Western fast-food brands are expanding into the countryside
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O FFICIALLY IT IS a city. But Hanchuan, in central China, is largely rural. Many of its 1m people live between fields and small factories. A company making sewing thread and a handful of fisheries make up a good chunk of its economy. But there was a buzz in the tiny city centre in January, when Hanchuan’s first McDonald’s opened its doors. When The Economist visited on a snowy afternoon soon after, the fast-food restaurant was packed.
Towns like Hanchuan never loomed large in the plans of multinational companies. But suddenly hundreds of places like it are the new frontier for Western fast-food giants. In the next three years McDonald’s is due to add 3,000 outlets to the 7,000 it had in China in 2025, many of them in smaller cities and towns. KFC intends to add over 4,000 to its tally of 12,600 over the same period. Burger King, Domino’s Pizza, Pizza Hut, Starbucks and Subway all have similarly ambitious plans.
One factor behind the push into the countryside is the need for new customers. Roughly two-thirds of China’s people live outside its 50 biggest cities, which are already saturated with burger and chicken joints. Around 70% of KFC s in China are within a ten-minute cycle ride of another KFC, according to UBS, a bank; at about 60%, the “cannibalisation share” for McDonald’s is not much better. This makes finding populations unexposed to burgers all the more important.
Another ingredient in the ruralisation of fast food is the restaurants’ ownership. Though McDonald’s and KFC are archetypes of American consumerism, their Chinese operations are separate. McDonald’s in China is mostly owned by Citic Capital, a powerful state-backed investor. Yum Group, owner of KFC and Pizza Hut, spun off its Chinese business in 2016 into a group called Yum China, which is listed in New York and Hong Kong but based in Shanghai. In November Starbucks sold 60% of its China business to Boyu Capital, a local private-equity firm co-founded by the grandson of Jiang Ziamen, a former paramount leader. Burger King announced a similar deal with another investor that has state connections the same month.
This partly reflects waning enthusiasm for China among foreign investors. The economy is faltering, consumers are gloomy and local competition is fierce. Many Western brands have stopped expanding or have started to shrink; they also lack the experience to venture into smaller, quieter parts of the country. Chinese investors, by contrast, have been willing to put up the capital needed to open thousands of restaurants under such conditions and bet boldly on semi-rural areas as the next market for shakes and fries.
It is a gamble. Chinese fast-food brands, such as Tastien and Wallace, offer similar cuisine, but are cheaper and have a significant presence in smaller cities and towns. Western brands will have to offer suitable prices to attract customers in poorer regions if they want to compete, says Jay Lau of S & P Global, an information provider. They will also have to build reliable supply chains in these far-off areas, he notes. That will add cost and further squeeze margins.
Moreover, finding appropriate spots to open restaurants will not be easy. At first blush large swathes of the country appear to be there for the taking; most small towns across Hubei province, where Hanchuan is located, have no McDonald’s. But many of these places have tiny centres with very few buildings suitable for accommodating large fast-food restaurants, notes Christine Peng of UBS. Competition for that space will be fierce, she says.
Take Hanchuan, with its traditional open-air markets and dated shopping areas. McDonald’s is picky about the type of space it occupies. The recent opening of a small but modern mall was crucial in convincing the company to set up shop. Many neighbouring towns may not yet have the right spaces to accommodate burger-flipping and coffee-brewing. The fast-food giants, though, are hungry for them. ■
논증 분석
유형: causal
핵심 주장
McDonald’s와 KFC 등 서구 패스트푸드 브랜드들이 중국 농촌 및 소도시로 급속히 확장하고 있으나, 이는 포화된 대도시 시장과 중국 자본으로의 소유권 이전이 맞물린 결과이며 상당한 리스크를 동반한다.
논리구조
- 전제: 중국 50대 대도시 시장은 이미 포화 상태다. KFC의 경우 중국 내 매장의 약 70%가 다른 KFC로부터 자전거로 10분 거리 이내에 위치하며, McDonald’s의 ‘자기잠식 비율’도 약 60%에 달한다.
- 논거: 신규 고객 확보의 필요성이 농촌 진출의 핵심 동인이다. 중국 인구의 약 3분의 2가 50대 대도시 밖에 거주하며, 아직 버거와 치킨에 노출되지 않은 인구를 찾는 것이 중요해졌다.
- 논거: 소유권 구조의 변화가 농촌 확장을 가능하게 하는 또 다른 요인이다. McDonald’s 중국 사업은 국가 지원 투자자인 Citic Capital이 대부분 소유하고, KFC·Pizza Hut의 모회사 Yum Group은 2016년 중국 사업을 Yum China로 분사했으며, Starbucks는 중국 사업의 60%를 전 최고지도자 Jiang Ziamen의 손자가 공동 창업한 사모펀드 Boyu Capital에 매각했다.
- 진단: 외국 투자자들의 중국에 대한 열의가 식으면서 현지 중국 자본이 그 빈자리를 채우고 있다. 중국 경제 둔화, 소비자 심리 위축, 치열한 로컬 경쟁 속에서도 중국 투자자들은 소도시를 다음 시장으로 보고 과감히 베팅하고 있다.
- 반론: Tastien, Wallace 등 중국 로컬 패스트푸드 브랜드들이 소도시에 이미 상당한 입지를 구축하고 있으며, 더 저렴한 가격을 제공한다. S&P Global의 Jay Lau는 서구 브랜드들이 더 가난한 지역 고객을 끌어들이려면 적정 가격을 제시해야 하고, 원거리 공급망 구축 비용이 마진을 추가로 압박할 것이라고 지적한다.
- 반론: 적합한 입지 확보가 쉽지 않다. UBS의 Christine Peng에 따르면, 많은 소도시들은 중심가가 매우 협소하고 대형 패스트푸드 레스토랑을 수용할 만한 건물이 거의 없어 그 공간을 둘러싼 경쟁이 치열하다.
결론
서구 패스트푸드 기업들의 중국 농촌 진출은 포화된 대도시 시장을 탈피하려는 전략과 현지 자본의 공격적 투자가 결합된 흐름이지만, 로컬 경쟁, 마진 압박, 물리적 입지 부족이라는 현실적 장벽으로 인해 성공은 불확실하다.