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30 Aug 2023

Econ Digest

Restaurant business in 2023 is expected to expand by 7.1%YoY…Food waste management will help reduce costs and achieve the net zero goal

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        The restaurant business is expected to grow during the remainder of the year, thanks to the recovery in tourism and long holiday festivals. KResearch projects that full-year 2023 turnover of the restaurant industry will reach THB435 billion, growing by 7.1%YoY. However, the expansion of restaurant business value remains uneven, while most operators still face challenges, such as intensified competition in all segments, elevated operating costs and labor shortages. These factors affect profitability and longevity of a business operation, making it take longer to reach the break-even point. Evidence turns out that only 35% of newly opened restaurants are able to survive more than three years after commencing operations (data from LINE MAN Wongnai). Going forward, restaurants that are likely to face challenges include casual dining restaurants due to the numerous players in this segment, and quick-service restaurants that must adapt to changing consumer behavior.

        Amid heightened competition, restaurant operators must shoulder rising operating costs, especially raw material costs that may fluctuate due to the impact of the El Niño phenomenon (raw material costs accounting for up to 35% of the total costs). Therefore, efficient cost management remains crucial. One strategy that restaurants could adopt is to manage food waste, which accounts for 4-10% of total ingredients. Achieving this would not only aid in cost reduction, but also contribute to mitigating environmental impacts. It has been observed that the food service industry globally generates around 244 million tons of food waste each year, contributing to 8-10% of global greenhouse gas emissions.

        Restaurant operators can help reduce food waste through more efficient raw material management and cooking processes, for example, by deploying technology in stock management such as Point of Sale (POS) systems; and offering discount promotions for food unsold at the day’s end through in-store sales and food delivery platforms. Other actions include organizing corporate social responsibility (CSR) activities to maximize the benefits of surplus food, such as using leftover food for animal feed or biogas production, making organic fertilizers for agricultural purposes, and creating menus with various portion sizes to offer customers a variety of choices when placing orders. While many restaurants may have already taken such actions, the focus should be on approach adjustments to achieve concrete results.

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