China and the World

Still alluring

Coke and McDonald’s ramp up presence in China

McDonalds-w

Who would have thought that Ronald McDonald might become a pioneer for China’s digital currency? This follows claims this month that regulators have been pushing the fast-food chain to accept payment in the central bank’s digital yuan. The plan is to get the currency circulating more widely ahead of the Beijing Winter Olympics next year, according to a report in the Financial Times.

McDonald’s already allows customers to use a digital renminbi wallet in 270 of its restaurants in Shanghai, the FT said. But the government wants more diners to pay with digital yuan around the country. And in another currency play, McDonald’s has just launched a limited number of non-fungible tokens (NFT) in celebration of the 31st anniversary of its arrival in China, as well as the opening of its new headquarters in Shanghai.

The tokens, called “Big Mac Cube”, are inspired by the shape of its new eight-storey HQ in Shanghai’s Xuhui district. “McDonald’s has always paid attention to fashion trends and cutting-edge technology,” claimed Zhang Jiayin, the company’s China head. “At this special time, we are using NFT to share innovation, digitisation and trend art with employees and consumers.”

The fast food giant is promoting the new HQ as a a high-tech building. Alongside the seventh Hamburger University and the largest of its flagship stores in China, the building is also home to a recipe development lab and a research and development centre that will pioneer improvements in the company’s restaurant management system and operational model.

It’s not just McDonald’s that is making new investments in China, Swire Coca-Cola, the fifth largest of Coca-Cola’s bottling partners by global volume, also announced the expansion of its Zhengzhou factory in Henan province, with new investment of about Rmb900 million ($140 million), the single largest investment in Swire Coca-Cola’s history in China. According to the bottler, the upgraded factory in Zhengzhou, which will take two years to complete construction, will boast advanced production technology with an annual production capacity of 1 million metric tonnes, up from 460,000 tonnes today.

The reason Swire Coca-Cola chose to rebuild the plant in Zhengzhou is because Henan has become such a major market for the soft drink giant. Data from Swire Coca-Cola also suggests that the China market contributed nearly 70% of the bottler’s global profits in the first half of 2021, of which 15% came from output from the Zhengzhou factory.

Swire Coca-Cola also announced that it will increase investment in other projects across China over the next five years. Alongside the upgrade in Zhengzhou, the company is expanding operations at two further bottling plants in Guangzhou and Shanghai, adding 20 new production lines.

China is a bright spot for Coke’s sales. In the second quarter of this year, global revenue was up 42% compared with a year ago, with China outperforming in the Asia-Pacific region.

The investments come at a time when Sino-American relations show little sign of improvement, with long-running rows over trade and technology yet to be resolved. But the commercial activity tells a different tale – not least that the Chinese consumer market is crucial for the two US multinationals, which are managing their businesses in China with the help of more localised partners (the Hong Kong conglomerate Swire in Coke’s case; and Citic, a major shareholder in McDonald’s China business).


© ChinTell Ltd. All rights reserved.

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.