Summary of Key Points
Recently, a number of leading food and beverage brands such as Wei Jia Liang Pi, Lao Xiang Ji, and Saliya have collectively raised their prices. This move reflects that the price war, which has been ongoing for over two years, has finally reached a critical point where businesses can no longer sustain it. The more prices are lowered, the less profit they earn (for example, Wei Jia Liang Pi sells products for 10 million yuan but only makes a profit of 150,000 yuan, resulting in a net profit margin of 1.5%). Additionally, the costs of ingredients, labor, and rent continue to rise, and the decline in delivery subsidies has taken a large portion of their income. The industry is now at a crossroads where further price competition could lead to its demise. Brands are no longer just competing on who offers the lowest prices; instead, they are focusing on who offers the best value. Some have subtly adjusted their pricing strategies (raising prices for takeout while keeping in-store prices unchanged, or reducing discounts indirectly), while others are reorganizing their costs and working to build customer loyalty, marking a shift from a price war to a value war in the food and beverage industry.
I. Price Hikes Are Not Arbitrary, but a Last-Ditch Attempt to Survive
Why have prices suddenly increased collectively? The essence is that the price war and rising costs have pushed businesses to a dead end:
- Price War Erodes Profits: Since 2023, the number of food and beverage establishments has increased, but the consumer base has not expanded. To attract customers, businesses have resorted to aggressive promotions (live broadcasts, group buying, etc.), leading to severe product homogenization, leaving them to compete solely on price. However, lower prices have not increased profits; instead, they have reduced gross margins from the usual 50%-60% to below 40%.
- Rising Costs: This year, the price of eggs has increased by 35%-58%, and the prices of beef and mutton have risen by 4.7% and 8.9%, respectively. Labor and rent costs are also on the rise. For takeout, the removal of platform subsidies has further reduced profits. For example, Lao Xiang Ji's takeout platform fees account for 6.3% of its income, and a 3000-yuan takeout order yields less profit than a 1000-yuan in-store order.
- Thin Profits: In 2025, the average national spending per person on food and beverages is expected to drop to 32.88 yuan. Rising costs and decreasing average order values have squeezed profit margins. Wei Jia Liang Pi's 1.5% net profit margin is not an isolated case. The Red Food Research Institute predicts that if this trend continues, the industry's average net profit margin will fall below 3% by 2028, with small and medium-sized businesses only earning 1.2%-2.0%, a situation akin to walking a tight rope and at risk of losing money at any moment.
II. Leading Brands Have Their Own Strategies for Price Hikes, Avoiding Losing Customers
Raising prices is a strategic move, and brands are cautious not to scare away customers:
- Brands with Extreme Cost-Effectiveness Have No Choice but to Raise Prices: Saliya, which relied on low prices, increased the price of its 18-yuan baked rice to 21 yuan (a 16.7% increase) within two years, yet its profits still declined. Wei Jia Liang Pi more directly raised the price of its signature cold noodles from 11 yuan to 12 yuan and hamburgers from 15 yuan to 18 yuan, a 7%-29% increase, admitting that "a single-store annual revenue of tens of millions only results in a profit of over 100,000 yuan, so price adjustments are necessary."
- Dual Pricing for Takeout and In-Store: Lao Xiang Ji only raised prices for takeout (by 1-3 yuan per item, with package prices increasing by up to 8 yuan), while in-store prices remained unchanged. The reason is simple: takeout incurs higher platform and delivery fees, and in-store sales are the foundation of its business. Lao Xiang Ji’s data shows that although takeout revenue has increased, platform fees have consumed most of the gains, and the average order value has decreased from 33.1 yuan to 27.2 yuan. Without raising takeout prices, it would not be profitable.
- Subtle Price Hikes and Regional Differences: Kudi ended its "9.9 yuan for all items" policy, retaining only 3-7 special-priced items. Xijia De varies prices in different cities and shopping districts; for example, a pack of 12 dumplings is sold for 29 yuan, which is equivalent to 36 yuan when purchased as 15 dumplings, and the price of red bean and tapioca pudding has increased by 98% from 6 yuan to 11.9 yuan. These adjustments are made quietly to avoid scaring off customers.
III. The Price War Has Reached a Dead End: Lower Prices Lead to Greater Losses, and Greater Losses Make It Harder to Stop
The vicious cycle of the price war is unsustainable:
- Traffic Trap: Businesses thought that lowering prices would attract more customers, but customers who come for the low prices are not loyal. They will switch to cheaper options as soon as the promotion ends. The founder of Hao Xia Chuan said, "The moment marketing stops, traffic plummets," which is a nightmare for many owners.
- Profitary Bottomless Hole: The removal of delivery subsidies has revealed the reality that the more you sell, the more you lose. For example, although Gu Ming has a large number of takeout orders, the profit after deducting platform and delivery fees is much lower than from in-store sales.
- Homogenization Deadlock: With everyone lowering prices, products become indistinguishable, and businesses are forced to compete on price, resulting in no one making a profit. Jiang Yi noted, "There will always be someone who offers a lower price, and restaurants that rely on discounts have no competitive advantage."
IV. Moving from "Who Offers the Lowest Price" to "Who Offers the Best Value"
The food and beverage industry is shifting from a focus on price to value. The goal is not just to raise prices but to make customers feel that their money is well spent:
- Reorganizing Costs to Improve Value: Zhu Guangyu Hot Pot Restaurant did not raise prices but replaced marketing fees with a 9.9 yuan all-you-can-eat experience that includes fruits, cakes, snacks, and desserts, providing a tangible benefit to customers. The founder, Li Yang, said, "Rather than marking the original price and then offering discounts, it’s better to invest in products to give customers the feeling that they are getting value for their money."
- Building Customer Loyalty: Xiaocaiyuan stopped its takeout subsidies and turned the money into membership benefits (88 yuan grants a 15% discount for the entire year), resulting in a 46.28% membership renewal rate and a 450,000 increase in in-store traffic after four months. Micun Banhan abandoned group buying and invested in products and services, developing its own membership system to reduce reliance on platforms. These strategies focus on building long-term customer relationships rather than short-term price discounts.
Conclusion
This collective price hike is not a random trend but a sign of the industry's transition from a price war to a value war. In the future, the competition will not be about who offers the lowest prices but about who can provide the best value to customers. Reorganizing cost structures, building customer loyalty, and enhancing the product experience are the true keys to success. If businesses continue with their current profit models, the industry will eventually fail. What China's food and beverage industry needs is not a general price increase but a common understanding of what constitutes value.