Eliza Wong
Alarming Industry-Wide Action Emerges
In an unprecedented industry movement, nearly twenty restaurant associations across China have jointly released formal proposals targeting destructive pricing practices. This coordinated action directly addresses what industry leaders term ‘internal volume competition’ – an escalating cycle of predatory discounts and unsustainable subsidies dominating China’s $700 billion food service market. Spearheaded by prominent associations in Shanghai, Beijing, Shenzhen and Chongqing, the initiative seeks to halt practices eroding restaurant profit margins below sustainability thresholds while jeopardizing food safety standards nationwide.
The Anatomy of ‘Internal Volume Competition’
The controversial tactics sparking industry resistance center on extreme discounting strategies deployed through major delivery platforms:
Platform Subsidy Tactics Explained
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– ‘100 Billion Subsidy’ campaigns offering artificial price points
– Loss-leader promotions including ‘0 Yuan Meals’
– Mandatory merchant participation in discount programs
Operational Damage to Restaurants
The Shenzhen Restaurant Association highlights alarming financial realities: ‘Many dishes operate at negative profit margins after mandatory discounts. For every 100 RMB order, restaurants typically lose 10-18 RMB after platform commissions and forced subsidy contributions.’ This destructive pricing environment punishes businesses prioritizing quality:
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– Premium ingredients become financially unsustainable
– Staff training budgets evaporate shrinking service quality
– Innovation pipelines freeze due to capital constraints
Regulatory Pressure Mounts
The State Administration for Market Regulation (SAMR) intensified scrutiny on July 18th with high-level meetings with Alibaba’s Ele.me, Meituan, and JD.com. Officials specifically referenced ‘internal volume’ tactics violating Anti-Unfair Competition Law provisions on predatory pricing. Platforms face firm demands to:
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– Eliminate below-cost pricing models by August deadlines
– Provide transparent merchant subsidy participation options
– Revise algorithm systems causing kitchen overloads
Operational Crisis and Consumer Consequences
Industry data reveals alarming consequences directly impacting consumer welfare:
The Supply Chain Domino Effect
‘When weekend promotions suddenly secure 300 orders hourly, ingredients meant for three days disappear in four hours,’ describes Guangdong restaurateur Chen Hao (陈豪). This whiplash effect creates:
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– Mass ingredient substitutions impacting dish quality
– Refrigerator overstocking increasing waste by 22% (China Hospitality Association)
– Staff exhaustion elevating kitchen accidents by 17%
Food Integrity Impacts
Chongqing’s Restaurant Association reported inspections uncovering quarterly decline in certified organic ingredient usage as operators substitute lower-cost alternatives. David Lee (李大为), Shanghai Food Safety Auditor observes: ‘Price wars create invisible ingredient downgrading affecting everything from cooking oil grades to protein sourcing.’
Constructive Pathway Forward
The joint association frameworks outline concrete industry transformation strategies:
Sustainable Operation Blueprint
The Shanghai proposals advocate these operational shifts:
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– ‘Value Menu’ tiers maintaining minimum ingredient-cost thresholds
– Seasonal ingredient programs reducing supply chain volatility
– Quality certification badges identifying uncompromised kitchens
Platform Partnership Reforms
Shenzhen’s Restaurant Association demands specific platform changes:
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– Clear subsidy participation transparency featuring opt-out protections
– Sustainable commission caps below 18% preventing profit erosion
– Non-discrimination algorithms supporting quality-focused operators
Industry Mobilization Accelerates
The initiative gained swift traction:
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– Over 3,700 premium Shanghai restaurants signed ‘Quality Pledge’ commitments
– Wuhan operators established emergency pricing associations
– Guangdong chefs launched ingredient transparency coalitions
Platform technology now supports healthier strategies. Meituan recently deployed its ‘Sustainable Store Analytics’ helping operators:
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– Optimize menu engineering around profitable dishes
– Identify ingredient savings preserving quality
– Predict ordering surges preventing kitchen bottlenecks
‘The campaign’s true victory lies beyond ending discounts,’ declares Shanghai Restaurant Association Director Mei Ling (梅玲). ‘We’re rebuilding market positions centered on what truly sustains operators – culinary excellence and consumer trust.’
Culinary Ecosystem at Crossroads
The historic cooperation between twenty restaurant associations represents profound system change. While short-term discounts will temporarily linger through platform transition periods, irreversible industry transformation now gains momentum. Operators who embraced premium positioning early report promising results – Guangzhou’s Ming Yue restaurant chain achieved 8.3% revenue growth post-deals despite cutting discounts.
Consumers hold ultimate influence through purchasing decisions prioritizing quality certifications. Industry leaders urge customers to ask establishments: ‘What safety certification system governs your kitchen? Where do your core ingredients originate?’ Such engagement supports restaurants maintaining integrity against discount pressures.
The fight transcends restaurant margins – it safeguards China’s rich culinary traditions against commodification. Associations urge operators nationwide to join reform initiatives and collaboratively elevate marketplace standards that honor culinary craft while ensuring sustainable futures.
