Big helpings are on offer catering to western tastes in China - but service is a problem

It's a mouth-watering prospect for any entrepreneur, but despite an apparent increasing desire for Western food across China, foreign caterers and restaurateurs are finding it hard to satisfy demand.

In a food and beverage industry worth more than 2 trillion yuan ($317.4 billion, 241 billion euros) annually, Western cuisine - which ranges from American hamburgers to French foie gras - makes up a tiny portion, with revenue of around 3 percent of that figure.

But in the past four years, the number of foreign restaurants in China's capital has more than doubled, from 2,000 to more than 5,000.

That trend has been evident across the country, Xu Meng, secretary-general of the Beijing Western Food Association, says. "For the past three years, Beijing alone has seen more than 400 new foreign restaurants opened each year," she says.

While interest in international cuisine is growing generally, especially among China's younger generation, the hunger is keenest in the major cities, with their greater concentrations of foreign residents.

"It's gotten very competitive," says Bob Boyce, founder and CEO of the Shanghai-based Blue Horizon Hospitality Group.

The 42-year-old American, who first established Blue Frog Bar & Grille in Shanghai in 2003, now manages one of the most successful China-grown foreign restaurant brands in the country.

So much so that in December a 51 percent stake in Blue Horizon Hospitality sold for 126 million yuan to Warsaw-based restaurant operator Amrest.

The move is part of a pledge made in August last year by the multi-billion dollar company, which operates about 650 restaurants globally, to expand its operations in China by more than 40 restaurants.

While large international companies may now see the potential of bringing investment in foreign food to China, it is pioneers like Boyce who helped build the industry, beginning more than a decade ago, when options were scarce.

"When we started there was really nothing like we were doing," he says.

What was regarded as Western cuisine at the time was limited to opulent hotels and restaurants or fast-food outlets.

Focusing on creating a mid-range option for white-collar workers, Boyce has seen the number of restaurants grow from one to 11 and his clientele shift from mostly foreign expatriates to China's middle class.

"When we first opened 10 years ago, the white-collar professional segment in Chinese society had not really developed," Boyce says. "Now, it's fully developed and the spending power is really incredible."

The growing number of young Chinese workers with money to spend heading to mid to high-end Western restaurants has also caught the interest of Chinese investors, who see China's increasing appetite for Western food as a chance to cash in.

However, imported ingredients used in foreign dishes often cost more and result in higher menu prices. Luo Juan with Forward and Intelligence Co Ltd, a catering industry analyst in Shenzhen, says it has found that Western restaurants generally turn higher profits than their Chinese counterparts in the same market range.

But even with that potential, the well-established dining chains one would expect to see lining the streets of any big Western city are almost absent in China. Several famous US and European brands have made attempts to enter the market but struggled.

In 2010, the US chain California Pizza Kitchen had to close its only Chinese outlet in Shanghai after discovering imported ingredients resulted in a product too expensive for Chinese consumers. Re-evaluating their operations, they made a second attempt the following year and have seen slow but steady growth this time.

Similarly in 2011, Outback Steakhouse was forced to close two Beijing locations after a local partnership soured. It too made a second attempt, opening in Shanghai shortly after, but has not had the same success as in the US.

But the resistance to large chains entering the industry has created a better landscape for entrepreneurs wishing to develop their own China-grown Western food brands.

This has given opportunities to entrepreneurs like Li Zhao, co-founder of Ahava Bistro, a small sandwhich shop focused on serving American style sandwhiches tucked in an alley near the University of International Business and Econocmics in Beijing.

With less than a half-dozen tables, Li is one of hundreds of small entrepreneurs cater to China's new demand for foreign dishes.

Opened in May 2012, she says the trick to their success so far has been doing something unique and having a Western partner who knows how to make authentic food.

"Most of the foreign cooks only work in the big restaurants, so this makes us unique," she says.

And while small shops take their share of the market, for the bigger chains, they provide a benefit.

"There is no big shark attacking us in the water, but there are a lot of little piranha fish swimming around," says Scott Minoie, CEO and founder of Element Fresh, a restaurant chain focused on healthy eating.

Minoie, who started Element Fresh as a small catering company, investing $1,000 (764 eurso) and operating out of his apartment before watching his business grow to a $30 million-a-year operation and 12 branches, is another of the country's foreign food pioneers.

He says the increase in the number of small competitors seen over the past decade is good for business.

"Any competition can be viewed as negative, but the increasing number of restaurants offering Western food has created a lot more awareness for the product," says the 39-year-old Bostonian.

While perceptions, true or not, of food safety may encourage people to go for foreign fare when dining, not understanding the dishes can sometimes act as a deterrent.

Mehernosh Pastakia, general manager of Taj Pavilion, one of Beijing's oldest Indian cuisine restaurants, says he's seen the number of Indian restaurants in the capital more than quadruple since first opening his restaurant in 1998.

While a decade ago he catered primarily to expats, he says in the past few years he's increasingly seeing young Chinese venturing into the restaurant.

"Many times they come in with a foreigner or an overseas Chinese who are familiar with our type of food," he says.

"But occasionally we have a Chinese person walk into the restaurant that has no idea about what Indian food is. Our Chinese staff describe to them exactly what they are ordering."

Though fierce competition is brewing in cities like Beijing and Shanghai, demand from customers looking for imported cooking styles in China's rapidly developing second and third- tier cities far outweighs supply.

The result is a businessman's dream, with droves of developers approaching brands such as Element Fresh and Blue Frog asking them to expand their operations.

"Xi'an, Tianjin, Chengdu, Chongqing - you name it, any second-tier city, we've got calls from major developments where they want us to come there and set teams up to look at these places," Minoie says.

However, expansion in these cities has also put a strain on China's service industry.

Xu of the Beijing Western Food Association says there is a shortage of about 60,000 to 70,000 service industry staff in the capital alone, ranging from serving staff to chefs and managers.

"The numbers show a shortage of millions throughout China," she says.

The shortage is attributed to the rapid development of the mid to high-end restaurant industry in the nation's newest metropolises.

"In the past, many serving staff in the big cities came from smaller cities," Xu says. "Young people want to go to big cities, either for more money or to broaden their horizon. But now the salary in small cities is just as high, so they are staying in small cities near their hometowns."

Also, while in the US and Europe it is common to see middle-aged employees in the service industry, in China this is rarely the case. And for foreign restaurants, which often pride themselves not just on food, but on service and the dining experience, a much higher level of training is required for restaurant staff.

"In a Western restaurant you need to learn the etiquette of that country, characteristics of its food, and also many cross-cultural things," Xu says.

Though the higher professional standards often mean higher wages, with Western establishments paying slightly higher than the Beijing average of 2,500 yuan a month, there are simply too few qualified candidates.

So while there is demand for Western food and too few places to cater for it, companies that can create a product pleasing to the Chinese palate are almost guaranteed success.

"Chinese people see gastronomy as an important part of their culture and are willing to spend a lot of money on food," Xu says.

Contact the writers at toddbalazovic@chinadaily.com.cn and chenyingqun@chinadaily.com.cn

(China Daily 03/01/2013 page10)