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Fast Food - China - April 2013

Sales in the Chinese fast food market more than doubled over the 2007-12 period, to reach an estimated RMB1 trillion, fuelled by the growth of the economy and consumer incomes and rapid expansion of leading players in the market. However, the market remains highly fragmented. The top ten operators only accounted for 0.65% of the market in 2011. The vast majority (98%) of the market still consists of small independent restaurants, which indicates there is substantial potential for growth for fast food chains in China.

The fast food market has come under scrutiny after recently exposed food safety scandals and it also faces potential threats from consumers’ growing health concerns. However, targeted strategies tailored to the location and consumer segment can assist fast food outlets in China to convert these potential threats into opportunities

-David Zhang, Research Analyst

Definition

Fast food and takeaways

This report covers fast food and takeaway restaurants which have a restricted or set menu, limited seating and sometimes offer takeaways. It can include pizzerias, grills & hotdog bars, burger bars, street stalls/kiosks, self-service outlets and takeaway-only outlets. Market value is based on expenditure including sales tax in these outlets; market volume is based on numbers of outlets.

Exclusions

Coffeehouses/shops and other outlets where food sales account for only a small proportion of turnover. Vending. Canteens in institutions (schools, hospitals etc.) and workplaces. Bakers, sandwich shops, bagel & doughnut shops. Full-service restaurants which generally have large menus and limited if any takeaway turnover and have waiter/waitress service.

 

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Table of contents

  1. Introduction

      • Definition
        • Fast food and takeaways
          • Exclusions
            • Methodology
              • Abbreviations
              • Executive Summary

                  • The market
                    • Figure 1: China fast food and takeaway market sales, 2007-17
                    • Figure 2: China fast food and takeaway market, number of outlets, 2007-17
                  • Companies and brands
                    • Figure 3: Leading companies in the Chinese fast food market, outlets, 2011
                  • The consumer
                    • Chinese fast food is the most popular choice for regular fast food eaters
                      • Figure 4: Frequency of using fast food restaurants in the last six months, February 2013
                    • Lunch is still the key occasion for fast food, and breakfast also has potential
                      • Figure 5: Occasions of easting at fast food restaurants, February 2013
                    • Food quality and safety are the key consideration factors for selecting fast food venues
                      • Figure 6: Important factors considered when selecting a fast food restaurant, February 2013
                    • Attitudes towards fast food restaurants
                      • Figure 7: Attitude towards fast food restaurants in general, February 2013
                    • Wider range and localisation are important to Western fast food chains
                      • Figure 8: Attitudes towards Chinese and Western fast food restaurants, February 2013
                    • Key trends
                      • Domestic chains’ rapid expansion highlights the need for product innovation
                        • Food safety scares of 2012 put fast food market under scrutiny
                          • Healthy living and fast food in China
                            • Breakfast opportunities
                            • The Market

                              • Key points
                                • Fast food market doubles in size from 2007-12
                                  • Figure 9: China fast food and takeaway market, value sales and outlets, 2007-17
                                • Fast food sector reached RMB500 billion in 2007
                                  • The financial crisis of 2008/09 hit discretionary spending and fast food
                                    • Soaring prices of raw materials and labour pose new challenges
                                      • Forecast: steady growth amid challenges ahead
                                        • Figure 10: China fast food and takeaway market, value sales, 2007-17
                                        • Figure 11: China fast food and takeaway market, number of outlets, 2007-17
                                      • Fast-expanding consumer base with greater spending power
                                        • Low consumer trust in food safety
                                          • More comprehensive food safety standards, rigorous testing and inspection, and stricter regulations put in place after food scandals
                                            • Higher food prices put pressure on fast food operators’ margins
                                              • Growing interest in healthy lifestyles may pose a challenge to the fast food industry
                                              • Companies and Brands

                                                • Key points
                                                  • Market shares
                                                    • Figure 12: Leading companies in the Chinese fast food and takeaway market, by market share (outlets), 2010 and 2011
                                                  • Yum! Brands
                                                    • KFC
                                                      • Pizza Hut
                                                        • East Dawning
                                                          • McDonald’s
                                                            • Hua Lai Shi Catering Management and Service Co., Ltd.
                                                              • Shanghai Shihao Catering Co., Ltd.
                                                                • Ting Hsin International Group
                                                                  • Dicos
                                                                    • Master Kong Chef’s Table
                                                                    • The Consumer

                                                                      • Key points
                                                                        • Frequency of using fast food restaurants in the last six months
                                                                          • Figure 13: Frequency of using fast food restaurants in the last six months, February 2013
                                                                        • Occasions of eating at fast food restaurants
                                                                          • Figure 14: Occasions of eating at fast food restaurants, February 2013
                                                                        • Important factors when choosing a fast food restaurant
                                                                          • Figure 15: Important factors when choosing a fast food restaurant, February 2013
                                                                        • Attitude towards fast food restaurants
                                                                          • Figure 16: Attitude towards fast food restaurants, February 2013
                                                                        • Attitude towards Chinese and Western fast food restaurants
                                                                          • Figure 17: Attitude towards Chinese and Western fast food restaurants, February 2013
                                                                      • Domestic Chains’ Rapid Expansion Highlights the Need for Product Innovation

                                                                        • Key points
                                                                          • A Bite of China: the unbreakable link between Chinese food and culture
                                                                            • Local tastes spark new interest
                                                                              • Chinese fast food outlets enjoy more frequent usage than Western
                                                                                • Figure 18: Frequency of eating in fast food restaurants, February 2013
                                                                              • Strong demand for innovative menus
                                                                                • Chinese fast food poses an increasingly credible challenge to Western chains
                                                                                  • Western fast food is rarely seen as better than local
                                                                                    • The emergence of Chinese fast food chains
                                                                                      • Local food can help Western chains maintain their ground
                                                                                        • Introducing more localised dishes
                                                                                          • Tier one cities and high-income consumers show most interest in localised dishes
                                                                                            • Figure 19: Agreement with the statement “I would like to see more ranges offered at Western fast food restaurants (eg reduced calories, new flavours)”, by income and city tier, February 2013
                                                                                            • Figure 20: Agreement with the statement “I prefer to go to Western fast food restaurants which provide localised products (eg soymilk, porridge)”, by income and city tier, February 2013
                                                                                          • Localised kids’ dishes offered by Western fast food restaurants
                                                                                            • Figure 21: Selected attitudes towards fast food, by presence of children in the household, February 2013
                                                                                          • What it means
                                                                                          • Food Safety Scares of 2012 Put Fast Food Market Under Scrutiny

                                                                                            • Key points
                                                                                              • Recent scandals make food safety a key concern in China
                                                                                                • Su Sheng Ji (‘hormone chicken’) scandal and its aftermath hit the fast food market
                                                                                                  • Concerns over food safety see consumers curb eating out
                                                                                                    • Food safety and quality become the key factors for choosing fast food outlets
                                                                                                      • Figure 22: Top ranked factors for selecting a fast food restaurant, February 2013
                                                                                                    • Leading operators look to reassure customers of their supply chains
                                                                                                      • Middle earners show greater interest in food quality
                                                                                                        • Figure 23: Quality of food as a factor in choosing a fast food restaurant and regular usage of Western fast food restaurants, by gross income, February 2013
                                                                                                      • Converting food safety into competitive advantages
                                                                                                        • Figure 24: Quality of food as a selection factor and regular use of Chinese fast food restaurants, by gross income, February 2013
                                                                                                      • What it means
                                                                                                      • Healthy Living and Fast Food in China

                                                                                                        • Key points
                                                                                                          • The pursuit of healthy lifestyle poses a threat to fast food industry
                                                                                                            • Nearly half of respondents are willing to pay the premium for healthier food
                                                                                                              • Figure 25: Agreement with the statement “I would pay more for healthier foods”, by income, November 2012
                                                                                                            • Marketing campaigns should put more attention on middle earners
                                                                                                              • Figure 26: Agreement with the statement “Eating at fast food restaurants in moderation is not bad for your health”, by income, February 2013
                                                                                                            • Treats and snacks: the escape from diet routines
                                                                                                              • Figure 27: Attitude towards healthy diets, November 2012
                                                                                                              • Figure 28: Agreement with the statement “Eating at fast food restaurants in moderation is not bad for your health”, by occasion at which users have eaten at fast food restaurants, February 2013
                                                                                                            • Redesigning fast food dishes to make them healthier
                                                                                                              • Functional ingredients can improve the image of fast food
                                                                                                                • Healthy seasonal dishes can tap into interest in new launches
                                                                                                                  • What it means
                                                                                                                  • Breakfast Opportunities

                                                                                                                    • Key points
                                                                                                                      • Breakfast is a popular fast food occasion
                                                                                                                        • Figure 29: Occasions of eating at fast food restaurants, February 2013
                                                                                                                      • The changing landscape of the out-of-home breakfast market
                                                                                                                        • Food safety scares make quality of food a key consideration
                                                                                                                          • Figure 30: Top ranked factors for selecting a fast food restaurant by those who have eaten breakfast at a fast food restaurant, February 2013
                                                                                                                        • Soaring food costs force street stalls to raise prices
                                                                                                                          • Opportunities to target various consumer segments
                                                                                                                            • Breakfast users are more drawn to new dishes offered by fast food chains
                                                                                                                              • Opportunity for Chinese fast food operators to target breakfast occasion in larger cities
                                                                                                                                • Figure 31: Occasions of and attitude towards eating at fast food restaurants, by city tier, February 2013
                                                                                                                              • Convenient breakfast can appeal to consumers in tier one and two cities
                                                                                                                                • Figure 32: Agreement with the statement ‘Convenience is the main reason I buy fast food’, by city tier, February 2013
                                                                                                                              • Traditional and less convenient dishes – congee, noodle, and wonton – can help fast food chains to target consumers in their forties
                                                                                                                                • Potential for premium Western-style breakfast
                                                                                                                                  • What it means
                                                                                                                                  • Appendix – Market Size and Forecast

                                                                                                                                    • Methodology
                                                                                                                                        • Figure 33: Best- and worst-case forecasts for China fast food market, by value, 2012-17
                                                                                                                                        • Figure 34: Best- and worst-case forecasts for China fast food market, by number of outlets, 2012-17
                                                                                                                                    • Appendix – Frequency of Using Fast Food Restaurants in the Last Six Months

                                                                                                                                        • Figure 35: Frequency of using fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 36: Frequency of using fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 37: Frequency of using fast food restaurants in the last six months, by occasions of eating at fast food restaurants, February 2013
                                                                                                                                        • Figure 38: Most popular frequency of using Western fast food restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 39: Next most popular frequency of using Western fast food restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 40: Frequency of using McDonald’s restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 41: Frequency of using KFC restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 42: Frequency of using Subway restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 43: Frequency of using Burger King restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 44: Frequency of using Dicos restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 45: Frequency of using other Western fast food restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 46: Most popular frequency of using Chinese fast food restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 47: Next most popular frequency of using Chinese fast food restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 48: Frequency of using Zhen Kungfu restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 49: Frequency of using Yonghe restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 50: Frequency of using East Dawning restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 51: Frequency of using Da Niang Dumpling restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 52: Most popular frequency of using street snacks in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 53: Next most popular frequency of using street snacks in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 54: Frequency of using self-dish selection restaurants in the last six months, by demographics, February 2013
                                                                                                                                        • Figure 55: Frequency of using other Chinese fast food restaurants in the last six months, by demographics, February 2013
                                                                                                                                    • Appendix – Occasions of Eating at Fast Food Restaurants

                                                                                                                                        • Figure 56: Occasions of eating at fast food restaurants, February 2013
                                                                                                                                        • Figure 57: Occasions of eating at fast food restaurants, by demographics, February 2013
                                                                                                                                        • Figure 58: Consideration factors for selecting fast food restaurants, by occasions of eating at fast food restaurants, February 2013
                                                                                                                                    • Appendix – Important Factors when Choosing a Fast Food Restaurant

                                                                                                                                        • Figure 59: Important factors when choosing a fast food restaurant, February 2013
                                                                                                                                        • Figure 60: Most popular top ranked important factors for choosing a fast food restaurant, by demographics, February 2013
                                                                                                                                        • Figure 61: Next most popular top ranked important factors for choosing a fast food restaurant, by demographics, February 2013
                                                                                                                                    • Appendix – Attitudes towards Fast Food restaurants in General

                                                                                                                                        • Figure 62: Attitudes towards fast food restaurants in general, February 2013
                                                                                                                                        • Figure 63: Most popular attitudes towards fast food restaurants in general, by demographics, February 2013
                                                                                                                                        • Figure 64: Next most popular attitudes towards fast food restaurants in general, by demographics, February 2013
                                                                                                                                        • Figure 65: Attitudes towards fast food restaurants in general, by occasions of eating at fast food restaurants, February 2013
                                                                                                                                        • Figure 66: Attitudes towards fast food restaurants in general, by most popular frequency of using Western fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 67: Attitudes towards fast food restaurants in general, by next most popular frequency of using Western fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 68: Attitudes towards fast food restaurants in general, by most popular frequency of using street snacks in the last six months, February 2013
                                                                                                                                        • Figure 69: Attitudes towards fast food restaurants in general, by next most popular frequency of using street snacks in the last six months, February 2013
                                                                                                                                        • Figure 70: Attitudes towards fast food restaurants in general, by most popular frequency of using Chinese fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 71: Attitudes towards fast food restaurants in general, by next most popular frequency of using Chinese fast food restaurants in the last six months, February 2013
                                                                                                                                    • Appendix – Attitudes towards Chinese and Western Fast Food Restaurants

                                                                                                                                        • Figure 72: Attitudes towards Chinese and Western fast food restaurants, February 2013
                                                                                                                                        • Figure 73: Attitudes towards Chinese and Western fast food restaurants, by demographics, February 2013
                                                                                                                                        • Figure 74: Attitudes towards Chinese and Western fast food restaurants, by occasions of eating at fast food restaurants, February 2013
                                                                                                                                        • Figure 75: Attitudes towards Chinese and Western fast food restaurants, by most popular frequency of using Western fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 76: Attitudes towards Chinese and Western fast food restaurants, by next most popular frequency of using Western fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 77: Attitudes towards Chinese and Western fast food restaurants, by most popular frequency of using Chinese fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 78: Attitudes towards Chinese and Western fast food restaurants, by next most popular frequency of using Chinese fast food restaurants in the last six months, February 2013
                                                                                                                                        • Figure 79: Attitudes towards Chinese and Western fast food restaurants, by most popular frequency of using street snacks in the last six months, February 2013
                                                                                                                                        • Figure 80: Attitudes towards Chinese and Western fast food restaurants, by next most popular frequency of using street snacks in the last six months, February 2013

                                                                                                                                    Companies Covered

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                                                                                                                                    Fast Food - China - April 2013

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