Thai Market Insights 2022

Based on the sources, the restaurant, hospitality, and food service industry in Thailand faced significant cost pressures and structural issues in 2022, despite enjoying a crucial rebound driven by tourism and domestic demand.

Top 10 Industry Challenges Facing Restaurants and Food Service in Thailand (2022)

Industry Challenge	Description
Elevated Inflation and High Input Costs	Inflation was expected to stay elevated due to the withdrawal of price subsidies and rising wages. High inflation was specifically attributed to the large weightage of food in Thailand’s Consumer Price Index (CPI) basket.
Supply Disruption and Volatile Raw Food Prices	Prices surged for domestic products, such as pork, since January 2022 due to a domestic outbreak of African swine fever, severely curbing production.
Rising Energy and Operational Costs	Increases in prices for diesel fuel and liquefied petroleum gas (LPG), essential for transport and cooking, were expected to raise transportation and cooking costs, affecting pricing and purchasing power.
SME Financial Vulnerabilities and Credit Access	Small and medium enterprises (SMEs) experienced deteriorating debt servicing capacity due to the economic slowdown. They faced difficulty accessing credit given data paucity and stringent loan requirements.
High Household Debt Dampening Consumption	Thailand’s household debt-to-GDP ratio remained high (88.2 percent in Q2 2022), which acts as a key factor slowing the recovery of private consumption for the broader economy.
Labor Shortages and Retention Issues	The sector faced ongoing challenges related to labor shortages and employee retention. Structural issues, particularly a shortage of skilled labor, continue to affect economic growth.
Intensifying Market Competition	The restaurant sector faced significant rivalry and intensifying competition from numerous local and international brands vying for market share.
Rapid Shift to Digital Services and Delivery	The consumer shift to digital ordering and delivery applications, along with the rise of “cloud kitchens,” forced traditional dine-in operators to adapt their models or risk losing market share.
Vulnerability to External Supply Chain Disruptions	Risks to growth and operations stemmed from further supply chain disruptions, particularly resulting from a protracted global slowdown.
Structural Drag from Aging Population	Over the longer term, the challenge posed by a rapidly aging population represents a structural challenge that impacts the country’s potential economic growth.

Top 5 trends Thai Businesses use to Increase Profitability

Strategy	Description
Capitalizing on the Nonresident (Tourism) Rebound	Businesses experienced a vital upturn due to the soaring nonresident spending, following the further relaxation of border restrictions and the strong rebound in international tourist arrivals (approximately 11.15 million), which underpinned the overall economic recovery of the service sector.
Accelerating Digitalization and Delivery Services	Firms continued to leverage the rapid adoption of digital technologies, a trend accelerated by the pandemic. Digital commerce and service delivery helped lower operating and transaction costs, allowing businesses to reach a wider range of customers and potentially permanently increase potential output via improved productivity.
Focusing on High-Value and Innovation-Driven Offerings	In line with the overarching national strategies (Thailand 4.0 and the 13th NESDP), the sector focused on restructuring toward value-based and innovation-driven economic activities to enhance long-term competitiveness and profit potential.
Securing Resilient Domestic Consumer Spending	Profitability was maintained by resilient domestic demand, with private consumption growing robustly at 6.3 percent. Businesses utilized the widespread adoption of cashless and contactless digital payments (e-money and mobile banking) to cater to consumer demand for convenience, stabilizing sales volume.
Enhancing Operational Efficiency to Offset Inflationary Costs	To counter the challenge of elevated inflation, high input costs (including volatile raw food and rising diesel/LPG prices), and minimum wage expectations, businesses likely focused on efficiency measures, such as adopting digital solutions for backend business processes and supply chain management, to protect profit margins.

Business Strategy: Tourist Customer Economy

• Capitalizing on the Tourism Rebound: Businesses maximized revenues by leveraging the significant increase in nonresident spending, which was driven by the strong rebound in international tourist arrivals (reaching approximately 11.15 million in 2022) after border restrictions were relaxed.
• Emphasizing Quality and High-Value Offerings: To improve profitability, businesses were encouraged to focus on enhancing the quality of services over competing on price. This strategy aligned with efforts to attract high value added tourism and luxury segments, which spend heavily on food, beverage, and accommodation.
• Adopting Advanced Health and Hygiene Standards: Restaurants and hospitality venues focused on implementing and promoting higher health and hygiene standards to attract tourists whose post-pandemic preferences emphasized safety, and favored less crowded or smaller group travel settings.
• Accelerating Digital and Contactless Payments: Businesses increased the use of contactless and digital payment systems (e.g., e-money and mobile banking) to meet the demand for swift, safe transactions and improve operational efficiency for both tourists and locals.
• Focusing on Niche and Experience-Based Tourism: Firms differentiated their offerings by targeting specialized segments such as gourmet experiences, cultural tourism, or medical tourism, often integrating with strategies to promote secondary cities, thereby maximizing revenue from specific, high-end tourist groups.

Business Strategy: Local Customer Economy

• Accelerating Digital and Contactless Payments: Businesses quickly adopted and utilized widespread digital payment systems (like e-money and mobile banking) to meet consumer demand for convenience, which also helped lower operating and transaction costs.
• Expanding Food Delivery and Digital Commerce: Firms increasingly leveraged digital commerce and delivery services to serve a wider local audience, which opened up new revenue streams and allowed them to streamline operations.
• Utilizing Government Fiscal Stimulus: Restaurants benefited from government tax stimulus measures that were adopted or considered in 2022 specifically to stimulate the purchasing power of residents and reduce the economic burden on households, thereby boosting private consumption.
• Focusing on Value-Based and Innovative Offerings: Businesses pursued a strategy of restructuring toward value-based and innovation-driven economic activities, focusing on improving the overall quality and justification for spending by the resilient domestic consumer base.
• Improving Operational Efficiency with Backend Technology: To counter inflationary pressures and rising input costs, firms adopted backend digital solutions for internal business processes and supply chain management, which was instrumental in managing costs and protecting profit margins.

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

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Utilization of Frozen Vegetables, Fruits, and Herbs in Thailand’s Restaurant and Food Services Industry in 2022

In 2022, 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 2022 allowed Thailand’s restaurant and food service businesses to enhance their competitiveness, improve operations, and meet consumer expectations effectively.