Restaurant chain Tao Heung opts for cost cuts to offset rising prices

Inflation is the biggest challenge facing the food and beverage industry this year, Tao Heung Holdings chief executive Eric Leung Yiu-chun says, but he adds his firm plans to offset rising prices by cutting costs rather than passing them on to customers.

The restaurant chain, which has more than 70 outlets in Hong Kong and other parts of southern China across 13 different brands, expects food price inflation of between 5 per cent and 10 per cent this year.

'This could be the second wave of the financial tsunami,' Leung said.

The firm will try to keep costs down by centralising production - it has a factory in Dongguan and last year bought a second in Tai Po Industrial Estate which it expects to begin production by January next year.

'We position ourselves as a company that provides value for money to customers, so we will not increase our prices,' Leung said.

He added that although the economic recovery is stimulating the retail industry, restaurant customers are not necessarily spending more per head than before, so Tao Heung will stay focused on cutting costs and increasing customer flow to maintain last year's average revenue of HK$62 per head.