And this is not an exaggeration. While American brands are not infallible, there’s a pervasive belief in China that American companies hold themselves to much higher standards than their Chinese counterparts. In the U.S., where bikes are still overwhelmingly used for recreation rather than transportation, e-bike sales are expected to break 200,000 this year, or about 1% of China's sales. They also have ghost shoppers to check on the stores.”. Case Study 1 Introduction Since KFC opened the first outlet in Beijing in 1987, the fast-food giant has occupied its dominant position in China (Bell and Shelman 2011). And China is the most profitable market of KFC… “And when you’re next to tourist sites you have foreign and domestic customers. KFC’s first location was on the southern edge of Beijing’s Tiananmen Square. Despite the increased competition, Dong says American companies don’t seem to be slowing down their Chinese expansion plans. Fried chicken became so popular that dark humor went around that KFC laced its chicken with opium to get Chinese hooked on foreign products again. Key to KFC’s success in the country has been catering its menu to local tastes. KFC's China operations also benefited from factors beyond its control. The 29,000-square-foot monolith opened in December 2017 and still draws a line out the door; it’s a massive operation that has the capacity to serve 6,000 to 7,000 customers each day. China opened its economy to the outside world 30 years ago, sparking a natural curiosity towards Western culture and brands. McDonald’s notably brought its own french fry vendor, Simplot, to China to grow its own potatoes. Here's what it was like. That's why within the next four years, McDonald's plans to open a new outlet daily in China. Adapting to local tastes has been integral to the success for American brands, but the embrace of American chains in China goes far deeper than just good food. “And even before WWII, they did not have a lot of exposure to the West. In 1987, when the first Chinese KFC opened in Tiananmen Square, Western-style fast-food restaurants were unknown in China. There’s a systematic approach to food service that American companies are very stringent on. Although customers didn’t like the food much, KFC made steady progress, ac… Over the years, China has become infamous for its domestic food scandals, including tainted baby formula, fake eggs, and mislabeled meats. KFC grew quickly and attracted urban consumers—particularly women, children, and young professionals—and became a magnet for tourists and out-of-town visitors. I tried a number of dishes at a KFC restaurant in Beijing and found the food to be tastier and fresher than its American counterpart. But it’s trying: In 2017, McDonalds sold an 80 percent stake in its China and Hong Kong operations for $1.7 billion, announcing that it would expand while focusing on menu adaptation. Another vital ingredient in KFC’s secret recipe is its leadership team, specifically its founding leadership team known as the ‘Taiwan Gang’, mainly because most had hailed from Taiwan and to a lesser extent, other parts of Asia. Why China Loves KFC. “If you have brands in a virgin market like China,” says Dong, “You can rebrand, go upscale, and do something completely different from your traditional model.” And that’s precisely what American brands have been doing in China over the last three decades. Though predominantly Western-educated, being ethnic Chinese, they inherently understood China. A couple got engaged at a KFC in South Africa and the fast food chain paid for their wedding. Starbucks stores in China are up to 40 percent bigger than even their largest U.S. counterparts, according to Quartz, a smart tweak that allowed the brand to stand apart from other American concepts trying to attract Chinese customers. KFC was the first American fast-food chain to touch down in China. Pizza Hut and McDonald's were launched in China in September and October 1990, respectively. Back then, a KFC meal was considered a luxury to most Chinese. Proving that it knows how to cater to Chinese tastebuds while maintaining its American brand identity, the chicken purveyor also serves pork chops, curry, congee, deep-fried crullers (a Chinese breakfast staple), and the most authentic Portuguese-style egg tarts in all of China. Today, a Starbucks store opens in China every 15 hours, and on a recent earnings call, the brand said China will surpass the U.S. as its largest market within a decade. Moreover, KFC was one of the first fast-food restaurant chains to expand internationally, including the opening outlets in Beijing, China, in November 1987 (KFC Website, 2013). “Starbucks is a place where you can sit down and have a coffee and chat with your friends.”. Quality is accomplished by establishing independent supply chains. In 2015, Simplot was fined for water pollution. If there were just a few things that China has wholly embraced from the West, it would be their love for Kentucky Fried Chicken, or KFC as it is more commonly known. There are many international fast food chains in China like McDonald’s and KFC. What happens in China, what Chinese people eat, impacts what you and I pay for food." They don’t trust their food, they don’t trust their water, they don’t they trust the air they breathe. Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram. What Are Hot Chocolate Bombs and Why Are They Suddenly Everywhere? Opened in 1987 in Beijing, it was quite the affair in a world where folks still wore Mao-style tunic suits and got around primarily by bicycle. The menu is expansive, with pizza and pasta, salads, steaks — there’s even a brunch menu with bacon and scrambled eggs. Not only is the KFC name simply faster and easier to say, according to the official KFC website, but other reports also note that the nickname was already popular with customers, too. "The timing was perfect, and we were just opening up so … “You have open kitchens and fairly decently maintained dining rooms. KFC became the first Western fast food company in China after its first outlet opened in Qianmen, Beijing, in November 1987. History. By 2013, McDonald's hopes to add 700 outlets to its already existing 1,300." A massive crowd showed up for opening day, and the store sold over 2,200 buckets of fried chicken, raking in $83,000 USD in just 24 hours. Over the past five years, industry revenue has grown at rate of 11.2 percent annually, compared to 3.1 percent in the U.S. over the same period. Three leading internet sites went so far as to survey user opinions on the safety of KFC’s food. But, at least in China, KFC is far more than just a fried chicken specialist. Today, as the vanguard of Western businesses, Kendeji,as KFC is known in the China, stands as sparkling economic testament to the influx of capitalism in the aftermath of Mao’s revolution in China. “You can have a semi-captive audience when you’re next to tourist sites,” Dong says. Brands, which also owns Pizza Hut. 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In China, KFC has achieved such dominance over McDonald’s and local rivals that Colonel Harland Sanders’s image is a far more common sight in many Chinese cities than that of Mao. “The thing about China is that it’s a very large market,“ Dong says. By the time the first McDonald's in Beijing opened in 1992, mainland China had proper infrastructure to supply the restaurants. Today, KFC and McDonald’s are the top-grossing American fast-food chains in China, with KFC consistently leading ahead of McDonald’s. Last year, it launched KPRO, a health food-focused concept restaurant, in Hangzhou, China to test the country’s growing interest in healthy eating. The coffee chain is wildly successful in China, where it sells itself as an authentic taste of the West (unlike at KFC, the menu at Chinese Starbucks locations is largely the same as it is in the U.S.). He visited restaurants and demonstrated his recipe, asking them … CNN Travel explores how the American fast food chain grew to be synonymous with the holiday seeason. With more than 5,000 restaurants in 1,100 cities in China, KFC dominates the country’s fast food landscape. KFC adapted to its local market and tailored its menu to the Chinese consumers by offering more than just the famous Kentucky fried chicken. Pizza toppings include Beijing duck and seafood. Even so, American chains are not immune to their fair share of scandals. And in 2012, KFC and Pizza Hut owner Yum Brands was hit with allegations that its suppliers had injected hormones and drugs exceeding food safety limits into their poultry. In 1987, the fast-food operator opened its first outlet near Tiananmen Square in Beijing. They don’t trust the medicines because almost every other day there’s some kind of scandal about tainted food: used cooking oil, gutter oil, and adulterated meat and vegetables that have loads of pesticides on them.”. Risotto comes studded with mushrooms; clam chowder is served under a pastry puff cap. “The numbers are still holding up well and these American companies are still announcing that they’re opening up more stores,” Dong says. Key to KFC’s success in the country has been its aggressive catering to Chinese tastes, with menu items that will never make their way to US restaurants. As a result, it’s able to charge three times as much in China: A three-ounce serving of Häagen-Dazs ice cream commands the equivalent of $14.29 in China, compared to $4.87 in the U.S. The operation was a joint venture, with a 60 percent stake held by KFC, 27 percent by the Beijing Tourist Bureau and 13 percent by Beijing Food Production. Both brands are American fast-food copycats, with menu items like chicken nuggets and burgers. Further up the country’s eastern seaboard in Shanghai is the world’s largest Starbucks. In Japan, Christmas is a time to feast on KFC. The Kentucky Fried Chicken brand is making a comeback in Australia, such so on KFC's website (above). McDonald’s plans to open 2,000 additional restaurants in China, which will make China the company’s second largest market after the U.S. And China is the biggest earnings driver for Yum Brands, which owns Pizza Hut and KFC; it announced plans to add more than 15,000 restaurants in the next 15 years. In Fujian, the chain that’s struggling to survive in the U.S. is a popular date-night spot that attracts couples dressed to the nines. But high costs soon became associated with high quality and being American, so KFC became popular in China. In addition to being the world’s most populous country, Dong points out that “the population is highly concentrated across the eastern seaboard of China from Beijing, back to Guangzhou, and Shanghai in the middle” — and Western brands have been especially proficient at securing prime real estate in these cities, especially at iconic historical sites. KFC’s first location was on the southern edge of Beijing’s Tiananmen Square. Craft beer and nitrogen-brewed tea are readily available, and the food and baked goods are provided by Rocco Princi, a famed Milanese baker. It quickly became a symbol of the country’s rapidly reforming economy and newfound openness to the world. (See 10 things to do in Shanghai.) Because China is so big this has a huge impact on the rest of the global food system. The biggest difference is that they tend to be cheaper and are better at meeting Chinese food preferences, with options like tuna salad bagels with corn, fish fillet burritos, and a hamburger with a deep-fried shrimp patty smothered in XO sauce and sandwiched with a rice patty. Foreign fast-food still popular in China (Xinhua) Updated: 2005-06-06 13:45. According to a report from IBIS, the fast-food industry in China generated roughly $150.9 billion in 2017, up 9.6 percent from 2016. Unlike in the States, there’s much more to the experience than just pizza. McDonald’s only has around 2,500 restaurants. KFC is popular in China because its western food, and chinese also likes to taste ot, just like Mc Donald. Pizza Hut isn’t the only American company to completely rebrand in China. Although Yum Brands still controls more market share, domestic companies like Hua Lai Shi and Ting Hsin International Group (which owns the burger chain Dicos) are slowly catching up. After opening in some of these major cities, [an American chain restaurant] can then slowly expand its footprint into the more inward regions of China.”. Starbucks has an ou… For many Chinese, it was their first taste of the Western world; the food was exotic and the experience felt a tiny bit illicit. While KFC, and its parent company Yum China, suffered a number of hits recent years thanks to a tainted meat scandal in 2014 and problems with avian flu in 2016, the chain has continued to push aggressively in the market. McDonald’s, KFC, and Starbucks are growing faster in the Chinese republic than in the U.S. Source:Supplied The first McDonald's in Shenzhen was supplied from Hong Kong from 1990 to 1992. I decided to give KFC a try on a recent trip to China to see what it was like. Pizza Hut in China has a full wine list and a three-course menu complete with dessert. Why Japan Is Obsessed With Kentucky Fried Chicken on Christmas ... the popular American fast food chain KFC. E-bikes weren't always so popular on the mainland. What happened in China with Yum! KFC is best known for serving fried chicken to Americans by the bucketful, but it actually makes most of its money in China. “You’re dealing with a civilization that pretty much closed itself off to the outside world for the greater part of the post-World War II period,” Dong says. “That’s a signal that they have confidence in the market and are not pulling back.”, Clarissa Wei is an LA-based journalist who has spent extensive time in China and Taiwan.Editor: Daniela Galarza, The freshest news from the food world every day, Why China Loves American Chain Restaurants So Much, Sign up for the But that desire for American “status symbol” dishes might be fading. We took a 4-hour flight on the new Delta Airbus jet that Boeing tried to keep out of the US. “There’s a trust arbitrage in China,” Dong says. Häagen-Dazs markets itself as a premium brand and often decks out its stores in gold accents and posh red furniture to target the higher-end consumer. “The thing about China is that it’s a very large market,“ Dong says. It took off quickly, and so did the Harvard-educated Okawara, who climbed through the company ranks and served as president and CEO of Kentucky Fried Chicken Japan from 1984 to 2002. I moved to the US from China — here are the biggest cultural differences I've noticed between the 2 countries, Bath & Body Works is now a standalone company — we visited a store and saw why it's been L Brands' secret weapon, CBA and NAB pass on RBA interest rate cut in full, but ANZ and Westpac defy Treasurer Josh Frydenberg's orders, How to watch Netflix on your TV in 5 different ways, The incredible story of Ferrari's 72-year journey from an upstart racing team to a $27 billion luxury brand. KFC is owned by a company called Yum! Beans — some of which are grown in the southwest province of Yunnan — are stored in a 40-ton copper cask. In addition to being the world’s most populous country, Dong points out that “the population is highly concentrated across the eastern seaboard of China from Beijing, back to Guangzhou, and Shanghai in the middle” — and Western brands have been especially proficient at securing prime real estate in these cities, especially at iconic historical sites. They will hold their store managers accountable. It was a place where residents with spending money could go for a special occasion. As of 2016, KFC still holds 11.6% of the market share in China, according to Euromonitor, far ahead of McDonald’s 5.6%. Many also ca… “Until recently people bought foreign products solely as a status symbol, so the more expensive the better,” says Antonio Graceffo, an economics PhD and MBA at Shanghai University. 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