Concrete Analysis | Hong Kong’s restaurant sector still on a high despite gloom in the retail segment

The Hong Kong government released its retail sales and restaurant receipts statistics last week on August 5. The results are indicative of consumer sentiment in the local retail sector. Interestingly, while retail sales have plunged 10.5 per cent in the first half of 2016, restaurant receipts, in contrast, have increased by 2.5 per cent. The two indexes have grown in opposite directions since March 2015 as the food & beverage (F&B) category has continued to shine as a clear outlier from other retail segments.

The restaurant segment not only grew more than any other core retail category, but also experienced the most consistent acceleration. According to CBRE Research, in 2015, there were 73 new international entrants to the Hong Kong retail market, of which 37 were F&B brands. In the first half of this year, the pace of F&B expansion grew even faster, with 26 out of 35 new entrants from the F&B sector.

Among all restaurant types, the value of receipts from ‘other eating and drinking places’, which includes coffee shops, dessert shops, ice cream houses, herbal tea stores and fruit juice shops, witnessed substantial growth in the first two quarters of this year, up by 5.2 per cent.

The growth in restaurant sales has more to do with fundamental lifestyle changes than purely cyclical factors. One of the factors that has influenced the growth of the F&B sector has been declining tourist spending – Hong Kong’s retail landscape is shifting from a visitor-reliant market to a more local-focused one. To address local citizens’ concerns about the overwhelming number of inaccessible luxury shops dominating Hong Kong streets, retail landlords are becoming more inclined to open F&B outlets, which are enthusiastically welcomed by local consumers.