Auckland's Chinese restaurants embroiled in 'destructive’ price war

Chinese restaurants in Auckland appear to be embroiled in a cut-throat price war in a desperate bid to attract customers.

Since August, set meals in the city that comprise meat, vegetables, rice and unlimited helpings of soup have been available at several establishments for less than $10.

Restaurant owners say the heavily discounted meals are necessary to combat reduced consumer spending.

However, industry observers have expressed concern the strategy could push small businesses to the brink of closure.

Yongli Noodle on Auckland's North Shore introduced a Chinese-style bento meal worth $9.90 on 7 August that has attracted a steady stream of customers.

Owner Victor Hou says the price-cutting strategy is a last-ditch attempt to keep his business afloat.

Hou says his restaurant lost hundreds of thousands of dollars in 2023 due to the sluggish economy, with margins plummeting further since June.

As a result, he decided to overhaul his business model and focus exclusively on producing a set meal worth $9.90.

"The economic environment has forced us to cut prices," he says. "Our goal is simply to cover essential operating expenses and survive."

Yongli Noodle needs to sell 400 set meals every day to cover labour, rent and operating costs, he says.

The restaurant sold more than 500 set meals on the first day the $9.90 offer was launched, matching this number on the second day.

Hou keeps the restaurant's current daily sales volume to himself, describing it only as being "very high" and "beyond what other restaurants can imagine".

He rejects any suggestion he wanted to initiate a price war with other restaurants, adding that the model may not be suitable for all establishments.

"I advise against blindly following this model," he says. "If you don't sell a certain number of bentos, it won't be profitable. I must use 900 eggs and prepare at least 40 kilograms of tomatoes every day to meet customer demand."

Zen E Private Kitchen in Newmarket, Auckland, typically offers mid-range and high-end Chinese cuisine at an average cost of about $50 per customer.

In August, it also introduced a $9.90 lunch set.

Owner Katrina Huang says she introduced the $9.90 set meal to attract more foot traffic, particularly during lunchtime.

Huang says customer numbers have increased by at least 50 percent since the set meal was introduced.

"Customers can't afford mid-range and high-priced cuisine this year, so we hope to provide more affordable options," she says. "The increase in customer visits has helped fill the gap and boosted foot traffic to the restaurant during lunchtime."

She says the $9.90 lunch set will help support the restaurant's primary business.

"The $9.90 lunch set is just an additional option for customers alongside our regular meals," she says. "We can't rely on these $9.90 bowls of noodles or set meals to cover labour and rent. It's impossible."

However, she expects customers to return once they've ordered a set meal.

"Once customers visit, there's a better chance they'll order some of our higher-profit dishes," she says.

Dominion Rd's Bento Express specialises in producing Chinese-style bento boxes.

Restaurant manager Jack Wang says bento-style meals have performed well since first introduced at his Burswood outlet in 2016.

Offering good value for money, bento boxes are typically popular with customers looking to save a little on meals in a sluggish economy.

However, he says it's tough to sell meals for less than $10 and make a profit.

"I started offering lunch bentos eight years ago. The starting price then was $9.80 for one meat and two vegetables, and $12.80 for two meats and two vegetables," he says. "Now, the $9.90 bento (that includes one meat, a meat-and-vegetable mix and one vegetable offering) is priced as it was nearly a decade ago."

Wang says the price of a bento meal that includes one meat and two vegetable dishes at his restaurant has risen to $15, while a bento meal that includes two meats and two vegetable dishes has increased to $18.

However, he has been forced to slash the price of a simple bento meal to $9.90 due to pressure from competitors.

"Other restaurants are selling at this ($9.90) price, so customers will complain if I don't match it," he says. "If I keep the meal's original price, I'll lose all my customers."

Wang says it is extremely difficult for his business to offer set meals at such a low price and make any profit but feels as if he has little choice.

Given the high cost of living, customers say they're strongly influenced by meal prices when deciding where to eat out these days.

Jing Ren, who works in Auckland's Newmarket, has generally been satisfied by lunches costing $9.90.

"It's expensive to eat lunch at most restaurants these days, so I'm always conscious of the price on offer," Ren says. "If a lunch costs $15.90, I'm not interested."

Steve Culpan, a regular patron of Chinese restaurants in Auckland, says the $9.90 set meals are particularly appealing.

"I think it's an excellent idea, especially when times are hard for restaurants," he says. "They are trying to keep their restaurants open and keep the staff employed."

However, Wang says the tactic may backfire.

While customers probably welcome reduced prices, Wang warns that the competition could ultimately force some businesses to close.

"This will deal a significant blow to the entire restaurant industry," he says. "Many businesses will reduce prices (to match their competitors) but won't realise they need to sell at least 300 to 400 bentos at $9.90 each day just to stay afloat.

"If you don't have the capacity to handle such large volumes, you're just throwing good money after bad."

Wang says few establishments have the capacity to sell more than 400 set meals each day. As a result, many small businesses risk losing customers.

Marisa Bidois, chief executive of the Restaurant Association of New Zealand, says the ongoing consumer slump is hurting many businesses.

Bidois says businesses should review their pricing strategies to ensure long-term sustainability.

"Margins in our industry are already slim, so reducing them further can be risky," she says. "While price reductions can help drive volume, they should be balanced with the need to maintain profitability."

She says dramatic price cuts could lead to lower-quality menu offerings, subsequently harming an outlet's reputation.

"Destructive competition doesn't benefit anyone in the long run," she says. "While competition is healthy, it's far better to focus on delivering good value rather than just offering low prices."