Lead
In January 2019, in Shanghai Xintiandi, restaurant Shake Shack opened its first store in mainland China and took the Chinese name "Xikebao". At one point, with a large-scale queue and a burger of up to 85 yuan, it was out of the circle.
But now, many of its offline stores have lost the grand scene of queuing in the past, and consumer evaluations of it are mixed.
Did the "Tesla of Hamburg" meet Waterloo in China?
Highlights of this article:
How is Shake Shack doing in the Chinese market?
How is Shake Shack different from McDonald's and KFC?
Is the route to high-end Hamburg feasible?
This article is reproduced from AI Finance and Economics (ID: ajcjnews), author: Xue Yongwei, editor: Dong Yuqing.
Two slices of tomato, two slices of lettuce, two slices of bread crust, a piece of beef, such a simple burger, in the restaurant Shake Shack, it costs more than 40 yuan to buy. One of the most expensive can be sold for 85 yuan.
If you want to come to a burger, a french fries plus a cup of Coke standard, it is more expensive to pay more than 100 yuan per capita - enough to eat a meal of Haidilao.
However, it is such a hamburger, at the end of March, received a group purchase order of tens of thousands of yuan in a high-end community in Shanghai, which was regarded by netizens as synonymous with high elite groups.
A few days later, on April 6, Shake Shack opened his first store in Guangzhou. At 10:30 a.m. on the opening day, the customers who came to consume were already lined up, and the customers who got the meal began to sit down to eat, and there were many people waiting around for the meal, and the waiting time was close to 1 hour. On the Little Red Book, many bloggers also posted notes on the new store punch card, and some people said that they also met a TVB star on the same day.
Shake Shack's first time out of the circle was because there were a lot of people queuing up at his house. In addition, it is sold very expensive. However, according to the "Finance world" weekly, in addition to the hot business of many Shake Shack offline stores in the early stage of opening, the flow of people has dropped significantly since then. More consumers said, "Shake Shack, I should only eat it once." ”
Shake Shack embarked on the path of capitalization years ago. In January 2015, just three months after Its listing, Shake Shack's share price reached more than four times the IPO price of $21 and was described as the "Tesla of hamburg." However, its all-time high of stock price also stuck at $92.85 in 2015.
△ Image source: Photo courtesy of the interviewee of "Finance world" weekly
As of the U.S. stock close on April 20, 2022, Shake Shack was trading at $62.04 per share, bringing a total market capitalization of $2.783 billion, nearly half from its high. At the same time, McDonald's was quoted at $250.51 per share, with a total market capitalization of $185.279 billion, 71 times that of Shake Shack; yum catering, the parent company behind KFC, was quoted at $122.97 per share, with a total market capitalization of $35.44 billion, 14 times that of Shake Shack.
Will Shake Shack, who symbolizes the ceiling of Hamburg's world, be a rival to McDonald's and KFC?
High-end burgers over 40 yuan
Shake Shack's first store in Guangzhou, which was still hot when it first opened, gradually became deserted later.
An internal staff member of Shake Shack told Caijing Weekly, "When the first store first opened, I was afraid that there were too many customers to be busy, and there were only (store) managers and employees who came from outside the store to support. ”
Someone brushed the information of this store on the little red book, have the heart to try, a post-95 graduate school student of a university in Tianhe District, Guangzhou is one of them, "After the school is unsealed, you may go to punch in a lively way, but the most wanted to eat hamburgers is McDonald's." ”
The influencer effect of Shake Shack's first store in Guangzhou began to recede the next day. On April 7, many consumers said that during non-peak dining hours, stores have opened both indoor and outdoor seats. According to media reports, during the peak lunch season, the waiting time for customers has dropped to about 40 minutes, and the role of the special "one-hour" waiting area has begun to decline. At 11:00, the queue for food takes only 5 minutes, and after 2:00 pm, there is basically no need to queue for food.
When the first store in Guangzhou tended to be calm, the first store in Beijing did not have the bustle of the past. Caijing Tianxia Weekly visited and saw that in Sanlitun, Beijing, the first store of Shake Shack, which was still crowded when it opened in August 2020, was relatively deserted on a Thursday afternoon in mid-April.
On Thursday, April 14, from 2 p.m. to 7 p.m., there were not many people at shake Shack Sanlitun's ordering counter, and the restaurant was never full. At 7 p.m., when the crowds of Sanlitun began to congregate, the people eating in the Shake Shack store were still not full. However, according to a takeaway delivery man, there are more takeaway orders at this time, with 174.
Shake Shack Beijing Sanlitun store
△ Image source: "Finance world" weekly
A takeaway delivery man waiting for a meal at the Beijing Guomao Shake Shack store also said, "Every day this (referring to Shake Shack) takeaway orders will explode", he can take orders 30 times a day at noon, and the delivery address is a nearby office building, the farthest is a business district 1.2km away.
In Beijing's Guomao business district, unlike McDonald's Monday to Friday, Shake Shack has a larger flow of customers on Fridays, Saturdays and Sundays. Here, the concentration is made up of employees from major domestic financial institutions, law firms and multinational companies.
Lin Yan is one of the surrounding office workers. She worked in an office building in the third phase of The International Trade Center, and in February this year, she visited Shake Shack's international trade store, which she knew was expensive, but decided to try it during her lunch break. But the $47 signature beef burger didn't surprise her much, she thought it was too greasy.
She was halfway through her meal and found a piece of plastic the size of a fingernail inside. She guessed that the bag that should have been the steak had not been torn clean. After reflecting with the clerk, the other party gave her a free order and sent her a fries as compensation. But she said, "I won't go again, I didn't expect such an expensive burger to have this problem."
But there are also many consumers who love Shake Shack. Another customer who also works near Guomao said That Shake Shack belongs to her "bite your teeth to eat" burgers, but its taste is very unique, the burger embryo is a potato burger embryo, "more fluffy, very distinctive, milkshake more mellow." Every once in a while, if there is anything particularly happy, I will go again. ”
Shake Shack's International Trade Store
△ Image source: "Finance world" weekly
Despite mixed consumer feedback, Shake Shack has more than 100 customer unit prices and has enough attention.
According to the official website, since Shake Shack opened his first store in Madison Square Park in New York in 2004, Shake Shack currently has a total of 366 stores worldwide, of which the number of stores in North America is as high as 263.
In 2018, Shake Shack began to enter the Chinese market, opening its first store in Hong Kong, China. In January 2019, in Shanghai Xintiandi, Shake Shack replaced Pizza Marzano's storefront and opened the first store in mainland China, taking the Chinese name "Xikebao".
Shake Shack menu
△ Image source: "Finance world" weekly
By February this year, Shake Shack already had four stores in Beijing: Sanlitun, Xidan Joy City, Guomao and Yitigang, while other domestic stores covered the exquisite business districts of Shenzhen, Hangzhou and Nanjing. As can be seen from the location of the store, Shake Shack has targeted high-paying groups in first- and second-tier cities from the beginning.
What's the difference with McDonald's and KFC?
Shake Shack's expansion began in 2015, when it officially landed on the U.S. stock market. Three years later, it is targeting the Chinese market, which has more consumption potential.
However, in China, the price of Hamburg was once defined by McDonald's in the range of 20 yuan. China's street fast food restaurants have long had KFC grandpa and McDonald's uncle, friends please eat between friends, if you choose to eat a McDonald's, it has become a manifestation of lack of sincerity. Hamburgers, no longer symbolize foreign petty bourgeoisie as they did 20 years ago, but can be seen everywhere like spicy hot and fried chicken.
But apparently, Shake Shack is telling a different story to capital.
Danny Meyer, one of the founders of the Shake Shack brand, came up with a new concept of "Fine Casual."< Specifically, make a fuss about the raw materials - an Angus beef, beef sausages without added hormones. In the preparation, emphasis is placed on cooking time, potatoes are cut into wavy shapes, and the area covered by the frying area and sauce is increased.
However, sometimes this is also seen as a "rough" American heavy taste, and not all consumers pay for it. A consumer who has lived in the United States for 7 years and has now returned to Beijing said that Shake Shack's taste belongs to a very greasy burger, the oil of fried meat, the butter of bread are a lot, and the sauce is also very greasy, "not a delicious one."
In fact, in the past few years, in order to gain a firm foothold in the Chinese market, Shake Shack has also made many changes. It has rarely updated its menu, launched localized menus for different cities, and launched limited edition products for different cities. For example, Guangzhou's limited milkshakes integrate the elements of chicken cakes and Cantonese sugar water into it, and the Shenzhen limited milkshakes add guava and passion fruit.
△Image source: Red Food Network Photo
But one Shake Shack may have forgotten the fact that the diet between the north and the south of the country is very different. In the area where desserts are preferred, it is naturally not difficult to combine a variety of traditional desserts, but for the Beijing natives who prefer salty mouths, everything seems to be almost hot.
A young female consumer from Hebei said that she ate a Beijing-limited milkshake in Sanlitun last year, and the already sweet vanilla milkshake was added to hawthorn, cranberry and lemon juice, but it was still "too sweet to eat a bite and can't eat it."
In addition to the taste or understanding deviation, Shake Shack seems to have not thought through the domestic consumption format thoroughly enough.
It is reported that when Shanghai's first Shake Shack opened in 2019, the turnover of the day exceeded 300,000, setting a record for nearly 7 hours of queuing. But at that time, Shake Shack did not know anything about the power of local takeaway, not only did not launch takeaway, but also circulated in the outside world that it wanted to push takeaway, and issued a special announcement to clarify: "At present, it has not cooperated with any takeaway platform, nor has it opened any purchasing service." ”
"The competitive landscape, consumer tastes may be completely different, more advertising investment and promotions are needed, and the recruitment and training of personnel is also a problem," Shake Shack wrote in his annual report about the concerns about entering new markets.
Compared with KFC, which has been pondering the Chinese market, it launched breakfast porridge in 2002, created old Beijing chicken rolls and Sichuan spicy chicken in 2003, launched Teriyaki Pork Chop Fort and Wang Laoji Herbal Tea in 2004, and shouted out the slogan of "Change for China" in 2005, putting fritters, tomato egg flower soup, soybean milk, baked cakes, rice, etc. into the menu, even bowl chicken, hot dry noodles, snail powder have not been spared.
Obviously, Shake Shack's localization attempts are far inferior to McDonald's and KFC.
Originally designed to show authenticity, McDonald's also maintained a menu that was synchronized with that of American stores for a long time, spending a lot of time cultivating the market. However, in 1998, it was also decided to learn from KFC, introducing the wheat spicy chicken wings and the wheat spicy chicken leg burger as an important supplement to beef products. Later, products such as small stir-fried meat burgers, mapo and cow castles appeared one after another.
This gap is also truly reflected in the financial report. According to Shake Shack's fourth quarter 2021 financial report, the company's revenue for the fourth quarter of 2021 was $200 million, an increase of 29% year-on-year; system sales revenue reached $310 million, an increase of 31.9% year-on-year; same-store sales revenue increased by 20.8% year-on-year.
During the same period, McDonald's fourth-quarter 2021 revenue was $6.009 billion, up 13% year-over-year. For the full year 2021, McDonald's generated revenue of $23.22 billion, up 21% year-over-year.
As of the end of the fourth quarter of 2021, Shake Shack operated 218 directly operated stores and 128 franchised franchised stores. Among them, franchise revenue in the fourth quarter was $7.4 million, an increase of 46.8% year-on-year. In the fourth quarter, a net of 19 new stores were opened, including 13 directly operated stores and 6 franchised stores (5 international, 1 US).
Shake Shack also intends to continue to increase the Chinese market, and its global CEO Randy Garutti has said publicly that it plans to open 55 stores in Chinese mainland and at least 15 stores in South China by 2030, targeting Shenzhen, Guangzhou, Fuzhou and Xiamen.
△Image source: Red Food Network Photo
Although everyone is comparing McDonald's and Shake Shack, Shake Shack has been deliberately emphasizing the difference between himself and McDonald's, especially the social attributes of the store, "We all have elements that young people like." We have red wine, beer, white wine, Kyo A, our music is the most fashionable music that comes from New York every season, and we also welcome pets. Lou Wei, CEO of Shake Shack China, once said.
When asked about the store recruitment, Shake Shack staff will also say, "We are different from McDonald's, part-time salary is 25 yuan per hour." McDonald's is only 17.8 yuan, and there are still many people, especially busy. ”
High-end hamburg is hard to do
Fast-food burgers have moved towards mid-to-high-end catering, giving birth to a new species of "boutique burgers". But in the eyes of some people, this high-end product is somewhat "unremarkable".
No matter how hard the Shake Shacks try, the junk food hat is hard to take off for a while. A person who had conducted in-depth research on fine burgers last year told Caijing Tianxia Weekly that in her cognition, "healthy diet" still does not include hamburgers, and she generally rarely eats hamburgers. In the eyes of most people, trying to equate a burger with health is not something that can be solved by simply labeling the nutritional content and launching a nutrition calculator to calculate calories.
The high pricing also makes the taste buds of consumers more picky, and the cost performance is not high, which directly determines the repurchase rate. The above-mentioned person in the United States bluntly said, "Once I went to Shake Shack, I will not go again", for him, eating more than 40 yuan of burgers, the demand for punch card Internet celebrity shops is greater than the pursuit of delicious burgers.
Shanshan, a post-90s girl who came to punch a card with a friend last summer, tried a burger of more than 40 yuan for the first time, and her friend told her that it was "the best burger in New York", and the two ordered two burgers, a fries and a cup of Coke, which cost more than two hundred. But the meal time was faster, and after a few bites of the hamburger, Shanshan fell into helplessness: "Expensive and unpalatable, never want to come again." For them, "if you've already been pitted once, you won't go a second time." ”
△ Image source: Shack Shake's official Weibo
Shanshan now runs McDonald's OH Maca herself, going at least three times a month, often trying new products launched regularly, and the most memorable is a set menu with chili noodles last year, cheap and enjoyable, in line with her taste habits.
Some netizens have shared on the Internet that from February to September 2020, they have accumulated more than 2,000 yuan in consumption just by eating McDonald's breakfast and "1 + 1 = 12".
In fact, Shake Shack is already struggling to beat the long-established burger shop. According to the data, according to the total retail sales of food services, in 2021, the market share of KFC and McDonald's will be 12.0% and 6.7%, respectively. According to the Research Report of Guolian Securities, as of November 2021, the number of offline stores of the four major Western-style fast food brands of KFC, McDonald's, Dicos and Wallace in China has reached 8110, 5025, 2519 and 19735 respectively.
Now, even on the road to boutique burgers, Shake Shack has to face fierce competition.
There is no shortage of very expensive burgers on the market: American burger Five Guys, which has swept Shanghai from 2021; there is also the Red Frog in the Western food industry, the dining environment is more elegant; the beer-making Leisure, also famous for selling burgers, most of which are priced between 68 yuan and 88 yuan; and the CHARLIE'S pink burger born in the local market has received investment from Station B.
If you compare Chinese fast food, then Shake Shack's living space is even smaller. According to the data of China Business Intelligence Network, in 2019, Chinese fast food accounted for 70.7% of the domestic fast food market, and the size of the Chinese fast food market was as high as 755.7 billion yuan, while the market share of Western fast food was small, with a market size of only 272.9 billion yuan, accounting for 25.5%.
The data predicts that by 2024, the size of the Chinese fast food market will reach 1,119.2 billion yuan, and the size of the Western fast food market will reach 413.4 billion yuan, and the market share growth rate will be lower than that of Chinese fast food.
The hat is hard to take off, the external troubles are removed, and Shake Shack's own business was once in trouble. Due to the impact of the epidemic, the company closed all restaurants in March 2020, shifting its position to takeaway, and in the second quarter of 2020, Shake Shack's same-store sales fell by nearly 40%, a staggering decline. In 2020, Shake Shack's total revenue decreased by 12.05% to $523 million.
The continuous opening of stores has also once made the revenue growth rate can not keep up with the growth rate of its stores, in 2018 and 2019, the number of Shake Shack direct stores increased by more than 30%, but the revenue growth rate in the same period was less than 30%. In 2021, 58 new stores will be opened, of which 35 will be directly operated. The self-diversion brought about by insisting on opening stores, the decline in sales, and the decline in profits are all problems that Shake Shack may face in the future.
As for how Shake Shack will develop in China in the future, let's wait and see!
(In the text, Lin Yan and Shanshan are pseudonyms).