BEIJING: Companies in the fast food and FMCG sectors are adapting their products to try and reflect consumer tastes in China, a trend exemplified by the competition for market share at breakfast time.

McDonald's, the US restaurant chain, currently provides numerous variations of its international menu items in China, like the Egg McMuffin with chicken, an offering that is "selling well". 

However, breakfast yields under 10 % of its Chinese sales, versus 25% in the US. "We know breakfast isn't going to be an overnight sensation," Jessica Lee, McDonald's senior director, corporate relations in Asia Pacific, told the Economist. "It wasn't in the US either."

Mintel, the insights group, reported that the foreign fast food market is now worth RMB87.8bn a year, but Paul French, an analyst at the firm, added that the breakfast category is "underpenetrated".

At present, only 21% of consumers eat fast food in the morning, rising to over 75% at lunch. One reason is the preference for local dishes, rather than exported menu items. "People want congee for breakfast, not a sausage sandwich," said French.

Indigenous chains like Manfadu and 82 degrees are making headway in this area, serving up congee  and youtiao, among other options, all while adopting similar formats to their overseas rivals.

Dave Novack, chief executive of Yum Brands, said its KFC chain was also prioritising this daypart. "We're acquiring the premier sites in the most vibrant trade zones and we're using our assets throughout the day with breakfast, delivery and 24 hour operations," he argued earlier this month.

The competition extends beyond the out-of-home dining industry. Nestlé, the Swiss packaged food group, recently took a 60% stake in Yinlu, its local counterpart, with parallel motives in mind.

"When we talk about acquisitions, it's interesting. It's not sometimes necessarily [focused] on just cost synergies," said Wan Ling Martello, Nestlé's chief financial officer. "Yinlu ... gave us entry into the breakfast category in China."

Kellogg, the cereal and snack giant, also announced in September that it had formed a tie-up with Wilmar International regarding the manufacture, sale and distribution of its products in China.

"This joint venture ... fundamentally changes our game in China," said John Bryant, Kellogg's CEO. "China's snack-food market alone is expected to reach an estimated $12bn by year-end, up 44% from 2008."

However, the cereal sector is only set to be worth $225m in 2012, Euromonitor International, the research firm, has predicted. This is five times the total from five years ago, but dwarfed by the $10bn market for the same products in the US.

Data sourced from The Economist, Wall Street Journal, Seeking Alpha, Reuters; additional content by Warc staff