This Makes Me Nuts!

This is the kind of article, Cooking up a challenge, that makes me nuts.  It is founded on the idea that western restaurants have been taking over the Chinese restaurant market and are now in the process of being vanquished by Chinese brands. Why is there always so much smack about US chains seeking global domination? Yes, there are more global brands in China every day. They have to be there because no global company can hope to prop up its stock price without having a China strategy. Yes, Yum! Brands has a ton of restaurants there and is opening bunches every week.

But you have to remember that there are commonly said to be five million restaurants in China.  5 MILLION! Our ReCount restaurant census finds that there are just more than 600,000 in the US. That, in the words of our research science gurus, is “way less” than the number of restaurants in China.

A quick web search tells us that there are roughly 4,000 KFCs in China and that McDonald’s has about 2,000.  No other global brands have enough units to be described as having a market impact.  And those 6,000 units amount to…hang on a sec…carry the one…OK, 0.1% of the total number of restaurants in the country.  Sure they have higher volumes than most other restaurants, but the point is that it’s a huge market and western quick service restaurants (QSRs) play a small role in the panoply of choices available to Chinese restaurant consumers.  It’s a huge opportunity for global brands.

And, there’s this sense that somehow the Chinese have been cramming themselves into the 10,000 western restaurants in China (I don’t know the actual number but that seems reasonable if you think about it) and have shifted their diets to burgers and other icons of US fast food and have now rejected that diet and are going back to Chinese food.

Here are a couple of things that you should know.

CREST® China, our ongoing consumer foodservice tracking research in 8 cities in China, tells us that, unlike any other country in the world, global foods like burgers and fries are not among the top foods consumed by Chinese consumers when they go to restaurants. Yes, they eat them but they have not yet reached “favorite” status.

CREST China tracks all kinds of outlets in those 8 cities, and Chinese chains, taken as a group, have always accounted for a larger share of the market than western chains. Only a handful of Chinese chains are in all 8 markets that NPD tracks.  They tend to be local, even if they are very large within their home city.

So, of course Chinese chains are getting larger.  They could hardly get smaller. They have always been bigger, as a group, than western QSRs as a group and that presents a tremendous opportunity for western AND Chinese QSRs. The fact that the Chinese prefer their own food is not new and not entirely unique.

What is happening is not necessarily that Chinese consumers are turning their back on western food.  What is happening is actually buried in the article.  Chains are stealing share from small mom and pop stores…from other Chinese restaurants, which is the REAL challenge.

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