On February 5th, McDonald's announced its fourth quarter and full year results as of December 31, 2023. McDonald's achieved a revenue of 25.494 billion US dollars in 2023, a year-on-year increase of 10%; The net profit was 8.469 billion US dollars, a year-on-year increase of 37%. Among them, McDonald's achieved a revenue of 6.406 billion US dollars in the fourth quarter of 2023, a year-on-year increase of 8%; Net profit was 2.039 billion US dollars, a year-on-year increase of 7%.
Among them, the performance of the Chinese market is relatively impressive. In the fourth quarter of 2023, global same store sales increased by 3.4%, and all segmented markets achieved growth; Throughout 2023, McDonald's global same store sales increased by 9.0%. Among them, China's international franchising market sector has the fastest growth.
As of December 31, 2023, McDonald's China has 5903 stores, with a total of 925 new stores added throughout the year, achieving the annual target of adding 900 new stores and achieving a historic high in opening speed. The number of new stores in the Chinese market contributed 67% of McDonald's international franchise market share.
"Overall, our performance in China in 2023 was very good, and we are satisfied with the performance of our business in China, achieving strong growth," said Chris Kempczinski, Global CEO of McDonald's.
Chris Kempczinski also stated on December 6, 2023 that the company plans to increase the number of Chinese restaurants from around 6000 to around 10000 by 2028. And he further optimistically predicted, "There is no reason why the Chinese market cannot open 20000 to 25000 restaurants, which will become our largest market in the world."
Given expectations for the long-term development of the Chinese market, McDonald's will continue to vigorously expand its stores in 2024. It is expected to open over 2100 restaurants worldwide in 2024, and the expansion of net restaurants will contribute nearly 2% to the overall sales growth of the system in 2024. The international franchise market will open over 1600 stores, with approximately 1000 in the Chinese market.
The speed of McDonald's China's strong expansion has also substantially driven performance growth.
In the fourth quarter of 2023, the equity income of McDonald's unconsolidated affiliated companies was $31.2 million, a year-on-year increase of 26.3%; For the full year of 2023, this revenue was 153.4 million US dollars, a year-on-year increase of 35.5%. And this income includes McDonald's global ownership of 20% equity in its Chinese business.
This may also be one of the reasons why McDonald's is increasing its holdings in China.
On November 20, 2023, McDonald's Global and Carlyle Group announced that McDonald's Global had agreed to acquire a minority stake in Carlyle's strategic partnerships in mainland China, Hong Kong, and Macau. After the completion of the transaction at the end of January this year, McDonald's global shareholding in "Golden Arch" (abbreviated as McDonald's China operating entity) increased from 20% to 48%.
On February 2nd this year, Zhang Jiayin, CEO of McDonald's China, stated that 90% of Golden Arch's suppliers come from China, ranging from chicken and bread to lettuce, potatoes, tomatoes, and more. This also means that McDonald's global increase in its stake in Golden Arch is not only optimistic about the growth of McDonald's China business's revenue contribution, but also about the cost advantage of Chinese manufacturing, as well as the ability of China's business to export innovative ideas and practices to the world.
However, Chris Kempczinski also acknowledges that the confidence of Chinese consumers is under pressure, with more fast food chain promotions in the Chinese market in the fourth quarter of 2023. "We don't necessarily have to follow up, but what is certain is that promotions have become more frequent."
From the perspective of the consumption environment in the Chinese market, returning to parity and high cost-effectiveness has become the mainstream of catering consumption in the past year. In the field of fast food chains, brands such as Hefu Lo mein, Metian Xiaomian and Xijiade are reducing the per customer price, and a large number of brands such as Micun Paofan and Chinese Hamburg Tastin are also rapidly expanding and occupying the market.
As Chris Kempczinski, its global CEO, has pointed out, McDonald's China's strategy has always been to "sell packages" and increase the frequency of promotions through product combinations. McDonald's China stated in December 2023 to Interface News that there will be new promotional activities launched every month, such as limited time discounts such as "half price for the second portion" and "buy one get one free for the first bucket of gold" for designated packages.
In fact, in the past year, McDonald's has repeatedly proposed its "ten thousand store goal" in China.
The market that McDonald's new stores may attack is, on the one hand, continuing to penetrate the community. By leveraging the advantages of its major shareholder CITIC Group, McDonald's China has previously established partnerships with real estate developers such as Country Garden and CNOOC Real Estate to open its stores in communities with lower rent and higher consumer stickiness. For example, McDonald's Shanghai General Manager Luo Wei once revealed to Interface News that the speed of opening stores in Shanghai will continue to increase in the future, with a focus on breaking through blank markets such as communities, the five major new cities, and high-tech zones.
On the other hand, it is aimed at sinking markets. Zhang Jiayin previously stated that outside of first and second tier cities, the lower tier market will be a key area for McDonald's deployment. At a media conference in August 2023, Zhang Jiayin revealed that 50% of McDonald's total stores in China are located in third - and fourth tier cities, with new stores accounting for half of the total in both high and low tier cities.
For example, in 2023, McDonald's opened re franchise in Yunnan, Inner Mongolia, Xizang, Xinjiang and other places. However, according to Zhang Jiayin, the current model "has no overall plan to increase", and McDonald's China "will continue the current state".
At the same time, China's chain fast food market is also facing more intense competition.
The "2023 Development Report on Chinese Western Fast Food Categories" released by the Red Food Brand Research Institute shows that in 2021, the Western fast food market increased by 10.4% year-on-year, and in 2022, the market size further increased to about 250 billion yuan.
McDonald's old rival KFC in China was the first to achieve a scale of 10000 stores. On December 15, 2023, KFC opened its 10000th store at the Wulinmen Port in Hangzhou, becoming the first overseas brand in the Chinese catering market to achieve a scale of 10000 stores.
It can be foreseen that with the continuous improvement of China's catering chain rate, McDonald's will inevitably face competition from giants including KFC and more local brands as it continues to penetrate and sink.