McDonald’s may be the No. 1 restaurant chain throughout most of the world. But in China, the globe’s fastest growing market, it is a distant second.
And even though previous tests of drive-through lanes by other fast-food chains have failed, McDonald’s thinks the time may now be right and is hoping it will be the key to capturing market share in the newly mobilizing country.
On Tuesday, the Oak Brook-based hamburger chain said it is joining with a government-owned gasoline filling station to add drive-through outlets throughout the country in a bid to capture some of those whizzing past in the new cars they are buying at a record clip.
“Chinese consumers are taking to the highways and byways and McDonald’s does not want to lose an opportunity to gain any ground,” said Matthew Tripodi, a food service analyst with Euromonitor International, a worldwide consulting company based in London.
The world’s largest restaurant chain sees its future hooked to the rising Chinese middle class which includes about 22 percent of China’s 1.3 billion population, or 290 million–about the same number as the entire U.S. population.
Because of this group, automobile sales in China are skyrocketing. In 2005, Chinese bought six million cars, a 13.5 percent increase from the previous year. Auto sales were up 54 percent in the first quarter of this year.
And McDonald’s is hoping the Chinese will use cars to get fast food, just as Americans have learned to do since the company first began selling burgers more than 50 years ago.
McDonald’s, half the size there of chief competitor Kentucky Fried Chicken, said it is joining with the state-owned Sinopec Group, the country’s largest gasoline retailer, in an effort to speed its expansion. It currently has about 760 operating restaurants–three of which have drive-through lanes. Many of those restaurants are located in office buildings. By comparison, KFC, the largest-selling American fast-food outlet in China, has 1,600 restaurants.
The burger giant, which said it wants to operate 1,000 Golden Arches restaurants by the time Beijing hosts the 2008 Olympics and plans to focus on developing service station drive-through lanes in Beijing, Shanghai and Guangzhou. Unlike U.S. operations, the stores operated in conjunction with a gasoline station will not have dining rooms.
The drive-throughs and restaurant rollouts are important parts of McDonald’s efforts to boost its market share, which fell to 8.7 percent in 2004 from 10 percent in 2002, according to Euromonitor. KFC’s market share climbed to 15.8 percent from 13.8 percent the same year.
“This is an important milestone in our 50-year history and even more important, in our 16-year history in China,” said Lisa Howard, a McDonald’s spokeswoman. “The development of McDonald’s drive-through restaurants in Dongguan, Shunde and Shanghai have been in direct response to the changing needs of the Chinese consumer and an ever-evolving market.”
But the restaurant chain, which first entered the Chinese market in Shenzhen, may be fighting a strong current.
Traditionally, Chinese have viewed meals as times when they sit down to eat with family or friends, not a time to pull up to a drive-through window to order a rice burger.
The rice burger is a new sandwich the chain is testing in Asia. It features a patty of beef or chicken held between two cakes of rice.
According to data compiled by Euromonitor, 90 percent of Chinese eating fast food dine in the restaurant. Sales of meals taken away from the restaurant are expected to only grow 2 percent, to 12 percent, by 2009.
By comparison, 71 percent of U.S. fast-food meals are taken away from the restaurant, while only 29 percent are consumed at the establishment. By 2009, nearly 75 percent of fast-food meals purchased in the U.S. will be taken away from the restaurant, Euromonitor predicts.
More important, according to Euromonitor, nearly 90 percent, or $113.2 billion, of all meals, purchased outside the home are bought at full-service restaurants in China. By comparison, about 45 percent of all restaurant meals sold in the U.S. are purchased at fast-food establishments.
Still, McDonald’s can’t ignore the Chinese market, Tripodi said.
“This is a long-term growth strategy and they don’t want to lose this opportunity. China isn’t going to be a flash in the pan. It helps that the Olympics are coming and that McDonald’s is making these deals to get their name out there, but at the end of the day, it is going to take time for the market to grow,” said Tripodi.
