China Consumer

Finer dining

KFC revamps outlets to court Chinese customers

øœµ¬ª˘–¬≤Õø

Now a place to linger: KFC

When it comes to resuscitating sales in China, KFC can’t be accused of not trying hard enough. Last November the fast-food chain launched a marketing campaign about food quality to counter concerns that its local suppliers had stuffed chickens with excessive antibiotics. Then it turned to social media to encourage its customers to write poems rekindling their love of eating chicken (especially the finger lickin’ variety). And two months ago, it hired five celebrities to lend some star power to its new menu, which was launched in March. The revamped menu features 10 new items and five updates of existing products. These include three rice dishes, two chicken sandwiches, four snack items, and six beverage or dessert items. The chain says it will undertake similar updates “at least once a year”.

Despite being the most successful foreign fast-food chain in China, KFC has been through a financial slump. Poultry contamination issues and avian flu scares led to a 15% decrease in Chinese sales and a 32% drop in local profits last year, forcing management to change direction.

So last month KFC unveiled another part of its push to win back Chinese diners. It says in addition to the new menu, it will be refurbishing its restaurant layouts to reposition them as places to linger and relax.

All of the chain’s outlets will also be getting free WiFi in an effort to bring customers into the restaurant for reasons other than just grabbing a quick bite.

Outlets in Shenzhen and Guangzhou have been among the first to receive the so-called “dining room” facelift and the Shenzhen Evening Post says the new KFC is barely recognisable. Gone are the red-and-white walls and garish fluorescent lighting. The new design has a dining area with grey and off-white walls, green plants and softer, dimmer lighting. There is more personal space too. The newspaper reckons it would be ideal for “a romantic date”.

“We offer fast food service. But how long and in what way our consumers want to spend time in our restaurants in China is not limited. The new designs will offer more quality service and a comfortable environment for social interaction and business meetings,” Samuel Su, the company’s China chief executive, told China News Service.

Many Shenzhen residents were impressed with the new KFC stores: “The new design feels very homey. I like it very much,” one wrote. Others seemed a little more confused: “Wait… is this the KFC I know? I thought it has become a coffee shop,” a more puzzled netizen commented. But analysts are generally supportive of the move. “The goal [of KFC] is to reposition itself as a more upscale brand that encourages people to sit and stay a while rather than gobble down their food and leave,” says Doug Young, author of Young’s China Business Blog.

“Coffee chain Starbucks has won phenomenal success through a similar strategy, positioning itself as a lifestyle choice for upwardly mobile yuppies rather than just a place to eat or gulp down a cup of coffee.”

Meanwhile, KFC has also been testing an online-to-offline service that allows consumers to order meals online and then pick them up at the store if they are pressed for time. The company says it will roll out the plan by the end of the year in all first-tier cities, says Beijing Times.

Yum Brands, the parent company of KFC, has a lot at stake. The fast food giant generates more than half of its overall revenues and operating profits from the Chinese market.

So far, KFC’s new initiatives seem to be making some headway. China sales increased 11% in the first quarter compared with the same period a year ago (although the base is low because same-restaurant sales in China dropped 20% in the first quarter of last year).

“Society is constantly changing so KFC needs to make changes too. Only by becoming a part of the lives of Chinese consumers will KFC continue to create value and become a really great brand,” Cui Huanming, the general manager of KFC outlets in Guangdong, told Southern Metropolis Daily.

Keeping track: the food may be “finger-lickin’ good” but is it fresh? This week a meat supplier to KFC (as well as McDonald’s)in China was accused of selling rotting meat and repackaging expired produce with new dates, says Dragon Satellite TV. Shanghai Husi Food reportedly repackaged meat that was already green and odorous. Yum Brands, which owns KFC, Pizza Hut, and Taco Bell, has released separate statements apologising for the scare and saying it will conduct its own investigations into the food safety breach. Meanwhile Husi’s production plant in Jiading was shut down as municipal food inspectors investigated the premises. The Shanghai Municipal Food and Drug Administration said in a statement that it had visited 581 food-related facilities suspected of using expired meat from Husi Food, and sent 875 personnel to carry out inspections. (Jul 25, 2014)


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.