Foreign fast food chains in China experiencing confidence crisis
June 18, 2013 Leave a comment
Foreign fast food chains in China experiencing confidence crisis
Staff Reporter
2013-06-18
Foreign fast food chains are facing a series of challenges that have hit their sales in China, which has become a key market after the companies’ rapid expansion in the country, the financial site of Chinese portal Tencent reported.
Yum Brands, which owns chains including KFC and Pizza Hut and controls 0.2% of the fast food market in China, posted a 13% drop in same-store sales at its over 5,200 outlets across the country in March, and forecast a further fall of 29% in April.Meanwhile, McDonald’s reported a 20% drop in same-store sales in China during the first three months of this year, Tencent added.
Although news of the H7N9 bird flu surfacing in China during late March was viewed as a factor behind the sales decline, the Tencent report said a slew of food safety scandals involving human errors have actually been the key issue.
Incidents, such as McDonald’s alleged use of a beef patty after it fell on the floor and basketball player Yi Jianlian’s claim that he found human hair in his KFC meal, have impacted Chinese consumers’ confidence in foreign fast food chains.
Foreign companies generally enjoy a higher level of credibility in China, as local consumers associate a more professional image with them, Tencent said, but food safety scares that surfaced abroad in recent years showed that it was not an issue unique only to China.
For instance, it was recently reported that more germs were found in ice cubes of over 60% of chain food stores in the United Kingdom than those in a toilet, Tencent said.
The foreign chains have also been hit by a slower global economy, with its ripple effects also being experienced by China, leading to a decline in consumer spending owing to little growth in incomes, the Tencent report added.
This does not, however, spell the end for foreign fast food chains in China, since economic growth in second and third-tier Chinese cities is expected to drive growth in the fast food and take-out market in the country to 1.8 trillion Chinese yuan (US$293.7 billion), Tencent said.
Such prospects also stemm from the country’s efforts to transform its economy from an export-driven one to one supported by domestic consumption, according to Tencent.
The days of rapid expansion for foreign fast food chains in China have ended and these brands will have to enhance their management of food safety to ensure that they can still generate profits in the next economic cycle, Tencent said.
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