Warc, 25 April 2014
SHANGHAI: Western restaurant brands such as Pizza Hut and McDonald's are planning further expansion in China, with many developing breakfast menus in new moves to attract local diners.
Yum Brands, owner of Pizza Hut and KFC, expects to open at least 700 new restaurants in the country during 2014; 123 new units have already opened during the first quarter.
Yum Brands recently reported increased sales and profits which it attributed in part to an overhaul of its menus. That momentum continued with a new breakfast menu unveiled earlier this week to be served in 300 Pizza Hut branches.
China Daily noted that Western chains, from KFC to Starbucks, were increasingly targeting breakfast with menu items such as coffee and cakes. As a result, traditional Chinese restaurants and stalls were struggling for trade, despite their steamed buns and soybean milk being significantly cheaper.
A number of reasons were evinced for this development, including food scares, which have resulted in white collar workers trusting western restaurants to supply safe and good quality food, and a more pleasant dining environment.
Beyond breakfast, Gao Jianfeng, general manager at Shanghai-based Bogo Consultants, also observed the impact of the government's austerity campaign which, he told China News, had "pushed customers to more casual and lower-end restaurants … [and] stimulated the sales at such restaurants as Pizza Hut".
The breakfast scrap taking place in China is, however, merely the latest iteration of a wider battle between western quick-service restaurants. Bloomberg recently reported how, in the US, McDonald's had reacted to a new Taco Bell (another Yum Brands outlet) breakfast menu item – waffle tacos – with an offer of free coffee.
McDonald's too is seeking to add another 300 outlets in China through increased franchises. Zeng Qishan, McDonald's China CEO, recently indicated his intention to double the proportion of franchised stores from 12% to 25%, although even that figure is a long way behind its global average of 80%.
While there will be a focus on first-tier cities, Gao said that McDonald's locations in second- and third-tier cities were losing to those of KFC.
Data sourced from China Daily, China News, Bloomberg TV; additional content by Warc staff