XE Flavor reports record loss amid austerity drive

High-end restaurant chain Beijing XE Flavor Group said it swung to a record loss of 564 million yuan…

High-end restaurant chain Beijing XE Flavor Group said it swung to a record loss of 564 million yuan ($92.5 million) last year, reflecting the impact of the government's austerity drive.

In 2012, it made a profit of 109 million yuan.

Revenue fell 41.2 percent last year to 802 million yuan because of "changes in the operating environment and a sharp drop in consumption", according to its annual results released on Thursday.

XE Flavor's struggles are common in the catering industry as the austerity campaign continues this year.

Food manufacturers and catering experts said the age of high growth for luxury food products and high-end businesses has ended.

Bian Jiang, a deputy director of the China Cuisine Association, noted that the growth rate of the catering industry slowed to 9 percent last year from 13 percent in 2012 and 16 percent in 2011. Last year was the first time that growth slipped below double digits in 23 years.

The net profit of China Quanjude Group Co Ltd, a famed roast duck restaurant chain, is estimated to have fallen 28.4 percent in 2013, the first decline in five years. The company said in January that its sales were affected by a decline in high-end customers and concerns over avian flu.

Meanwhile, XE has had to adapt to changing times. It plans to target mainstream customers. It's also shut some stores that seem unlikely to be profitable again.

Five restaurants in Hohhot, Nanjing and Wuhan were closed, while the floor area of one outlet in the Xidan area of central Beijing was reduced to cut costs. The company has closed 10 restaurants so far.

XE Flavor also dropped high-priced dishes from its menu and eliminated minimum charges.

Li Qiang, secretary of the board of XE Flavor, said on Friday that the company aims to return to profitability this year by investing in diversified businesses including environmental protection and culture.

The company acquired Hefei Tianyan Green Energy Development Co Ltd in December. It also made an investment in Jiangsu Shengyi Environmental Technology Co Ltd.