Food and Beverages News
- McDonald's and KFC prepare for drive-through boom in China market
Date: 22-Jan-2007 Sources: (Shenzhen Daily)
MCDONALD'S Corp. opened its first drive-through in Beijing on Friday, launching a partnership with China Petroleum and Chemical Corp. to exploit the country's growing taste for both cars and Western fast food.
The Beijing drive-through is the first in McDonald's venture with China Petroleum and Chemical Corp., which McDonald's China CEO Jeffrey Schwartz said would open 25 to 30 more in the next 12 to 18 months. Both gas stations and drive-throughs are booming as car purchases by newly affluent drivers speed China's change from a bicycle culture to a car culture.
McDonald's and its partner, also known as Sinopec, christened the new two-story Beijing restaurant, set beside a Sinopec filling station, with a ceremony that mixed traditional lion dancers and a Chinese-speaking Ronald McDonald.
China's booming market is a key growth area for the hamburger chain, Schwartz said.
'It's huge. It's a real priority for the global company because of the potential growth in China,'he said. 'We think drive-throughs are a big part of this.'
China's double-digit economic growth has created a burgeoning market for cars, fast food and other consumer goods. The country overtook Japan last year to become the world's second-biggest vehicle market after the United States, with 7.2 million cars sold, a 37 percent growth.
McDonald's, based in Oak Brook, Illinois, opened its first restaurant in China in 1990 and has grown to 780 outlets in 120 cities with 50,000 employees. It faces strong competition from Yum! Brands Inc., the industry leader in China with more than 2,000 KFC restaurants and 300 Pizza Huts.
'China is certainly a significant market for McDonald's, and they're focused on seizing that,'said John Owens, who follows the restaurant industry for financial firm Morningstar Inc.
McDonald's plans to open about 100 new restaurants in China over the coming year, with more than half equipped with drive-through windows, Schwartz said.
Drive-throughs, which are highly profitable, have been a key part of McDonald's resurgence in the United States in recent years. The company has extended operating hours at many U.S. outlets, operating exclusively via drive-throughs through the night at many restaurants as a comparatively inexpensive way to boost sales.
McDonald's speeded up its plan to open drive-throughs in China after seeing strong demand at the first, which opened in December 2005 in Dongguan, Guangdong Province. It already has 15 other drive-throughs in Shanghai and Guangdong Province. The 20-year deal with Sinopec gives it the pick of any sites where the Chinese partner decides to open a restaurant beside one of its filling stations.
Sinopec, the country's No. 2 oil company, has more than 30,000 outlets throughout China and is adding 500 to 600 a year.
Drive-throughs, along with local recipes that cater to Chinese culinary tastes, are the latest attempts by McDonald's to catch up with KFC in China's food industry, with 1 trillion yuan (US$125 billion) in estimated annual sales. McDonald's has 762 outlets in China, less than half of Yum's 1,600, according to the Web sites of both companies.
The Ministry of Commerce estimated Oct. 20 that China's 1.3 billion people may spend more than 1 trillion yuan eating out in 2006, 13 percent more than in 2005. Yum had 1.5 percent of China's restaurant sales last year, the largest market share among food operators.
KFC last year announced a plan to build 100 drive-through restaurants in China by 2008, including some outlets alongside stores of B&Q, the home-improvement unit of Kingfisher Plc.
KFC, with more than 80 outlets in Shenzhen, signed an agreement last April to open its first Shenzhen drive-through in Longhua Subdistrict, Bao'an District.
McDonald's has opened 60 restaurants in Shenzhen, according to the company.
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