the forecast period. Chain operators will grow at a higher rate compared to independent operators across restaurant channels.

Nath concludes: “Increasing inclination towards healthy food options made with fresh and local ingredients will be on the rise in channels such as QSR and FSR. As a result, operators need to constantly innovate their menus with health-focused and quality dishes. The key target demographics for healthy indulgence will be the youth and millennials in China.”