Economic Watch: After Din Tai Fung’s closure of stores, old brands need adjustment to new market

BEIJING, Sept. 16 (Xinhua) — When the Taiwan-based dumpling chain Din Tai Fung opened its first store on the mainland in Shanghai in 2001, the per capita disposable annual income of urban residents on the mainland that year was less than 7,000 yuan (about 985 U.S. dollars).
Founded in 1958 in Taiwan, Din Tai Fung entered the mainland as a chain selling high-end xiaolongbao (soup-filled small steamed buns) and quickly gained popularity for serving tasty and delicate traditional Chinese dishes in fine dining spaces — at the time a fresh experience for many on the mainland.
More than two decades later, however, despite the more-than-seven-fold increase in the per capita disposable annual income of mainland urban residents, Din Tai Fung seemed to fall out of favor. In August, it announced the plan to close 14 of its mainland branches, following a roughly estimated loss of nearly 45 million yuan in these stores in the first seven months of this year, according to media reports.
Despite Din Tai Fung’s explanation that its decision was the result of the expiration of the business license and a lack of consensus from the board on the renewal, some observers see the deeper reasons as increasing competition among restaurants on the mainland and the brand’s failing to adjust adequately to the market.
Liu Ying, a researcher at the Institute of Taiwan Studies, Chinese Academy of Social Sciences, pointed out that the rapidly increasing speed and quality of innovation and upgrading in the mainland restaurant industry led to a relative decline in the competitiveness of Din Tai Fung.
She noted that younger consumers, who are the main force in the market, have increasingly high expectations for cultural elements, personalized services and innovation in dining experiences.
As restaurant competitors grew in both quality and quantity, Din Tai Fung must also respond to growing consideration of better value for money — young consumers, who today have far more dining and entertainment choices than ever before, and weigh up whether they will get their money’s worth before spending it.
The mainland market now features new trends, with consumers becoming more rational and pragmatic, unwilling to pay extra just for a brand premium, and increasingly focused on value for money, Liu said.
Zhao Zhiqiang, founder of a mainland restaurant chain, said consumers have a set price range in mind for each food category. “Spending 150 yuan per person on seafood might be acceptable, but over 100 yuan for a meal of buns is harder to justify,” he said.
A quick look at food review app Dianping and the social media app Xiaohongshu reveals controversies surrounding Din Tai Fung and value for money. Some consumers complained about the taste of its xiaolongbao, which cost as much as 100 yuan for a set of 10, while others criticized its 10-percent service charge when “there is no service.”
Din Tai Fung, so as some other brands that entered the mainland in the earlier days, is faced with challenges in keeping up with the fast pace of the mainland market. These old brands are often seen as more conservative when it comes to market sensitivity, product updates, marketing strategies and customer interaction, in contrast to new brands that are good at capturing market trends and using social media for efficient marketing.
“The market is changing,” said a recent commentary published by Taiwan’s Want Daily, noting that mainland restaurants have been innovating in cuisine diversity and services, and the fierce market competition is weeding out weaker players.
“Food brands from Taiwan need to maintain keen market sensitivity and keep up with the times to remain competitive,” it suggested.
The market on the mainland is still large. In 2023, the restaurant industry’s total revenue reached 5.2 trillion yuan, marking an impressive 20.4-percent annual growth.
With the world’s largest middle-income group, the mainland boasts vast market space, Liu said. She and other observers remain positive about the investment and development prospects of Din Tai Fung and other brands from Taiwan. Din Tai Fung has confirmed that its 18 other stores on the mainland will continue to operate normally.
Cross-Strait cooperation in the service industry, including the restaurant sector, is an important aspect of integrated development, and by enhancing competitiveness, restaurant brands from Taiwan can continue to benefit from the rapid growth of the mainland economy, she noted. ■