Eliza Wong
Xi Bei’s Strategic Operational Shift
On September 15, Chinese restaurant chain Xi Bei (西贝) issued a public apology letter outlining plans to transition from centralized food preprocessing to in-store cooking. The company committed to completing this operational overhaul across all national locations by October 1, 2025, marking a significant reversal in the industry’s decade-long trend toward central kitchen models.
From Efficiency to Authenticity
Xi Bei’s decision represents a fundamental rethinking of food service efficiency versus quality perception. Where central kitchens promised standardized quality and reduced labor costs, many consumers increasingly value the theater and freshness of in-store preparation. This shift particularly resonates in post-pandemic China where food transparency and safety have become paramount concerns for diners.
Market Context and Industry Implications
Xi Bei’s operational reversal occurs against the backdrop of evolving consumer preferences and intense competition in China’s restaurant sector. The move from central kitchen preprocessing to in-store cooking represents one of the most significant operational pivots in recent years, potentially signaling a broader industry trend.
Consumer Preferences Driving Change
Market research indicates growing consumer skepticism toward pre-prepared foods, particularly in the premium casual dining segment where Xi Bei operates. A 2023 consumer survey by China Hospitality Association revealed that 68% of diners expressed preference for restaurants demonstrating visible food preparation, while 72% associated in-store cooking with higher quality ingredients.
Financial and Operational Considerations
The transition from central kitchen preprocessing to in-store cooking carries substantial financial implications. While potentially increasing labor and rental costs due to expanded kitchen space requirements, the move may reduce logistics expenses and food waste while potentially justifying premium pricing through enhanced quality perception.
Cost Structure Analysis
Industry analysts estimate the operational shift could increase labor costs by 15-20% while reducing supply chain expenses by 8-12%. The net effect on profitability will depend on whether perceived quality improvements translate into increased customer traffic and higher average spending. Xi Bei’s decision to transition from central kitchen preprocessing to in-store cooking represents a calculated bet that operational transparency will drive revenue growth sufficient to offset increased costs.
Regulatory and Supply Chain Factors
China’s evolving food safety regulations have increasingly emphasized traceability and transparency in food preparation. The 2021 Food Safety Law amendments placed additional documentation requirements on centralized food processing facilities, potentially making the central kitchen model less attractive from compliance perspective.
Supply Chain Considerations
The shift to in-store preparation may simplify supply chains by reducing dependency on specialized preprocessing facilities. However, it requires developing new supplier relationships for raw rather than pre-processed ingredients, potentially increasing vulnerability to ingredient price fluctuations while reducing processing margin compression.
Investment Implications and Sector Outlook
Xi Bei’s operational pivot from central kitchen preprocessing to in-store cooking warrants attention from investors monitoring China’s consumer sector. The success or failure of this strategy could influence operational models across the restaurant industry, with potential ripple effects on food processing companies, commercial real estate, and equipment manufacturers.
Sector-Wide Impact Assessment
If consumers respond positively to Xi Bei’s transparency initiative, competitors may face pressure to follow suit, potentially affecting valuations across the sector. Companies heavily invested in central kitchen infrastructure might face write-downs, while suppliers of kitchen equipment and fresh ingredients could benefit from increased demand.
Forward-Looking Market Perspective
Xi Bei’s transition from central kitchen preprocessing to in-store cooking represents more than an operational adjustment—it’s a strategic repositioning in response to evolving market dynamics. The two-year implementation timeline suggests careful phased execution rather than rash reaction, indicating management’s confidence in their analysis of long-term consumer trends.
For investors, the key metrics to monitor will be same-store sales growth, customer traffic patterns, and margin evolution during the transition period. Successful execution could establish a new operational paradigm for China’s restaurant sector, while missteps might demonstrate the enduring efficiency advantages of centralized food preparation models.
Market participants should watch for similar announcements from competitors and assess how this strategic shift affects supply chain partners across the food service ecosystem. The move toward in-store preparation, if adopted industry-wide, could reshape everything from agricultural sourcing to commercial kitchen design over the coming decade.
