China set to become McDonald's biggest market

31 March 2010

SHANGHAI: McDonald's, the fast food chain, has predicted that China will become its biggest single market in the next few years, possibly providing greater returns than the US and Europe combined.

The quick service specialist has outlined its intention to open more than 500 new outlets in regions like Asia Pacific and the Middle East this year.

It will focus much of this effort on the world's most populous nation, where it aims to have 1,300 restaurants in operation by the close of 2010, an uptick from 1,135 at present.

Looking further ahead, the US firm has pegged this figure at more than 2,000 units by the close of 2013, as it seeks to enhance its position in the rapidly-developing economy.

Alongside having just opened a "Hamburger University" in Shanghai, the maker of the Big Mac will introduce up to 50 McCafés in China this year, reflecting the rising domestic demand for coffee.

Overall, the organisation will heighten its local investment by around a quarter this year, in recognition of the importance now attached to this market.

"Asia, Middle East and Africa is the fastest growing area in the world and of that, China is the fastest growing country," Tim Fenton, McDonald's president for Asia, Pacific, Middle East and Africa, said.

More specifically, Fenton forecast that the company's Chinese arm will better its targets of revenue growth in the 3% to 5% range, and income growth of between 5% and 7%, this year.

"We are a little bit ahead of what we had planned to do, so that's always nice ... but we do see things changing. We see the economy getting better," he said.

Fenton quoted estimates suggesting that the casual dining sector in China is increasing in size by some 10% a year, and could reach a potential value of $310 billion (€231bn; £206bn) in 2010.

By contrast, the US is set to improve by just 2% on an annual basis this year to $460bn, with Europe largely flat in this period on $470bn.

Indeed, looking to the longer-term, Fenton displayed considerable optimism about McDonald's Chinese prospects.

"Just China alone, if you do the math, in five-to-ten years, it could surpass the US and or both Europe," he stated.

The main contributors to this trend will include the continued expansion of the middle class, which will boost the number of people interested in out-of-home dining.

While many multinationals have expressed caution about the climate in China in light of the controversy surrounding Google, McDonald's, which established a presence there for 20 years, was more positive.

"China has been, in my experience, one of the easier countries to do business in," Fenton said.

"But like any country, you do business within the laws of the land and we abide by the laws in the land. It's certainly easier doing business today than 20 years ago."

Data sourced from Reuters; additional content by Warc