Thai Market insights 2024

Top 10 Industry Challenges during 2024

Challenge	Description
Sharp Rise in Labor Costs	raising the minimum wage, combined with labor demand from the recovering tourism sector, is causing sharp wage increases (over 5.0 percent wage growth in this sector). This significantly raises costs for businesses that rely heavily on minimum wage labor.
High Household Debt & Slow Local Income Recovery	High household debt (89.6 percent of GDP) and slow income growth for vulnerable households limit the amount of money local residents can spend on dining out, leading to cautious private consumption.
Intense Market Saturation and Competition	The market is experiencing increasingly fierce competition from numerous new entrants, existing chain expansion, and new concepts (like food halls and expanded QSRs), making it difficult for businesses to stand out and raise prices.
High Operating Costs and Rent	Restaurants, especially those in prime urban and tourist areas, continue to face high overhead costs, including substantial rental expenses.
Rising Cost of Ingredients and Packaging	Input costs, especially for imported proteins, dairy products, and specialty ingredients, have seen double-digit inflation in 2024 due to global supply chain issues and currency fluctuations, severely straining profit margins.
Subdued Prepared Food Prices (Pricing Constraint)	Despite facing high internal costs, core inflation remains low partly due to unexpectedly low prices for prepared food and strong competition, which limits the ability of restaurants to pass on rising labor and ingredient costs to consumers.
Supply Chain Bottlenecks and Freight Costs	Geopolitical tensions (such as those in the Red Sea) are increasing production costs via higher freight costs and supply chain delays. For perishable goods, longer delivery times threaten exports to distant markets.
Financial Strain and Credit Risk for Small Businesses (SMEs)	The slow income recovery, coupled with high debt, elevates credit risk and increases the likelihood of debt problems (NPLs), particularly among small and vulnerable businesses.
Strict Regulatory and Compliance Burden	New regulations, such as the Food and Drug Administration implementing comprehensive food safety standards, require substantial resources for compliance, especially for independent restaurant owners lacking economies of scale.
Structural Labor Skill Gaps and Decline in Growth Potential	Thailand faces a long-term challenge due to a shrinking labor force and skill gaps, which hinders productivity improvement. This contributes to a long-term decline in the country’s potential GDP growth.

Top 5 trends Thai Businesses use to Increase Profitability

Focus Area	Details
1. Digital Expansion and Cloud Kitchen Growth	Restaurants increased their market reach and efficiency by leveraging digital ordering platforms and prioritizing the rapid growth of Cloud Kitchens, which are forecast to surge at a 26.13% Compound Annual Growth Rate (CAGR) through 2030. Furthermore, some businesses sought to increase profit margins by incorporating service fees (GP) into the net price of their items sold via delivery platforms.
2. Dominance and Efficiency of Quick Service Restaurants (QSRs)	QSRs maintained their market dominance, holding 51.02% of the market share, by successfully providing cost-effective and accessible dining solutions to urban professionals and price-sensitive local consumers. Profitability was secured through constant store expansion (QSR outlets increased by 3.6% in 2024) and utilizing operational technology to streamline workflows.
3. High-Value Gastronomic Tourism and Experience	Full-Service Restaurants (FSRs) and specialized venues focused on high-end cuisine and unique dining experiences to capture revenue from international tourists, whose arrivals are expected to rise significantly to 36.7 million in 2024. This strategy aligns with the goal of the Tourism Authority of Thailand (TAT) to generate 20–25 percent of its revenue from the food sector.
4. Operational Cost Mitigation and Menu Engineering	Businesses implemented strict cost control measures, such as menu engineering, portion optimization, and supplier diversification, to protect profit margins against major internal pressures. These pressures include sharply rising labor costs—with accommodation and food services sub-sector wages growing by more than 5.0 percent—and double-digit inflation on imported proteins, dairy, and specialty ingredients.
5. Catering to Health and Sustainability Premium Trends	Profitability was enhanced by differentiating offerings to align with the growing demand from consumers—especially urban millennials and Gen Z—for healthier, plant-based, and sustainable food options. This trend allows businesses to justify higher prices, as consumers are willing to pay a premium for products that emphasize wellness and eco-friendly sourcing/packaging.

Business Strategy: Tourist Customer Economy

1. Prioritizing High-Value Dining and Experiential Tourism:
   Businesses are focusing on upmarket offerings and unique experiences to attract tourists who pay a premium, shifting away from mass-market, low-cost approaches. The strategy emphasizes gastronomic tourism, with the Tourism Authority of Thailand (TAT) aiming for 20–25 percent of its revenue from the food sector. This is supported by the prominence of fine dining and sophisticated restaurants, including Thailand’s 34 MICHELIN-starred establishments.
2. Strategic Expansion in High-Traffic Tourist Areas:
   Restaurants are expanding their operations in prime locations to capture the near-full recovery of international arrivals. Travel-related foodservice venues (such as those in airports, hotels, and tourist attractions) are forecast to record the fastest growth, with an estimated Compound Annual Growth Rate (CAGR) of 11.01%. Full-Service Restaurants (FSRs) particularly benefit from the return of international tourists seeking authentic and unique dining experiences.
3. Specializing in Global and High-Quality Cuisine:
   To cater to diverse international palates and support higher price points, establishments are specializing in both authentic Thai delicacies and high-demand global cuisines. Asian Full-Service Restaurants, for example, registered value growth due to the rising popularity of cuisines like Chinese. Businesses also ensure profitability by sourcing and utilizing high-quality imported ingredients (such as chilled/frozen beef and dairy products) which are perceived as high quality, safe, and reliable by international tourists.
4. Adopting Digital Transactions and Contactless Payments:
   To streamline operations and improve the service experience for foreign guests, businesses are increasingly implementing technology. This includes using digital menus and expanding the adoption of contactless payment systems. Improving digital efficiency helps facilitate transactions and enhances customer service, which is crucial for maximizing revenue during a single visit.
5. Utilizing Enhanced Reputation and Branding for Differentiation:
   In a competitive and saturated market, profitability depends on standing out. Businesses focus on creating unique brands and leveraging their strong hospitality reputation. This supports the general strategy of focusing on the quality of services rather than just price, which is effective because tourist decisions are driven by experiences and reviews.

Business Strategy: Local Customer Economy

1. Aggressive Digital Integration for Sales Volume:
   Businesses significantly expanded their reach by relying on online sales and food delivery platforms. This strategy allows operators to serve a broader customer area without investing heavily in new physical, high-rent locations. This focus on driving transaction volume through digital convenience supports overall profitability despite the challenges in attracting high numbers of dine-in customers due to subdued domestic demand.
2. Strategic QSR (Quick Service Restaurant) Dominance:
   QSRs captured the largest market share (51.02%) by offering essential cost-effective and accessible dining solutions needed by price-sensitive residents, urban workers, and families. Profitability is maintained through continuous store expansion (projected 3.6% outlet increase) and updating business models to streamline efficiency, such as renovating stores and leveraging technology for ordering.
3. Efficiency-Focused Store and Service Innovation:
   Restaurants focused on operational efficiency to counteract sharply rising labor costs and the inability to easily raise prepared food prices due to fierce market competition. This involved streamlining Quick Service Restaurant operations, making sure new locations facilitate services like pick-up and delivery, and using technology like digital menus to enhance transaction speed and internal workflow.
4. Monetizing Delivery Convenience through Unified Pricing:
   To boost profit margins, many restaurants established a single price for their meals that applied to both in-store dining and delivery platform orders. Since platform prices are typically 30–35% higher to cover delivery service fees, setting this unified price allows the restaurant to capture additional profit from in-store customers who pay the higher, platform-influenced rate.
5. Catering to Local Health and Sustainable Trends:
   Businesses differentiated themselves and justified premium pricing to health-conscious residents by specializing in new offerings. This trend includes expanding menu options for plant-based and health-conscious menus and offering sustainable or eco-friendly products. Local consumers are increasingly willing to pay a premium for items that align with their values regarding wellness and environmental sustainability.

The combination of these strategies allowed businesses to adapt their strategies accordingly, ultimately contributing to their profitability and sustainability in a dynamic market.

---

Utilization of Frozen Vegetables, Fruits, and Herbs in Thailand’s Restaurant and Food Services Industry in 2024

In 2024, the restaurant and food service industry in Thailand increasingly leveraged frozen vegetables, fruits, and herbs to enhance competitiveness. This strategy addressed various challenges, streamlined operations, and met consumer demands for quality and consistency.

Key Advantages of Using Frozen Products

Advantage	Details
Cost Control	Reduced waste due to longer shelf life compared to fresh produce, allowing for better inventory management.
Year-Round Availability	Access to seasonal fruits, vegetables, and herbs throughout the year, ensuring consistency in menu offerings.
Quality Retention	Flash-freezing methods preserve nutrients and flavors, maintaining quality comparable to fresh products.
Labor Efficiency	Pre-prepared and portioned frozen items reduce preparation time, allowing staff to focus on service and customer experience.
Menu Consistency	Standardized ingredients improve dish consistency, crucial for customer satisfaction and repeat business.
Supplier Reliability	Partnerships with suppliers specializing in frozen produce ensured a steady supply chain, minimizing disruptions.
Sustainability	Lowered food waste aligns with sustainability goals, as leftover frozen items can be saved for later use.
Operational Flexibility	Temporarily reduced reliance on local fresh supply fluctuations, particularly during adverse weather conditions or market volatility.
Product Diversification	Enabled restaurants to experiment with a broader range of international cuisines and menu items, appealing to diverse customer demographics.
Health Conscious Options	Frozen options catered to the growing demand for healthy, ready-to-use ingredients, attracting health-conscious diners.

Impact on Competitiveness

1. Enhanced Menu Diversity: Restaurants could offer a wider variety of dishes, integrating frozen items that appeal to both local and tourist customers. This allowed them to adapt quickly to changing trends.
2. Streamlined Operations: Using frozen produce simplified kitchen processes, enabling staff to focus on customer service and ensuring faster meal preparation. This efficiency was crucial for handling peak dining times.
3. Nutritional Value: Frozen fruits, vegetables, and herbs maintained essential nutrients, addressing health trends prevalent among both locals and tourists. This contributed to a more attractive menu for health-focused customers.
4. Cost Management: Sourcing frozen goods allowed establishments to better manage their food costs, minimizing losses due to spoilage and allowing for strategic pricing without compromising quality.
5. Competitive Edge: Restaurants that successfully integrated frozen produce notably improved their ability to compete in a saturated market, standing out through quality, efficiency, and diverse offerings.

In summary, the strategic use of frozen vegetables, fruits, and herbs during 2024 allowed Thailand’s restaurant and food service businesses to enhance their competitiveness, improve operations, and meet consumer expectations effectively.