On December 27th, many consumers found on McDonald's ordering platform that the unit price of their products had generally increased, with increases ranging from 0.3 yuan to 0.6 yuan. McDonald's price adjustment has attracted widespread attention from netizens, and related terms once jumped to the top of Weibo's hot search list.
It is worth noting that the prices of chicken and pork, as upstream raw materials, have shown a downward trend this year. According to data from Mysteel, a data service platform for commodities and related industries, domestic chicken prices have risen first and then fallen since the beginning of this year. The price on December 25th has fallen by about 29.3% compared to the high point of the year.
Not only that, Western style chain fast food giants are also accelerating their entry into the Chinese market. According to KFC's official Weibo account, on December 15th, the scale of KFC's Chinese stores officially exceeded 10000. McDonald's China is moving towards its goal of breaking through 10000 restaurants by 2028.
Analysts suggest that the purpose of product price adjustments may be to stabilize performance. Based on recent developments at McDonald's and KFC, the concentration of the domestic Western style chain fast food market may further increase in the future.
McDonald's price increase
On December 27th, many consumers found on McDonald's ordering platform that the unit price of their products had generally increased, with increases ranging from 0.3 yuan to 0.6 yuan. However, the price of the "1+1 with your heart" package is still 13.9 yuan.
It is worth noting that the price of broiler chickens, as upstream raw materials, has been on a downward trend this year.
According to Mysteel data, since the beginning of this year, domestic chicken prices have risen first and then fallen. The price on December 25th (3.77 yuan/jin) has dropped by about 29.3% compared to the high point of the year (5.33 yuan/jin).
According to Mysteel data, the price of live pigs on December 25th was 14.33 yuan/jin, a decrease of about 18.5% from the annual high of 17.59 yuan/jin in August this year.
Chinese food industry analyst Zhu Danpeng said in an interview with Shanghai Securities News that from the perspective of the entire supply chain, McDonald's price adjustment may be based on cost pressure. McDonald's already has brand and scale effects, and it needs to focus on overall sustainable development. Appropriate price adjustments can help alleviate cost pressure. "The key factors for chain fast food include scale effect, brand effect, and fan effect. In addition to considering raw material costs, attention should also be paid to the impact of new store expansion, as well as the personnel and management costs after expansion."
According to McDonald's (NYSE: MCD) performance report for the third quarter ended September 30, 2023, McDonald's achieved revenue of $6.692 billion, a year-on-year increase of 14%; Net profit was 2.317 billion US dollars, a year-on-year increase of 17%. The same store sales growth in the international development franchise market segment, including China and Japan, reached 10.5%.
Giants increase their focus on the Chinese market
Since September 2019, McDonald's China has achieved over 30% growth in system sales. In 2023, McDonald's once again increased its presence in the Chinese market.
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 transaction is completed, McDonald's global shareholding in McDonald's China will increase from 20% to 48%. The CITIC consortium will continue to hold 52% of the shares. The above transaction requires approval from relevant regulatory authorities and is expected to be completed in the first quarter of 2024.
"China is now McDonald's world's second largest market, with over 5500 restaurants, double the number from 2017," said Chris Kampkinsky, McDonald's Global President and CEO. It is reported that McDonald's China is moving towards its goal of breaking through 10000 restaurants by 2028.
It is worth noting that another Western fast food chain giant, KFC, is also increasing its presence in the Chinese market.
According to KFC's official Weibo account, on December 15th, the KFC Grand Canal Restaurant opened at the Wulinmen Pier in Hangzhou. At this point, the scale of KFC's stores in China has officially exceeded 10000.
Qu Cuirong, CEO of Yum! Brands China, the parent company of KFC, stated at the opening of KFC's 10000th store that she hopes to reach over 700 million Chinese consumers with KFC's food and services by 2026, and achieve a population growth of over 50%.
Multiple Chinese chain fast food companies are sprinting for IPO this year
According to the September 2023 report from CITIC Construction Investment, China's catering industry has a large number of players and a highly dispersed market, belonging to a perfectly competitive industry. The overall concentration of the catering industry is only 3%, while the concentration of fast food and chain catering is significantly higher than the overall level of the catering industry, reaching 10% and 16% respectively.
Western fast food companies are frequently making big moves, and many Chinese fast food chain companies are also making efforts, such as Lao Niangjie and Lao Xiangji, which have been rushing to IPO in recent years.
In the prospectus, Lao Niangjie stated that after entering the stage of large-scale and standardized development, catering enterprises are facing difficulties in the standardized, replicable, and fast operation of Chinese style catering chains. How to achieve consistency in food, hygiene, service, and dining environment among different stores is the key to the sustained and rapid expansion of Chinese fast food.
Liu Peng, the leader of the Big Consumption Group of Great Wall Securities and a PhD in Food Science, stated in an interview with Shanghai Securities News that McDonald's mainly adjusted its prices for stable performance due to market factors. Based on recent developments at McDonald's and KFC, the concentration of the domestic Western style chain fast food market may further increase in the future.
"The market for Chinese chain fast food in China is relatively dispersed, as the current profit level of Chinese chain fast food is lower than that of Western style and management is more difficult. Currently, other chain fast food enterprises may not have reached the time to raise prices," said Liu Peng.
