China Consumer

Changes in store

Fast food giants McDonald’s and KFC look for an edge in the Chinese market


Planning to double its outlets

Last year a badly designed set of IKEA drawers toppled over in several homes, crushing four children. The Swedish home furnisher was obliged to recall the item, doing so in its North American markets. However, it delayed the same course of action in China. Only after anger from customers did it extend the recall to the Middle Kingdom too.

Last week Chinese consumers were again feeling like second-class citizens. This time the culprit was McDonald’s. In accordance with guidance from the World Health Organisation, McDonald’s announced that it is requiring suppliers of chicken meat to phase out the use of antibiotics that contribute towards strains of medicine-resistant superbugs. Markets in North America, Europe, Brazil, Japan and South Korea will be supplied with chickens that haven’t been reared on the antibiotics by 2018. But suppliers in China needn’t purge the antimicrobials until 2027.

This has riled consumers, who have suffered from a litany of food-safety scandals (see WiC6 and WiC147), some of which have been linked to fast-food outlets such as McDonald’s and KFC (see WiC248).

One angry citizen told the Global Times “If McDonald’s does not reduce antibiotics in its chicken supplied to China in 2018, I will boycott the brand” and news sites stoked the discontent, with China News Service wondering whether the ban was delayed in China by a decade to save McDonald’s on the extra costs.

Paradoxically – just a week before – the Xinhua-backed China Newsweek was much more complimentary about the fast-food giant, asking “Why is McDonald’s better than KFC?”

The answer, according to the magazine, is primarily down to the menu. The opinion piece argued that while KFC had “localised” its menu too much, McDonald’s had retained its distinct, Western flavours.

“Do Western brands want to use Chinese food to win over Chinese people? Don’t bother!” the author chided, equating KFC’s go-local strategy with an identity crisis for the Kentucky-born brand.

It isn’t entirely true that McDonald’s has kept its menu all-American. The fast-food chain offers congee and Chinese-style pancakes, and it serves up local treats timed for special occasions – such as the Double Happiness burger it marketed during the Spring Festival.

But for the time being, McDonald’s seems more focused on growing rapidly in China, with ambitious plans to double the number of its outlets (to 4,500) where its store numbers lag far behind those of Yum China, the operator of KFC.

McDonald’s says it will focus away from bigger cities in its growth spurt, targeting less-developed areas: 45% of the new outlets will be located in third or fourth-tier cities

As part of the upgrade, it has struck a deal with property giant Evergrande to put restaurants in the developer’s residential complexes. And state-backed Citic, which now controls the McDonald’s business in China, is promising to hire 70,000 new staff as waiters at the burger outlets – a major departure from the chain’s previous practice.

KFC also boasts local investors in China, with Alibaba and Primavera Capital both holding stakes. This partnership is prompting changes in operation procedures too, including facial-recognition technology at a debut K Pro outlet in Hangzhou (K Pro is a newly created Yum franchise that offers healthier options like salads topped with crayfish).

In the ‘Smile to Pay’ system, a 3D camera scans the customer’s face to verify their identity, with phone number verification for added security. Promoted by Ant Financial – Alibaba’s payments offshoot – the system deducts payment from Alipay accounts. Local media is reporting that the technology was developed in conjunction with Chinese startup Megvii, which has raised over $150 million from investors that include Foxconn.

Joey Wat, Yum China’s president, said the new format at the store was aimed at “young, tech savvy consumers who are keen to embrace new tastes and innovations”.

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