F& B Chair Booklet Purchasing function in Shanghai
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  • 1. job observatoryin the f&b industry purchasing function in shanghai supported by
  • 2. This booklet presents the second prospective study conducted by the Food & Beverage Research Chair of the École Hôtelière de Lausanne (EHL, Switzerland) The Chair’s first prospective research focused on the purchasing function in 2025 in six European countries : France, the UK, Germany, Spain, Sweden and Poland. It not only investigated the way the evolution of this function is envisaged by F&B buyers and restaurant managers themselves, but also confronted it to the opinions of academic experts. After its completion, we decided to do a similar study for F&B outlets in Shanghai. A new qualitative research allowed us to adapt the quantitative questionnaire we had done for Europe to the context of F&B purchasing in Shanghai. Our qualitative research has shown the following elements to be important and typical of the foodservice market in Shanghai : >> The prevalence of small to very small traditional Chinese restaurants. >> The strong influence of traditional and persistent networks and ways of functioning on logistics organisation. >> Guanxi, which refers to the importance attributed to personal relationships, networks and recommendations. >> The greater need for adaptation and flexibility (price and quantity) in a context characterised by volatile prices and a growing demand. >> The issue of food safety, which is a major challenge for F&B operations in Shanghai and in the whole country. This study allowed us to define the factors which will influence the way the organisation of restaurants, and more specifically of the purchasing process and function, evolve until 2025. They belong to four domains : >> The structure of the market : The Chinese market is highly fragmented, with a majority of small, traditional operations. It is evolving towards an increased professionalisation, as the development of restaurant chains contributes to its concentration. However, the strength and speed of this evolution are di÷cult to anticipate. >> Food safety : Food safety scandals occur regularly in China. Even though consumers in Shanghai tend to be resigned about the safety of food products, addressing this issue will undoubtedly be amajor challenge for restaurant operations. Food storage, transportation and traceability will therefore be priorities. >> Technology : The gap between traditional and occidental restaurant operations is all the more visible that the use of IT and technologies di≈ers radically between the two. There is also a di≈erence in productivity between these two types of outlets : it is lower amongst traditional operators. This shows that there is an important progress margin in the use of management software and technologies, both for restaurant kitchen operations and to communicate information to suppliers or customers. >> Political interventions : The Chinese government has the power to modify situations with unexpected intensity and strength, especially when there are issues which threaten the social stability of the country. If the government, in collaboration with Shanghai authorities, decided to implement strict controls and dissuasive sanctions for food operators, the F&B market could change rapidly and radically : a large part of traditional outlets would be forced to either adapt or close down. Along with the results we obtained, the changes anticipated by the experts and professionals we interviewed allowed us to identify the skills and activities which the purchasing function will require in 2025 in Shanghai.
  • 3. Contents Introduction.................................................................................................1 Context....................................................................................................... 2 Results....................................................................................................... 5 Consequences on restaurants...................................................................12 Most probable scenarios for purchasing in restaurants in 2025...............13 Consequences of the most probable scenarios on the purchasing function.......................................................16 Conclusion.................................................................................................17 Acknowledgements.................................................................................. 20
  • 4. 1Job observatory in the f&b industry purchasing function in shanghai Introduction The Food & Beverage Industry Research Chair was founded in 2010 by EHL and is supported by Danone Professional, Nestlé Professional and Unilever Food Solutions. Its objectives are  : >> To contribute to the development of innovative trends for operators, suppliers, distribution channels, sellers and marketers. >> To enhance students’ and professors’ understanding of the industry. It has two work axes  : >> Observation post for current and prospective jobs in food & beverage outlets. >> Business intelligence (monitoring of strong and weak signals of F&B professionals’ interest in sustainable development).
  • 5. 2Job observatory in the f&b industry purchasing function in shanghai Context The Chair has created an observation post for current and prospective jobs in the catering industry, which aims to  : >> Develop a better understanding of F&B jobs  : operators, suppliers, distribution channels, sellers, marketers, etc. >> Provide a framework for job identification and employment trends that includes di≈erent methodologies and agree on a common working language. >> Analyse the impact of technological or organisational advances on the skills required for F&B jobs. This booklet summarises the second project conducted by the Chair  : a prospective study on the purchasing function in F&B outlets. The goal was to anticipate how this function will have evolved by 2025, especially in terms of activities and skills. This of course implied anticipating the evolution of the macro-environment as well. After a first research conducted in several European countries, we chose to focus on Shanghai. We therefore studied the macro-environment in China, and then more specifically in Shanghai. For both, the main economic, legal and social issues were studied. We also interviewed F&B experts and professionals who worked in Shanghai. This allowed us to identify specificities and di≈erences with Europe which needed to be taken into account, and thus to adapt our questionnaire before distributing it on a large scale to restaurants in Shanghai.
  • 6. 3Job observatory in the f&b industry purchasing function in shanghai China & shanghai macro-environment Main features of the macro-environment in China : >> Most populated country in the world (1.35 billion people). >> Largest country in Asia. >> Going through major economic, social and ecological changes. >> Responsible for 40 % of the worldwide growth. >> Industry constitutes between 45 and 50 % of the GDP. >> Food safety is a national priority after a 2008 scandal. >> Food safety scandals are covered almost weekly in Chinese newspapers. >> Human cost of pollution in China : 750,000 premature deaths every year. Main features of the macro-environment in Shanghai : >> Strategic place in terms of economic output, logistic facilities and localisation. >> Most populated city in China (5.2 million permanent residents in 1949, 14.4 million today). >> Population is mainly old and the city attracts large numbers of former farmers. >> In 2009, the annual GDP per capita was USD 11,750 (highest in the country). >> Remains the first destination for foreign investments in China. >> Aims to become the Chinese leader in food safety. Several measures were taken to this end : financial rewards for denunciations, a stricter application of laws and long jail sentences for those responsible for unsafe food productions. >> Food supply chains in their entirety need to be more involved in the improvement of sanitary conditions. Main features of the Chinese food and beverage industry : >> One of China’s fastest growing sectors : its output increases by more than 20% each year. >> In 2009 Shanghai was the city with the highest consumer foodservice sales, followed by Guangzhou. >> The Chinese foodservice market way estimated at US $ 333 billion in 2012, among which US $ 306 billion were accounted for by independent firms. >> Global chains are expanding rapidly (15 % growth in volume from 2009 to 2010). >> Chinese menus have been changing following a rise in disposable incomes and a change in dietary habits. >> In big Chinese cities, people are prepared to pay three times more for organic milk. >> Food stalls are a common type of outlet in Shanghai. >> Only 30 % of the 10,000 existing food stalls have reliable suppliers. Moreover, less than 10 % of the 650 stalls investigated had a business license. >> In restaurants the whole family is involved. The purchasing function Ensuring the liaison between internal departments and suppliers, the purchasing function is located upstream of the production and transformation process. Overall, it can be considered strategic, as it contributes directly to the quality policy of a company. It is essential that the buyer have a global vision of strategy and business objectives and be able to meet the specific needs of di≈erent departments that depend directly or indirectly on its performance. These departments can include sale, marketing, development, production and logistics. To do so, the buyer must above all use business intelligence so as to identify trends and suppliers. The purchasing function exists in all institutions, but its explicit position might not. It is therefore frequent for independent restaurants to handle or outsource procurement. In larger companies, one or several persons are specialised in purchasing. The buyer must take responsibility for all procurement management tasks, such as order tracking, inventory and budgets. In an e≈ort to control costs, he looks for suppliers and selects products according to defined sale or production criteria (quality, cost, delivery time…). Familiar with the characteristics of suppliers and their products, he negotiates the terms of purchase and delivery in collaboration with logistics services. But, above all, he must study the markets, get in touch with potential suppliers and stay aware of the latest innovations. To do this, he practices a “purchase watch” by analysing purchase and supply market trends. This leads him to collect a potentially considerable quantity of information that he is able to sort and prioritise so as to optimise its use.
  • 7. 4Job observatory in the f&b industry purchasing function in shanghai For most people, the buyer and the seller appear to have common skills. Purchasing of course has an extremely strong com- mercial dimension. It is sometimes associated with marketing because it requires a thorough knowledge of the markets. Some large companies have merged their purchasing and marketing departments in order to have procurement and distribution monitored by the same persons. Creation of prospective scenarios We identified three sub-systems (macro-environment, foodservice market and purchasing organisation), each with a dif- ferent number of variables. We considered each variable’s past evolution, its trend and the disruptions which could a≈ect it. We also identified three or four degrees of intensity or performance for each variable. We then crossed the variables and their intensity levels. This produced fourteen micro-scenarios for the macro-environment sub-system and fifteen for the foodservice market and purchasing organisation sub-systems. Finally, a cross-analysis determining which micro-scenarios were most compatible with each other allowed us to create a total of nine scenarios.Interviews of chinese professionals & adaptation of the european survey For the quantitative research, we adapted the survey we had created for our European study. We therefore had to identify the main di≈erences between the two areas.To do so, in addition to studying the macro-environment, we interviewed several experts on the catering industry in China and Shanghai. Several key aspects of restaurant purchases were discussed with them : the organisation of purchases, the relations between restaurateurs and suppliers, the importance of technologies and CSR issues. Following these interviews, the variables which concerned Europe rather than China were removed, and we added ques- tions taking into account the following elements : >> The prevalence of small to very small traditional Chinese restaurants. >> The strong influence of traditional and persistent networks and ways of functioning on logistics organisation. >> The importance attributed to personal relationships, networks and recommendations (guanxi). >> The greater need for adaptation and flexibility (price and quantity) in a context characterised by volatile prices and a growing demand. >> The issue of food safety, which is a major challenge for F&B operations in Shanghai and in the whole country. The survey was then checked by a panel of foodservice industry experts. Data collection To know which changes restaurant managers and buyers anticipate for 2025, we hired English-speaking Shanghai students to distribute the questionnaire to people in charge of purchasing in catering outlets. We thus gathered a total of 304 questionnaires, among which 294 were usable.
  • 8. 5Job observatory in the f&b industry purchasing function in shanghai Results Description of the sample NUMBER OF SEATS 1 to 50 83% 51 to 100 12% 101 to 200 3% more than 200 2% 83 % of small restaurants The overwhelming majority of our respondents (83 %) work in a restaurant that have between 1 and 50 seats. Only 5 % of them work in an outlet with more than 101 seats. 2 to 100 62%101 to 150 9% 151 to 200 17% more than 200 12% AVERAGE NUMBER OF MEALS 62 % with less than 100 meals/day 62 % of the restaurants included in our sample serve on average 100 meals per day or less. The second most common answer was 151 to 200 meals per day. more than 30 3% 21 to 30 7% 11 to 20 16% 6 to 10 29% 1 to 5 45%NUMBER OF EMPLOYEES 45 % of very small enterprises (VSEs) Almost half our respondents (45 %) work in restaurants that have 1 to 5 employees. In 29 % of cases, the outlets have between 6 and 10 employees, while 16 % have 11 to 20. Only 3 % have more than 30 persons in the staff.
  • 9. 6Job observatory in the f&b industry purchasing function in shanghai TYPE OF RESTAURANTS Traditionnal 44% Fine dining 12% Fast casual 7% Fast food 27% Bar/pub 1% Street stall 4% Tea room 2% Other 3% Independent 89% Chain 11% INDEPENDENT VS CHAIN 89 % independent restaurants Our sample is composed of 89 % of independents and 11 % of chains. This distribution is fairly similar to the one we had in our European study (84% independents, 16 % chains). 44 % traditional restaurants Traditional restaurants – mostly old, small structures with few processes and very traditional practices – make up 44 % of our sample, while 27 % of our respondents work in a fast food out- let. The third most common kind of outlet in our sample is fine dining (12 %). The sample also includes fast casual restaurants (7 %), street stalls (4 %), tea rooms (2 %) and bars/pubs (1 %). By contrast, in our European study on the purchasing function, 62 % of the respondents were traditional restaurants, 14 % described themselves as fine dining and 7 % as fast casual, and only 2 % were fast food outlets. one 49% two 28% three 11% four 2% five 9% seven 1% NUMBER OF PEOPLE IN THE PURCHSING DPT 44 % with a purchasing department 44 % of our respondents work in an outlet that has a purcha- sing department. 49 % of these are single-person departments, whereas 28 % are run by two staff members and 11 % by three.
  • 10. MACRO-ENVIRONMENT & FOODSERVICE Legislation on food safety implemented No practice gap between Western and Chinese restaurant Some products replaced by substitutes Di÷cult for suppliers to meet rising demand 0% 20% 40% 60% LAW PERTAINING TO THE CATERING INDUSTRY Laws more restrictive Laws allow improvement of practices Food safety controls more systematic Food storage regulated Food transportation regulated 0% 20% 40% 60% Yes No Undefined 7Job observatory in the f&b industry purchasing function in shanghai Prospective results (2025) The previous graphs show the percentage of positive responses for each variable by country. A positive response generally means that the respondent agreed with an assertion, though in some cases it corresponds to the selection of one option over others. We compared these results with those of our previous research. This allowed us to get an idea of how the opinions and expec- tations of restaurateurs in Shanghai di≈er from those of restaurateurs from various European countries. As a reminder, the questions concerned what the restaurant managers and buyers thought they would do or need in 2025, as well as how they thought the F&B market and the macro-environment would be. They therefore indicate their opinions on the future. F&B market & environment in 2025 The respondents globally disagree with the idea that the practice gap between Chinese and Western restaurant will disappear (65 %) and that some products will be replaced by substitutes (61 %). They are uncertain (62 %) about whether the legislation on food safety will be implemented. For the assertion “suppliers will have di÷culties meeting the rising demand”, there are two dominant responses rather than one : 43 % of the respondents respond neutrally and 40 % negatively. By contrast, only 17 % agree. Shanghai restaurateurs have the same opinion as their Spanish and Swedish colleagues regarding food substitutes in 2025. By contrast, in France, the UK, Spain and Poland, respondents reacted rather positively to this variable. Neutrality is strikingly high (68 %) in response to the assertion that laws will be more restrictive. On the other hand, the pos- sibility of laws giving restaurateurs the opportunity to improve their practices is rejected by 53 % of the respondents. 43 % of them also disagree with the assertion that food safety controls will be more systematic, and the same percentage is neutral about food storage regulation. For the last variable, the regulation of food transportation, no response stands out : 31 % of the participants in our study think that transportation will indeed be regulated, 35 % disagree with this idea, while 34 % are neutral. The way legislation will evolve is much less clear for Shanghai restaurateurs than for their European counterparts. This can be explained notably by the di≈erence in political regime. However, it is notable that, as those in Europe, restaurant managers in Shanghai do not think that laws would allow the improvement of practices.
  • 11. CSR BEHAVIOUR Food safety improved thanks to simplified legislation CSR practices through nutrition CSR practices through eco-labels Monitor waste of food Monitor waste of water and energy 0% 20% 40% 60% PURCHASING & STRATEGIES: IMPROVING THE PURCHASING PROCESS WILL INCLUDE Partnership with other restaurants Implementation of documented procedures Improve cost forecasting Improve the e÷ciency of the process 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Yes No Undefined 8Job observatory in the f&b industry purchasing function in shanghai For the first three variables, the di≈erence between the respondents’ reactions is not strongly marked. Disagreement prevails for the assertions “food safety will be improved thanks to a simplified legislation elaborated in collaboration between autho- rities and practitioners” and “you will implement CSR practices in your restaurant through eco-labels” (37 % in both cases). The idea of implementing CSR practices through nutrition is approved by a small majority (36 %) of the respondents. For the other two variables, the contrast is more striking : the perspective of monitoring the waste of food and of water and energy seems unlikely to respectively 47 % and 49 % of the restaurateurs. According to various studies, sustainable development will be of great importance in Shanghai in the upcoming years ; the Shanghai survey therefore had more questions on this subject than the European questionnaire. The Shanghai respondents are more divided on the topics of the implementation of nutrition and eco-labels in menus than the Euro- pean professionals we contacted for our first study. Their overall response to each of these two variables is close to the Polish restaurateurs’ : accepting, but not overwhelmingly so. However, unlike their Polish colleagues, they think that CSR is slightly more likely to be implemented through nutrition than through eco-labels. The purchasing function in 2025 When it comes to the ways in which Shanghai restaurateurs think they will improve the purchasing process, improving its e÷ciency is the first or second selected variable in 78 % of the cases. The improvement of cost forecasting is mentioned as first or second option by 65 % of the respondents. For the options “implement formal and documented procedures” and “enter into partnerships with other restaurants”, this is the case 46 % and 9 % of the time, respectively. In Shanghai, the respondents are less confident than the European ones when it comes to the improvement of cost forecasting during the coming years. They also attach more importance to the improvement of the e÷ciency of the purchasing process.
  • 12. PURCHASING & IT: IT WILL BE USED TO… Monitor orders Assess the e÷ciency of purchasing (cost) Implement procedures for purchases Order the purchases Network between cash register & purchasing department Monitor safety of goods 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% PRIORITIES IN SUPPLIER SELECTION WILL BE… Safety of goods Degree of trust Personalisation of the o≈er Habits Adaptation of deliveries Flexibility in payments Quality of products Respect of F&B costs 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 9Job observatory in the f&b industry purchasing function in shanghai The monitoring of orders, the assessment of the e÷ciency of the purchases and the implementation of purchasing procedures are the three most commonly cited uses of IT for 2025. These variables appear in the respondents’ top three choices in 89 %, 74 % and 67 % of the responses, respectively. During the research on the macro-environment in Shanghai, it became apparent that food safety management was and would remain crucial. This variable was hence emphasised compared to the survey which was created for our European study on the purchasing function. The respondents’ answers suggest that food safety will not be managed using technology. Shanghai respondents think that IT will be used not only to assess the e÷ciency of purchasing (which was also consi- dered important by the European respondents), but also to monitor orders and to implement purchasing procedures. In our European study, the former variable garnered a very small amount of positive responses, while the latter was overall only mildly accepted ; the options those restaurateurs primarily chose were “assess the e÷ciency of the pur- chasing process” and “order the purchases”. The respondents anticipate their priorities in supplier selection in 2025 to be the respect of F&B costs (83 % of occurrences in the four main decisive factors), the quality of products (80 %) and the adaptation of deliveries (63 %). The two most important variables were the same in Europe, but not the third one : the European respondents listed trust after respect of F&B costs and quality. Adaptation of deliveries reached the third place in Sweden, though. The importance of this variable is probably linked to the size of the Chinese city and to the flexibility this requires from restaurants. Finally, flexibility in payments and personalisation of the o≈er is more important for the Chinese sample that for the European respondents, who deemed these two variables insignificant.
  • 13. PURCHASES & RELATIONSHIP WITH SUPPLIERS Informal & based on trust Based on contract In a virtual market 0% 20% 40% 60% Yes No Undefined PURCHASER WILL EXPECT FROM SUPPLIERS Clear nutritional information CSR practices The use of new techno- logies for traceability Participation in stock management 0% 20% 40% 60% MANAGERS’ ATTITUDE TOWARDS SUPPLIERS Be proactive in supplier selection Use wholesalers more frequently Use group purchasing more frequently Buy more from independent suppliers 0% 20% 40% 60% 10Job observatory in the f&b industry purchasing function in shanghai The assertion that relationships with suppliers will be informal and based on trust elicited a mostly neutral response (51 %) ; the agreement rate for this variable is low (15 %). The response to relationships being based on contracts is slightly positive : 38 % of the respondents agree, while 30 % of them disagree and 32 % are neutral. In the case of the third variable, the existence of a virtual market, the disagreement and neutrality rates are almost the same (37 % and 36 %, respectively). The diversity of restaurants in our sample explains this response. In this case too, restaurateurs find trust less important in Shanghai than in Europe. On the other hand, a development of contract-based relationships is expected both in Europe and in China. Shanghai restaurateurs are less resistant to a virtual market than their European counterparts. All four variables of this category have a very similar response structure : in each case, agreement is the most prominent reac- tion (46 % to 51 %), disagreement is low (19 % to 22 %) and about one third of the respondents are neutral (19 % to 22 %). The variable for which the results are most contrasted is “clear nutritional information”. In Europe too, restaurateurs thought that CSR-related services and o≈ers, especially nutritional information, CSR practices and technology-enabled traceability, would be managed by F&B suppliers. The idea of participating in stock management was less positively received than in Shanghai, where restaurateurs are more oriented towards technology, the implementation of procedures and the improvement of the e÷ciency of the function. More than half of the restaurateurs which took our survey (54 %) are undecided on whether they will be proactive in supplier selection. Results are less clear-cut for the other variables. For the use of wholesalers, the agreement and neutrality rates are very close (35 % and 38 % respectively). More frequent group purchasing and purchasing from independent suppliers prompted almost the same reactions : respectively 29 % and 26 % of approval, 32 % and 33 % of rejection, 38 % and 41 % of indecision. It is more di÷cult for this sample to anticipate the future of supplier selection than it was for our European respondents. Moreover, their response to the variable “use wholesalers more frequently” is the opposite of the European restaura- teurs’ response ; they might therefore anticipate a restructuration and a consolidation of the supplier market.
  • 14. EVOLUTION OF THE MARKET Productivity will increase and staff be reduced Market will be directed by suppliers Suppliers in cooperatives 0% 20% 40% 60% USE OF TECHNOLOGIES Traditional will use technology as much as western No more correlation between size of restaurant & use of tech Technology integral part of the relationship with suppliers Technology integral part of purchasing process 0% 20% 40% 60% Yes No Undefined 11Job observatory in the f&b industry purchasing function in shanghai 39 % of the respondents think that neither will productivity increase, nor will sta≈ be reduced. 37 % of them are unsure whether suppliers will direct the market, but 36 % think that it will not be the case. On the other hand, uncertainty clearly dominates the responses to the assertion “local suppliers will be organised in cooperatives”. The idea of traditional Chinese restaurants using technologies as much as Western restaurants does not elicit agreement : it is rejected by 40 % of the respondents, while 42 % are not sure what to think about it. According to 46 % of the replies we collec- ted, there will still be a correlation between the size of restaurants and their use of technology in 2025. Respondents also think that technology will be an integral part neither of the relationship with suppliers (41 %), nor of the purchasing process (42 %). Most of the respondents (41 %) are uncertain about the necessity of training in nutrition. Reactions are almost perfectly evenly distributed for training in technologies : 34 % agree that it will be essential, 34 % disagree, and 32 % are neutral on the ques- tion. Finally, 41 % of the respondents do not deem training in management necessary. Management and nutrition are thus the domains in which they think training will be least useful. This perception might be due to the fact that they think they already have the required skills ; alternatively, perhaps they are not qualified, and thus have a narrower vision of the job and do not see how training could be useful. This disinterest in training is similar to the opinion of restaurateurs in Poland and, to a lesser extent, Germany. Respondents’ comments At the end of the survey, we asked the following question : “What do you wish you had today from your food and beverage suppliers ?” A large part of the restaurant purchasers or owners who participated in our study replied to this question. Their comments express three types of needs : >> A need for cheaper products, which illustrates theirpricesensitivity ;theterms“price”,“cheaper” and “reasonable prices” exemplify this need. >> A need for healthier products, formulated in clearandmeaningfulterms :“healthy”wasoften quoted, and terms such as “safe”, “safety” and “clean” appeared too. >> Aneedfora closerrelationshipwithsuppliers : wordslike“integrity”,“trust”and“partnership” show that this kind of strong relationship is rather rare. Some respondents even asked for “more supply chain supervision”. The tag cloud of the comments looks like this :
  • 15. 12Job observatory in the f&b industry purchasing function in shanghai Consequences on restaurants The SPSS clusters revealed two types of 2025 restaurants : “getting better” outlets and “old school” outlets. “Getting better” outlets This cluster is representative of the perception of chained or innovative F&B outlets. It attests a positive anticipation of the use of IT and technologies in restaurants. It also suggests potential improvements in processes and training. >> Legislation : evolution of the legislation to ensure food safety, secure supply chains and storage ; >> Strategy : contracts with suppliers, financial management ; >> Nutrition and CSR : sustainable, safe and nutritional products will be preferred, waste and energy will be monitored ; >> Technology : monitoring of traceability and of the purchasing process, automatisation of the service and the kitchen, automatised ordering for customers ; >> Training : training in management, nutrition and IT will be mandatory. “Old school” outlets This cluster is representative of the perception of traditional Chinese restaurants and shows that traditional management practices will endure. E≈orts to improve nutrition and food safety controls are nevertheless expected. >> Legislation : more food safety and storage controls, but still not enough. >> Suppliers : will have di÷culties meeting the demand, relationships with buyers are informal and based on habits, contracts are starting to be used ; >> Purchases : just-in-time stock management, the value for money of products and the suppliers’ flexibility for payments are preponderant criteria ; >> Nutrition and CSR : nutrition is becoming important, no monitoring of waste or energy ; >> Technology : might be used, but only for traceability. Getting better 23% Old school 77% TYPE OF RESTAURANTS
  • 16. 13Job observatory in the f&b industry purchasing function in shanghai Most probable scenarios for purchasing in restaurants in 2025 We looked for correlations in the results of the quantitative study to determine which of our scenarios are the most probable. Out of the nine scenarios we had constructed, two emerged. A basic and traditional purchaser 82% of correlations confirmed In this scenario, there has been a “soft landing” of the Chinese economy. This slow GDP growth delays the evolution of many markets and industries, including the F&B market. The remaining pressures (urbanisation, ageing of the population and inflation of food prices) favour an increase in the e÷ciency of the market. Indeed, they should lead to a rationalisation of the F&B market and to productivity gains. F&B Market >> Independent and traditional restaurants remain the core of the foodservice market in Shanghai. >> The number of F&B customers has increased. >> The budget for F&B expenditures and the average ticket are still low, as price is a crucial variable for customers. >> Persistent food safety scandals, but no concrete action is undertaken to improve the situation. >> More restrictions and controls of food storage and safety. >> Consumers are resigned. >> The dichotomy of the market is especially strong : modern outlets use IT tools, while traditional ones do not. >> Restaurants compensate low sta≈ productivity by having numerous badly paid employees.
  • 17. 14Job observatory in the f&b industry purchasing function in shanghai Purchases >> The use of IT and technologies for purchases, production and delivery is limited. >> The purchaser ensures food procurement and adapts food quantities to customer demand and budgets. >> The restaurant purchaser does not need to be a strategic thinker. >> Low degree of definition of the need or of anticipation of the demand. >> Negotiation and reactivity are constantly needed. >> The purchaser’s activities and relationship with suppliers remain simple, based on routines and mainly informal. >> The purchaser does not have defined processes for his purchases. A strategic purchasing manager 68% of correlations confirmed This scenario would be particularly appropriate in case of an outstanding GDP growth in China and of an improvement of infrastructures. This would drive strategic governmental choices, translated in public investments for productivity and a more qualitative growth. To compensate for an important inflation and evolution of food prices, the foodservice industry would be obligated to incorporate more qualifications, knowledge and technical skills. F&B Market >> Concentration of the market due to the extension of restaurant chains and the disappearance of many small, independent operations. >> Improvement of the overall market. >> Implementation of e÷cient and secure supply chains. >> The gap between chained and independent restaurants still exists, but is less important. >> Processes and IT tools are used to better monitor the operations and increase productivity. >> The use of IT and technological devices is not yet generalised to the whole foodservice. >> Robotisation, automatised ordering for customers in chained and high-end restaurants. >> IT contributes to a general pursuit of greater productivity and a diminution of the costs. >> Expectations regarding safe, sustainable and nutritional products are high. >> The evolution of the legislation encourages adaptation. Purchases >> Purchasers gain expertise in legislation, safety, sustainability and nutrition. >> Progress in food transportation, storage and traceability thanks to technological solutions. >> More strategic and professional behaviour. >> Purchasers implement processes and take initiatives to improve collaborations with suppliers. >> Network management is an obligation for the purchaser. >> Technology has improved the ordering of purchases and the monitoring of the suppliers’ market. >> Financial management of the purchases is a priority for the purchaser.
  • 18. 15Job observatory in the f&b industry purchasing function in shanghai Additional scenario : state regulation Contrary to the two scenarios described above, this one is not the result of the survey analysis. It has been elaborated on the basis of a remark which was made by every expert we met in Shanghai and Beijing : the Chinese government has the power to modify situations with unexpected intensity and strength (compared to Western countries), especially when there are issues which threaten the social stability of the country. F&B Market >> Complete control of food safety and traceability by governmental agencies. >> Major strategic choices and public investments in the foodservice market to secure supply chains. >> Most small and traditional businesses are not able to comply with the new regulations or to invest to regularise their situation. >> Consumers are more inclined to “hop” between restaurants, as more of them seem safe and secured. >> Restaurants specialise in health issues related to food consumption. >> Probable increase in the use of IT and technologies improving food security. Purchases >> The purchaser occupies an even more central and strategic position in the restaurant, as priorities and finances would be deeply influenced by purchasing requirements. >> Very high degree of professionalisation of the purchaser or purchasing department. >> Purchasers are versatile technicians : able to understand, apply and anticipate legal norms and evolutions and at the same time to find and use the most adapted means to do so. >> IT tools mobilised to reach the highest food safety standards possible. >> The purchaser has to be proactive, both in the restaurant and with external partners. >> Concentration of the supplier market. >> Development of new products with wholesalers and group purchasing organisations. >> Within these strategic supply chains, sanitary, nutritional and even ecological aspects are strongly improved.
  • 19. 16Job observatory in the f&b industry purchasing function in shanghai Consequences of the most probable scenarios on the purchasing function Several kinds of activities and skills will have appeared or become more important in 2025, depending on the evolution of the market. A basic and traditional purchaser A strategic purchasing manager State regulation Activities >> Beginning of professionalisation >> Specialised in purchasing >> Multitasks >> Technician >> Application of the law >> Chooses suppliers based on partially formalised selection >> Endured sustainability >> Moderate communication >> Moderate professionalisation >> Specialised in purchasing >> Multitasks >> Negotiator >> Application of the law >> Chooses suppliers based on partially formalised selection >> Limited number of suppliers >> Strong communication with suppliers >> Endured sustainability >> Scans the environment >> Food safety controls >> Regulation of storage and transportation for food safety >> Complete professionalisation of the activity >> Adapts quickly to the needs >> Negotiator >> Pools for purchasing >> Sustainable practices >> Implements and anticipates legal aspects >> Monitors waste (food, energy, water) >> Regulates food storage >> Uses technological tools to communicate with suppliers >> Tracks traceability >> Chooses key suppliers based on formalised selection >> Contract management with suppliers >> Scans the environment Skills >> Multitasking >> Ability to understand laws >> Ability to recognise safe and healthy products >> Ability to analyse suppliers’ practices >> Cost-focused >> Basic communication skills >> Basic technological skills >> Multitasking >> Ability to recognise safe and healthy products >> Ability to analyse suppliers’ practices >> Ability to select a small number of suppliers >> Cost-focused >> Communication skills >> Structuring relationships with suppliers >> Basic technological skills >> Ability to understand & apply laws e÷ciently >> Ability to monitor food safety >> Ability to scan the environment >> Ability to monitor and formalise activity >> Ability to scan & understand the environment >> Ability to understand internal needs >> Ability to anticipate the legal evolution >> Understanding of sustainability issues >> Ability to regulate food storage >> Cost-focused >> Ability to monitor traceability >> Communication proficiency >> Ability to use advanced technological tools
  • 20. 17Job observatory in the f&b industry purchasing function in shanghai Conclusion The results of our study stress the high level of changes that will occur in the Chinese F&B market, especially the Shanghai area, by 2025. The evolution of the foodservice market will depend on several factors : the degree of concentration and di≈usion of techno- logies and the frequency of food safety crises, for example. Moreover, several evolutions of the F&B market in Shanghai will depend on local and national policies such as food safety regulation. Indeed, if some strict rules are adopted and e÷ciently implemented, a large part of the F&B outlets would have to adapt or close down. Even if an economic landing of the Chinese economy is expected, the Chinese middle class will continue to progress and to request better and safer products. This will prompt an increase in the market value and an improvement of F&B practices. To answer this demand, restaurants will have to improve their processes and use tools. There already is an improvement trend in restaurant management, instigated by restaurant chains and some especially modern restaurants in Shanghai. Nevertheless, the dichotomy of the market will remain strong. Indeed, two categories of restaurants emerged from the quantitative part of the study. On the one hand, there will be small, traditional operators. They will remain a significant part of the restaurant operation in Shanghai, though they will form a smaller majority in the future. They use few processes and technologies but provide cheap and convenient food. They will be able to do this notably thanks to a low-paid workforce. These operations will marginally improve their attitude towards food safety and nutrition, but their priority will be to remain as flexible as possible in order to adapt to the changes in food prices, product availability and customer requests. On the other hand, modern and innovative restaurants (the majority of which are chains) will increase their market share. Sta≈ productivity and financial profits will contribute to their success and development in the Shanghai F&B market. They will continuously implement management processes and training for their employees in order to gain e÷ciency. Software, IT and even robotisation of some specific tasks will also be used to that end. Moreover, these outlets will be better able to answer the growing customer demand for safe, nutritional and sustainable meals.
  • 21. 18Job observatory in the f&b industry purchasing function in shanghai Based on this research, here are our recommendations for F&B suppliers : Training >> Make restaurant managers understand the need for training >> Help restaurants have healthier meals by providing training >> Provide basic computer training (free or cheap) Technology >> Provide simple technological (Excel) and paper tools to help restaurants monitor their costs >> Support stock management in restaurants (IT tools, connection with cashier machines or suppliers…) >> Monitor and support changes towards an increased use of technology in the kitchen (production), for service and for purchases (for chains) >> Provide simple traceability tools >> Packaging that protects products in any storage conditions Products >> O≈er safe products & highlight their safety >> Emphasise the good value for money of your products >> Provide cheap products >> Provide healthy products >> Provide packaging that protects products in any storage conditions Relationships >> Improve trust in your brand >> Favour long-term relationships based contractual agreements >> Support them in the improvement of their practices >> Be flexible in payment deadline Sustainability & nutrition >> Communicate and highlight the safety of your practices >> Communicate more information on the healthy aspects of your products
  • 22. 19Job observatory in the f&b industry purchasing function in shanghai Acknowledgements This report would not have been possible without the contributions of several academic colleagues and institutions members : >> Mr Dominique Jolly, Professor at Skema Business School, Shanghai campus >> Mrs Juan Shan, Assistant Professor at School of Management, Shanghai University >> Mr Pascal Marmier, Executive Director / Vice Consul General, Swissnex China >> Mrs Viviane Gut, Communications & Entrepreneurship, Swissnex China >> Mrs Stephanie Chatelanat Marmier, Advisor Food and Hospitality Services, Shanghai Numerous F&B professionals in Shanghai also participated in the qualitative research or in the collect of data : >> Mr Franck Lafourcade, Area General Manager - Eastern China General Manager - Sofitel Shanghai Hylandand >> Mr Peter Weber, RVP & GM at Four Seasons Hotel, Shanghai >> Mr Jayan Shrestha, Food and Beverage Manager, Sofitel Shanghai Hyland >> Mr Thomas De Bruyne, Mr Max Bonon, Mr Benjamin Blaise, co-founders and managing partners at “le Café des stagiaires”, Shanghai >> Mr Alexandre Mathais, Assistant Director of Food and Beverage Four Seasons Hotel, Beijing Finally, students from EHL and from the School of Management of Shanghai University helped us translate documents to and from Mandarin, improve of our data and network in the Shanghai F&B market and collect data for the quantitative research : >> Mrs Hui Hui Yang, BSC 3 Student, EHL >> Mrs Ludivine Roux, BSC 3 student, EHL >> Mrs Xirong Lu, AP student, EHL >> Mr Tom Moers, BSC1 student, EHL >> Mr Shan Zhou, Student of School of Management, Shanghai University – who did a particularly amazing work during the collection of the data.
  • 23. Research team Food & Beverage Industry Chair - École hôtelière de Lausanne dr. christine Demen Meier Chair holder, PhD +41 21 785 14 92 christine.demen-meier@ehl.ch Clémence Cornuz Scientific collaborator +41 21 785 13 57 clemence.cornuz@ehl.ch Stéphanie Bonsch Scientific collaborator +41 21 785 13 57 stephanie.bonsch@ehl.ch Nicolas Siorak Researcher +41 21 785 13 07 nicolas.siorak@ehl.ch