Navigating Shanghai’s Evolving F&B Landscape: Trends That Define the Market

Shanghai is a city synonymous with dynamism and innovation. The food and beverage scene in the city provides a reflection of broader societal, economic, and cultural shifts. At LEVELS, we are fortunate to be actively involved in shaping this exciting market, with two five-star hotel projects currently in development. On a recent visit, we took the opportunity to sit down with chefs, bartenders, food writers, and hoteliers to better understand how Shanghai’s F&B industry is performing as it emerges from the pandemic. Here are our key takeaways from those conversations.

1. The Spending Shift: Value Over Luxury

Economic pressures have significantly influenced consumer behaviour in Shanghai. While diners remain adventurous, they are increasingly value-conscious, leading to a softened demand for fine dining. Casual and mid-tier restaurants offering unique experiences and high quality without premium pricing have gained popularity. This shift reflects a broader trend where consumers prioritize affordability without compromising on culinary exploration.

Additionally, there is a noticeable move toward regional travel. Travellers are opting for domestic getaways, opening new opportunities for F&B venues in areas surrounding Shanghai. Hotels and restaurants catering to weekend travellers are thriving, while weekdays present challenges. This pattern underscores the importance of adaptability in the hospitality industry to meet evolving consumer preferences.

For restaurateurs and hoteliers, these trends highlight the need to balance creativity with value. Offering distinctive yet affordable dining experiences can attract a broader customer base. Similarly, developing strategies to engage weekday patrons, such as targeted promotions or partnerships with local attractions, can help mitigate the fluctuations in demand.

Shanghai's F&B scene continues to evolve, demonstrating resilience and innovation in response to economic challenges. By aligning offerings with consumer priorities, the industry can navigate these shifts and continue to thrive.

2. Hot Pot: A Comforting Constant

If there’s one dining category that has thrived despite economic challenges, it’s hot pot. The staggering growth of hot pot restaurants—tripling in numbers over just a few years—reflects its enduring appeal. On Dazhong Dianping, Shanghai now boasts over 15,000 hot pot locations, up from 12,000 during the pandemic, highlighting the concept’s remarkable resilience. From fiery Sichuan broths to nourishing Cantonese herbal varieties, hot pot’s diversity ensures there’s a style for every diner.

Hot pot’s success can be attributed to several key factors. At its core, it’s a relatively simple concept to operate. Unlike many restaurant formats that rely heavily on skilled chefs, hot pot shifts much of the cooking responsibility to diners themselves, reducing kitchen labor and operational complexity. This self-service model allows operators to focus on sourcing high-quality ingredients, creating engaging dining environments, and optimizing service.

Additionally, industry leaders like Hai Di Lao have elevated the hot pot experience through unparalleled service and attention to staff welfare. Hai Di Lao’s service innovations, such as offering complimentary manicures and shoe-polishing while diners wait for a table, have become legendary. The brand’s commitment to ensuring a superior customer experience extends to small but impactful touches, like providing aprons and hair ties, or even plastic covers for phones at the table.

Behind the scenes, Hai Di Lao’s investment in its staff has played a critical role in its success. The company is renowned for its robust training programs that equip employees with both technical skills and hospitality acumen. Beyond training, Hai Di Lao provides staff with dormitories and other welfare programs, fostering loyalty and ensuring consistency in service quality across its outlets. This focus on employee well-being not only strengthens the business but also ensures that the brand’s signature hospitality culture is maintained.

Hot pot presents an opportunity to capture a concept that resonates deeply with both locals and tourists. Its communal, interactive dining style aligns perfectly with Chinese cultural values of togetherness and sharing, while its adaptability allows operators to scale offerings from casual to premium. However, to compete with the giants, new entrants must not only focus on flavors and ambiance but also innovate in service and guest engagement.

3. Woodfire Cooking: A Return to Roots

In Shanghai there's a notable resurgence of wood fire cooking, reflecting a broader desire for authenticity and simplicity in dining experiences. This method emphasizes natural flavors and traditional techniques, resonating with diners seeking transparency in their meals.

A prime example is The Merchants, a restaurant we visited that seamlessly blends Western cooking methods with Chinese ingredients. Housed in a beautifully restored colonial villa that used to be home to the Shanghai Film Studio, The Merchants offers a rustic, shared-dining experience that fosters a sense of warmth and community. Their culinary approach centres on dry-aging, smoking, and cooking over a wood-fired grill, with specialties like house-made charcuterie of wagyu and hamachi, and a standout smoked yellowtail dish.

Despite the growing demand for wood fire cooking in China, implementing such concepts in five-star hotel settings presents significant challenges due to stringent local fire regulations. Cooking with solid fuels like wood or charcoal, and even gas, is heavily regulated, especially in open kitchen designs. Hotels are often required to install fireproof glass to separate cooking areas from diners, which can detract from the engaging counter dining experience that many patrons enjoy.

Interestingly, standalone restaurants like The Merchants often navigate these regulatory hurdles more effectively. This advantage can be attributed to existing fire permits being grandfathered in or the influence of 'guanxi'—the Chinese concept of personal connections—which can facilitate smoother operations within the regulatory framework.

4. Rise of Wine Bars and Chinese Wines

Shanghai's wine culture is experiencing a significant transformation, with a growing appreciation for wine as a sophisticated alternative to the city's traditional nightlife. This shift is evident in the increasing number of wine bars that not only offer international selections but also prominently feature Chinese wines, reflecting the rising quality and recognition of domestic production.

A notable example is Cila, a contemporary Chinese restaurant inspired by Xibei (Northwestern) cuisine. Led by Chef Mario Chen, formerly of Jean Georges Shanghai, Cila presents traditional recipes from Northwestern China executed with Western cooking techniques. The menu highlights ingredients such as beef and lamb from Ningxia and Gansu, emphasizing sour, spicy, garlicky, and cumin-infused flavors

In addition to its culinary offerings, Cila features an expertly curated selection of Chinese wines, showcasing the synergy between regional dishes and local vintages. This approach not only supports domestic winemakers but also provides diners with a comprehensive experience that celebrates China's rich gastronomic and viticultural heritage.

The integration of Chinese wines into wine bar menus is a growing trend in Shanghai. Establishments like Vinism, a pioneer in the natural wines movement since 2017, offer a selection that includes Chinese, Slovenian, and French bottles. Vinism's intimate setting and focus on natural wines have made it a favorite among wine enthusiasts seeking unique and authentic experiences.

This evolution in Shanghai's wine scene reflects a broader shift toward embracing local products and traditions. By highlighting Chinese wines, these venues contribute to the growing recognition of China's wine industry and offer patrons an opportunity to explore the diverse flavors and profiles that domestic wines have to offer.

5. Regional Chinese Cuisine on the Rise

The pandemic has notably shifted Shanghai's dining landscape, bringing regional Chinese cuisines to the forefront. As international dining options faced challenges, restaurants specializing in bold and affordable dishes from provinces like Guizhou and Hunan have gained prominence, offering vibrant flavors that resonate with local diners seeking authentic culinary experiences.

In the realm of Guizhou cuisine, Shan Shi Liu (山石榴) stands out as a popular choice. Founded in 2018, this casual restaurant chain has expanded to multiple locations in Shanghai, including a flagship on Maoming Road recognized as a Michelin Selected Restaurant. Shan Shi Liu is known for its authentic Guizhou dishes, such as sour fish soup and spicy chicken, which have garnered a loyal following among locals.

For Hunan cuisine enthusiasts, Yuan You Tao (园有桃) offers a contemporary take on traditional flavors. This restaurant presents Hunanese dishes with a modern twist, emphasizing spice-laden nostalgia that appeals to Shanghai's diners. The team at Yuan You Tao combines their Hunan heritage with culinary training from Paris, bridging traditional flavors with modern techniques to create a unique dining experience.

Interestingly, even foreign chefs are embracing regional Chinese cuisines. BASTARD, led by Polish chef Michael Janczewski, exemplifies this trend. The restaurant offers contemporary Chinese dishes that blend various regional flavors with pan-Asian and Western influences, resulting in a unique culinary experience that resonates with Shanghai's diverse dining audience.

6. Craft Tea Bars and the Rise of Non-Alcoholic Options

Shanghai's beverage scene is undergoing a transformation, with craft tea bars at the forefront of this evolution. These establishments seamlessly blend traditional tea culture with modern innovation, offering experiences that are both nostalgic and refreshingly contemporary. 

During our visit, we explored venues like Kaiji on Maoming Road, where traditional teas are reimagined with creative presentations. For instance, cold brew teas are served in craft beer bottles, and tea bricks are fashioned into waffle shapes, providing a unique twist on classic offerings.

This innovative approach to tea is not only about aesthetics but also about engaging a younger, health-conscious demographic. The demand for alcohol-free options is on the rise, with consumers increasingly gravitating toward beverages that align with healthier lifestyles. 

Premium soft drinks and craft teas have become mainstays on menus across the city, reflecting a broader trend toward mindful consumption. According to a report by Tractus Asia, the market size for sugar-free beverages in China grew seven-fold from 2014 to 2020, reaching $1.71 billion USD, and is projected to further increase, reaching an estimated RMB 22.74 billion (approximately $3.31 billion USD) by 2025.

The rise of craft tea bars also signifies a shift in social dynamics. These venues offer alternative spaces for socializing that do not revolve around alcohol, catering to a clientele that values wellness and authenticity. The emphasis on high-quality ingredients, artisanal preparation methods, and innovative flavour profiles resonates with consumers seeking both tradition and novelty in their beverage choices.

Moreover, the integration of local elements into these modern tea experiences highlights a renewed appreciation for Chinese cultural heritage. By reinventing traditional teas with contemporary twists, craft tea bars are not only appealing to domestic patrons but also attracting international visitors eager to explore Shanghai's evolving culinary scene. This fusion of old and new reflects the city's dynamic spirit and its ability to adapt and innovate while honouring its rich traditions.

7. Expat Exodus and Its Impact on the F&B Scene

Before the pandemic, Shanghai’s expatriate community was a vital part of the city’s vibrant international dining culture. Venues like Simply Thai, the Camel Group’s sports bars, and Sherpa’s food delivery service were considered institutions among Western residents, offering not just dining options but also a sense of familiarity and comfort for those navigating life in China. From my own years in Shanghai, I remember these places as a saviour for expatriates, especially for those new to the city and seeking a taste of home. Their closures, as noted in a recent article on SmartShanghai, mark the end of an era and reflect the challenges faced by international operators in Shanghai’s F&B landscape.

The pandemic and subsequent economic uncertainties triggered a notable exodus of foreign residents, with official data estimating a reduction of approximately 30,000 foreign workers in the past three years. This decline not only altered the expatriate demographic but also impacted the diversity of the city’s dining scene. With fewer international patrons and a shift in local preferences, many Western restaurants struggled to sustain operations, highlighting the challenges of maintaining global concepts in a rapidly changing market. While there are signs of expatriates trickling back into Shanghai, their numbers remain well below pre-pandemic levels, signalling a transformation in the city’s cosmopolitan dining fabric.

During a recent project meeting for a five-star hotel in China, I encountered a clear example of how these changes are influencing the F&B industry. While planning the hotel’s main all-day dining restaurant, the owners—savvy and well-traveled—expressed doubt about including a classic Italian concept, once a default choice for Western dining in China. Their concern was rooted in a belief that the demand for such a concept would not be sufficient by the time the project opens. For me, this was an eye-opening moment and a sign of the shifting winds in Shanghai’s F&B world, where Western operators now face a steeper uphill battle to remain relevant.

Reflections on the Visit: A City in Flux

Shanghai’s F&B industry is at an inflection point. It’s a city where challenges breed innovation, and the post-pandemic market has only sharpened this instinct. The conversations we had with industry professionals revealed a market that’s pivoting, experimenting, and ultimately finding ways to thrive in a transformed landscape.

At LEVELS, we’re proud to be part of this journey, working closely with clients to create concepts that align with Shanghai’s unique identity. Whether it’s developing high-end hotel dining or exploring regional flavors, we remain committed to delivering visionary, guest-centric experiences that stand the test of time.

Shanghai’s culinary landscape continues to inspire, offering valuable lessons for operators and diners alike. As we navigate this ever-changing market, one thing is clear: Shanghai’s resilience and creativity are as robust as ever.

LEVELS is a hospitality creative agency based in Kuala Lumpur and Dubai.

We deliver holistic, end-to-end consultation, creativity, and execution that disrupts the ordinary to provide world-class hospitality solutions for our clients. Since 2020, we have launched over 75 hospitality projects across three continents including restaurants, hotels and airport lounges. From initial market research, to concept development, we make recommendations using a hospitality lens on current trends, competitive landscape and industry trajectory.