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15 Jan 2021

Econ Digest

Restaurant industry in 2021 is still highly risky

      The restaurant industry in 2021 is still as highly risky as it was in 2020. The new wave of local COVID-19 transmissions, fierce competition among businesses and yet-to-recover purchasing power will affect any recovery of restaurants in 2021 to varying degrees. Full-service restaurants may recover only slightly, with a growth of 0.7 percent, while limited-service restaurants and street food stalls, particularly those with low- to mid-range prices, may see support from the government’s stimulus packages to boost spending during 1Q21. Moreover, expansion of market segment and adjustment of business models for mid-sized to large business operators are expected to generate growth of 2.4 percent and 2.0 percent, respectively.

     For their businesses to survive amid the current conditions, restaurant operators will need to shift their business model to compact-size enterprises which possess 1. mobility in accessing target customers speedily and extensively, with examples of such eateries including pop-up restaurants, food trucks and cloud kitchens; and 2. management flexibility, which encompasses flexibility in marketing channels or the ability to make changes to steps and formats of business operation; for instance, small restaurants with limited space (like kiosks) are distinguished by their use of smaller advance investment and working capital compared to mid-sized to large restaurants.

     KResearch perceives that, if the spread of COVID-19 remains below levels which would necessitate another nationwide lockdown, the total value for restaurants in 2021 will amount to THB 410-415 billion, representing a slight growth of 1.4 to 2.6 percent amidst a fragile business environment that signals the need for all restaurants to maintain caution in their investments and undertakings. For the past year of 2020, the market value of the restaurant industry shrank by 6.0% or approximately THB 405 billion by estimation.

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Econ Digest