McDonald's outlines China growth plans

01 March 2012

BEIJING: McDonald's, the fast-food chain, is diversifying its strategy in China to further improve its market share, and to boost customer loyalty.

The US multinational, which entered China two decades ago, currently has 1,400 wholly-owned outlets in the country, opening 200 last year, and with plans to unveil another 225 to 250 in 2012.

In a bid to enhance its position in the world's most populous nation, McDonald's will also increase the amount of franchises it operates from just 36 branches at present.

"Right now, it's a low percentage. But I think that over a very short time, you can get to quite a good mix of stores being franchised," Kenneth Chan, McDonald's China CEO, told Reuters. "At the end of the day, McDonald's is a franchise company."

Finding the right partners will be vital to this process, as McDonald's seeks to catch up with Yum Brands, which boasts 4,500 sites running under the KFC, Pizza Hut, East Dawning and Little Sheep banners.

However, simply gaining scale is not the primary concern. "We're not looking to be the largest in terms of the number of restaurants ... but we want to be the best-quality, best-service restaurant," said Chan.

"Thus, we will get more market share versus our competitors even though we have fewer restaurants," he added. "It's not about trying to grow at breakneck pace, but at a pace that .... can be sustainable in the long term."

McDonald's tactics in China to date have included adding highly affordable options to its menu, and rolling out products to suit local tastes.

The company will also run television ads later this year promoting the fact it offers "100% fresh beef", as well as emphasising the high standard of its ingredients, reflecting the importance of food safety to Chinese consumers.

Euromonitor, the research group, reported that Yum Brands took 5.2% of the Chinese quick service category in 2010, with McDonald's on 2%, indicating both fragmentation and room for growth.

More specifically, sales in the food service industry rose by 14% to RMB625bn last year, and should surpass RMB950bn in 2015, Euromonitor estimated.

Data sourced from Reuters/Wall Street Journal; additional content by Warc staff