How China's housing problems affect the QSR market

Yum China’s CEO believes that price points are more crucial than ever in the fast-food sector, as a target audience of largely young people are saving to buy homes or rent flats.

“We certainly see that value for money is becoming a more and more important theme,” said Joey Wat, as reported by the South China Morning Post. “It is ironic that the young people in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen have tighter budgets than [their peers in] the lower-tier cities because of housing prices,” the CEO added.

Why it matters 

The housing market’s difficulties are well documented: a liquidity crisis among developers has meant that they have struggled to finish pre-sold apartments and to raise money to start new ones; buyers have threatened to stop mortgage payments, and some banks are now offering mortgages that stretch across generations. 

While it’s a far cry from 1987, when KFC first entered China and a meal could cost a third of an average monthly income, the suggestion that housing prices are having an impact on the sale of 30 yuan meals may be replicated across other categories. 

Takeaways 

• Yum China plans to add up to 1,300 new stores in mainland China this year.
• Brand awareness will attract customers but competition in the QSR sector is fierce and the market is always changing.
• Its KFC and Pizza Hut chains are launching new dishes that reflect the tastes of the local market.

Key quote

“Our industry is quite a fragmented industry, so this is not an industry that few players can dominate. It is not about what type of food or what brand one serves. Instead, it is about the price point, or consumption per person” – Joey Wat, CEO, Yum China.

Sourced from South China Morning Post, Reuters, Guardian

[Image: Yum China]