Fast Food Giants in China: Growth and Impact of KFC and McDonald's

1. KFC and Mcdonalds in China By: John Basa Shaira Cortez

2. KFC Overview • KFC’s entry to Chinese Culture • Business Growth in China • The company’s contribution to the economy • Brief history • Yum! and some of their setbacks • Interesting current events

3. KFC Entry into Chinese Culture • KFC started with less than 100 employees in 1987 • The first KFC was located at Qianmen, Beijing • KFC was quickly accepted upon its entrance to China • KFC entered China during the era of reform and opening • The western business model of fast food was new and interesting to the Chinese • China during KFC’s first opening thought of it as an example of modern times

4. KFC Growth in China • KFC is one of the most influential western restaurants in China -- passing Mcdonalds • Since 1987, the employee rate has grown from 100 employees to over 300,00 • Its localization rate has now 99.9% • On June 11, 2017, KFC has opened 5,039 restaurants in China • Since 2010 KFC controls 40% of the market share.

5. KFC’s Contribution to the Economy • KFC has around 550 local Chinese suppliers that maintain 90 percent of their needs in store. • KFC and other Fast Food companies increased competition with local Chinese catering businesses. • KFC’s American business model was introduced to the Chinese economy

6. Brief History of KFC in China First branch opened in Beijing: • Achievements • From having over 500 stores in 2001 to more than 20,000 in 2008 • Setbacks • Uncontrollable crowd and the “New Orleans Roasted Chicken” • The Taiwan Gang(Initial top management team are from Taiwan) • Essential leaders for KFC

7. Story of Yum!’s Setbacks • Sales of KFC decreased 3 years consecutively from 2009 to 2012 • Extreme levels of antibiotics in the chicken supply • U.S. company OSI sold China expired meat

8. KFC’s Alternative Program for Eating Healthy • KPRO and what it represents • Types of food and merchandise

9. Facial Recognition and KFC • Supported by Ant Financial • How the machine gathers information • Baidu and its involvement

10. Special Edition KFC phone partnered with Huawei • Why put the KFC logo on a phone? • Characteristics of the Huawei Enjoy 7 Plus • Bonus of buying the KFC cellphone

11. Mcdonald's Overview • Mcdonald’s introduction to Chinese Culture • Growth in China • McDonald’s feud with China • The contribution to Chinese economy • Current events

12. McDonald’s Entry into Chinese Culture • Mcdonald's was introduced to China in 1990 • NOT widely accepted by the Chinese culture • In fact, many of the items on the menu, items which we find familiar in Western culture, had never been heard of (e.g. french fries and hamburger combo) • Even more so, food combos such as french fries with ketchup and hamburgers with cheese had an influence on McDonald’s popularity rates • The first Mcdonald's was located in Shenzhen • Led to a shift in Chinese eating preferences at the end of the 20th century • McDonald’s has also provided other domestic Chinese businesses with a pattern of fast food management -- take-out or home deliveries

13. McDonald’s Entry (cont’d) • The western restaurant did not always have a smooth transition into China during the ‘90s • Upon its arrival in Beijing during the ‘90s, McDonald’s decided to strategically locate themselves on Wangfujing street, a busy shopping district • Two years after opening, the city decided to use the Wangfujing property as a location for their next supersized shopping mall -- the problem was that McDonald’s was supposed to be located on that property for 20 years • Despite the city’s efforts to get McDonald’s to vacate their spot, McDonald’s 20 year lease gave them the right to stay and so the city demolished all the buildings but the McDonalds • A lot of controversy but Beijing and McDonald’s had reconciled in 1996; resulting in a $12.3 million fee paid to McDonald’s for the upheaval and a new outlet 150 meters away from where the original McDonalds stood

14. McDonalds vs. Beijing

15. McDonald’s Growth in China • Currently expanding steadily since its entrance into China in the ‘90s • China is the no. 1 growth market for McDonald's aside from the US • McWeddings • People in China see fast food as attractive because it symbolizes status (able to keep up with the “fast paced” lifestyle) • Prices may be higher than U.S. prices but this contributes to the idea of McDonald’s as “high fashioned” • People can also throw engagement parties or marriages at McDonalds • Since its opening, china has built many restaurants and have increased their number of employees drastically; thus, indicating the acceptance of McDonalds in the Chinese culture as well as McDonalds dominance in most food retailing environments in mainland China

17. McDonald’s Contribution to Economy • McDonald's has established more than 2,200 restaurants in China (2015) • There have been over 100,000 people employed since 1990 • McDonald’s introduced a new technique called “the coupon” • Helps Chinese business people to retain potential customers • Helps to obtain new generation’s attention • Idea that a coupon may persuade consumers to change their attitudes and behaviors and as a result, have these consumers thinking that their brand should be considered alternative purchases • This strategy emerged during the ‘90s (time when economy was still growing) and allowed China to witness the power of coupons • The coupon strategy is now used by both traditional and newly developed fast food restaurants

18. Job Opportunities • Both KFC and McDonalds provide many job opportunity • 50,000 tons of potato chips are produced for fast food brands like KFC and McDonalds • There are about 400 employees who work together to produce the potato chips • 10,000 local farmers are employed because of the high demand in potato chips • Because of the adoption of the coupon strategy, handing out and seeing coupons are now a normal occurrence in China • Allows for job opportunities for college students -- employed to hand out coupons on the commercial streets

19. Mcdonald’s and the Younger Generation McDonald’s had influenced the younger Chinese generation to stray from their traditional ways of eating: • Traditional Chinese eating habits consisted of avoiding fried foods because they were high in calories and contained oncogenes • McDonald's has influenced the younger Chinese generation to relinquish their traditional eating habits • Because the younger Chinese generation has given up their traditional, more healthy style of eating, their health has been impaired as a result (risk for diabetes, obesity, and other noncommunicable diseases)

20. Growth of Fast Food and Obesity in China • With the growth of the fast food industry, the Chinese began putting down their traditional steamed bun, plant-based protein, and soybean milk meals for fried chicken and hotdogs -- thus influencing their risk for obesity. • Increased income, urbanization, busier lifestyle, food safety, new brands of food and fast fast food service has influenced a demand for fast food • As a result, obesity among adults have increased • From 20% (‘92), to 30% (‘02) to 42% (‘12) → based on Chinese BMI standard • Regional data and cross - sectional studies suggested that there was a relationship between eating at fast food restaurants and obesity in children and females • Over a third of Chinese adults in major cities are obese

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