Summary of Key Points
In the first half of 2026, national catering revenue only increased by 2.8% year-on-year, indicating the disappearance of new growth markets and the intensification of competition among existing businesses. Leading catering companies have collectively chosen to lower prices to attract customers, but the results have varied significantly: some have managed to increase profits through cost control (such as Yu Jian Xiao Mian), while others have seen a decrease in profits despite revenue growth due to uncontrolled costs (such as Xiao Cai Yuan), and others have barely maintained same-store growth through multi-scenario operations (such as Best Buy China). Lowering prices is no longer a simple matter of trading volume for price; it has become a precise test of a company's cost structure, operational efficiency, and ability to serve multiple customer segments.
I. Why is the entire industry lowering prices? — No new growth, so we must compete for existing customers
The 2.8% increase in catering revenue in the first half of 2026 means that the market size has hardly expanded. The “growth era” when opening new stores was profitable is over; now, companies must compete for customers from other businesses. Lowering prices has become the most direct strategy: small street shops are cutting prices, as are leading brands, ranging from fast food (Yu Jian Xiao Mian) to traditional Chinese cuisine (Xiao Cai Yuan), and from Western styles (KFC, Best Buy China). After all, not lowering prices could result in losing customers and even the right to compete in the market.
II. Different approaches to price cuts: Proactive vs. Reactive
Not all price cuts are the same, as companies have different motivations and methods:
- Proactive price cuts to attract customers: Yu Jian Xiao Mian has actively reduced prices for four years, from 36.2 yuan to 27.7 yuan (a 21% decrease); Xiao Cai Yuan has lowered the prices of its signature dishes and introduced an annual membership program for 88 yuan, with over 1.5 million members, with the chairman stating that they are giving back excess profits to customers.
- Reactive price cuts to lower average transaction prices: Best Buy China’s price cuts are due to the impact of new businesses such as Ken Yue Coffee (3,300 stores) and KPRO Light Meals (450 stores), which have dragged down the overall average transaction price; Best Buy China, on the other hand, is aiming to align its prices with the mid-range market.
III. Why do some companies profit while others lose despite price cuts? — The fate of three companies
The outcomes of price cuts vary greatly, depending on “price-volume balance” and “cost control”:
1. Yu Jian Xiao Mian: Profits increased, but same-store sales decreased.
- Success: Price cuts led to more orders (daily average orders increased from 372 to 401, a 7.8% increase), and profits grew by 51.2% year-on-year.
- Concern: The increase in orders did not offset the loss from price cuts; same-store sales decreased by 4.3%, and the average profit per order dropped to 1.7 yuan, making the business vulnerable to slight fluctuations in orders.
- Strategy: Cost savings were achieved by moving to areas with lower rent (rent as a percentage of costs decreased from 18% to 16.9%) and reducing headquarters expenses (advertising costs decreased from 1.4% to 1.1%).
2. Xiao Cai Yuan: Table turnover increased, but profits plummeted.
- Success: Table turnover increased from 3.1 times per day to 3.5 times (a 12.9% increase), and dine-in revenue increased by 18.1%.
- Problem: Same-store sales decreased by 12.5% (most significantly in first-tier cities), and net profits dropped by 24.3%.
- Reason: Uncontrolled costs—raw material prices rose by 17%, and employee costs increased by 24.1%, resulting in a double squeeze on profits due to price cuts and rising costs.
3. Best Buy China: Used price cuts to increase customer frequency, barely maintaining stability.
- Strategy: KFC reduced prices by 3% and saw a 4% increase in orders; Best Buy China reduced prices by 11% and saw a 13% increase in orders, with a slight increase in same-store sales.
- Logic: Diversified operations—breakfast, afternoon tea, and late-night snacks encourage multiple purchases per day; a large membership base of over 270 million customers helps retain customers.
IV. The battle of price cuts is not about who dares to cut prices, but who can withstand the impact — The key capabilities
Winning in price cuts depends on three factors:
1. Optimized cost structure: Yu Jian Xiao Mian maintained profits by reducing rent and headquarters expenses; Xiao Cai Yuan’s rapid cost increases eroded its profits.
2. Multi-scenario operations: Best Buy China extended its business hours to cover all meal times and used smaller orders to offset the impact of price cuts.
3. Member programs to retain customers: Xiao Cai Yuan’s VIP program encourages repeat visits, while Best Buy China’s large membership base ensures stable customer flow.
V. The future of the industry: Price cuts are just the beginning; refined operations are the goal
The catering industry in 2026 shows that there are no winners in price wars, but not lowering prices means facing extinction. The future competition will focus on:
- Maintaining profitability in each store (through cost control).
- Expanding consumption scenarios to encourage multiple purchases per customer.
- Balancing scale expansion with growth of existing stores (new stores must be profitable, and existing stores must not lose money).
In simple terms, it’s about solving complex “mathematic problems” — finding the right balance between lowering average transaction prices and increasing orders, and between giving discounts to customers and making profits. Only by doing so can companies survive and thrive in the competitive landscape of the catering industry.