On the eve of the outbreak of Chinese burgers: Tustin frantically expanded stores, KFC fought a price war丨Catering changes

21st Century Business Herald reporter He Hongyuan reported from Beijing

Chinese burgers seem to be on the eve of an outbreak.

Recently, a number of media reported that the Chinese burger chain brand Tustin will complete a new round of financing with a valuation of about 7 billion yuan, and the potential investors are Sequoia Capital and the old shareholder Source Code Capital.

In fact, at the beginning of the year, there were rumors in the market that Tustin had contacted hundreds of investment institutions.

However, Tustin quickly denied the news of a new round of financing. "All information and valuations related to this round of financing are not true, and please refer to Tustin's official announcement. Another party involved, Source Code Capital, expressed his position to the 21st Century Business Herald reporter. In 2021, Source Code Capital and Bufu Venture Capital participated in Tustin's angel round of investment.

But there is no escaping the fact that Tustin is indeed running faster and faster.

Spend 452,300 yuan to own a Tustin store. Source: Tustin official website

Crazy Tustin

Today, Tustin is still expanding rapidly.

According to data from Narrow Door Restaurant, as of November 28, 2023, the number of stores of the brand has reached 6,127 stores. At the beginning of 2023, the number of Tustin stores will only exceed 3,000. From the perspective of market distribution, 7.67% of Tustin stores are located in first-tier cities, 22.72% of stores are in new first-tier cities, 21.87% of stores are in second-tier cities, 24.2% of stores are in third-tier cities, and 23.54% of stores are located in third-tier cities and below. The sinking trend is obvious.

According to the official website, the Tustin brand was founded in 2012, and the hand-rolled freshly baked burger embryo inherited from the Chinese pastry skills is the core competitiveness of its products.

In 2019, Tustin opened up a new category of "Chinese burgers" on this basis. Since then, the brand has successively launched creative Chinese forts such as Peking Roast Duck Burger and Mapo Tofu Burger.

This is a franchise catering brand, and the official website shows that the cost of opening a Tustin store is about 452,300 yuan, but it does not include rent, water and electricity costs. Among them, the franchise fee is 38,800 yuan and the brand usage fee is 15,000 yuan.

On the other hand, Tustin already has a capital plan. According to the company's disclosure, at the end of 2021, at the celebration dinner of the Tustin National Job Skills Challenge, Yang Bing, general manager of the company, said that the management team led by Wei Dong (Wei Youchun, founder of Tustin) has a clear plan for 2022, and the number of stores will be opened to 2,500, 5,000 in the next three years, and strive to be listed in the next five years.

Looking back, Tustin's rapid expansion was driven by a previously overlooked market demand.

At present, the mainland Western-style fast food market is still in a growth trend. According to Frost & Sullivan data, in 2017, the size of China's Western-style fast food market exceeded 200 billion yuan, reaching 224 billion yuan, and continued to grow to 272.9 billion yuan in the following two years. In 2020, it was affected by the epidemic and dropped to 238.1 billion yuan, a year-on-year decrease of 12.8%. In 2021, as the impact of the epidemic on catering weakened, the Western-style fast food market rebounded, and the market size rebounded to 282.8 billion yuan, a year-on-year increase of 18.8%.

The hamburger category has a unique advantage in the Western-style fast food market. Taking a person's one-day food expenditure as the anchor point, and comparing the price system of hamburgers in the United States and Japan, it can be found that the price of the burger set of the top brands is significantly lower than the daily per capita food expenditure.

The founder of a leading catering brand admitted to the 21st Century Business Herald reporter that hamburgers are cost-effective in terms of time, taste, and production cost. "McDonald's and Burger King are sold all over the world, Japan (Morse Burger) and South Korea (Lotte Li) have all appeared local burger fast food giants, and China is the same. ”

In addition, Chinese burgers are borrowing from the mature business model of Western fast food that has been proven for many years in terms of store model and operation system. This makes it relatively easy to build a supply chain and easy to chain up.

In addition, Tustin has also seized the marketing outlet. According to data from the Douyin platform, as of November 28, the official account called "Tustin (China Burger) Food Bureau" had more than 2.452 million followers. After entering Douyin, Tustin quickly established a professional self-broadcast operation team and started a normalized live broadcast.

What's more, Tustin captures the "value for money" demand. Nowadays, affordable consumption has become the mainstream of the market. The "China Western-style Fast Food Category Development Report 2023" released by Red Meal Big Data pointed out that in 2022, the per capita consumption of Western-style fast food in mainland China will account for more than ninety percent of consumers below 40 yuan, and the proportion of consumers below 20 yuan will be 63.5%, an increase of 0.4 percentage points over 2021, and the proportion of consumers with per capita consumption in the range of 20 yuan to 40 yuan will be 28.7%, an increase of 2.1 percentage points over 2021.

According to the data of Narrow Door Dining Eye, as of November 28, the unit price of Tustin customers was 19.18 yuan. As a comparison, the unit price of McDonald's is 27.88 yuan, and the unit price of KFC is 34.36 yuan. From the perspective of the pace of expansion, in 2023, McDonald's will expand 679 stores and KFC will open 1,550 new stores, both of which are far less rapid than Tustin.

Radical opponents

Seeing Tustin running wild, rivals are pouring into the market.

On March 9, 2023, Jia Guolong's first store in Chinaburg officially opened in Beijing Zhongguancun e-World. As of November 28, Jia Guolong Chinafort has opened 51 stores, all of which are directly operated stores, realizing the preliminary market layout. According to the data of Narrow Door Dining Eye, the unit price of the brand is 28.17 yuan.

Xibei said that at the product level, Jia Guolong China Fort adopts intangible cultural heritage technology, using red knotweed flowers and glutinous rice flour to make koji, and then fermenting the embryo of China Fort with wine, which has advantages in taste. And the China Fort series focuses on "Chinese steamed buns and Chinese cuisine", which can eliminate regional barriers and "have both functionality and deliciousness".

At present, Jia Guolong's Chinaburg is in the stage of running through mode, and Tustin has become a reference coordinate. "We run first, rely on direct sales, and are still in the running mode stage. At the same time, 50 stores were tested at the same time, with multi-point and multi-store types, including shopping mall stores, street stores, community stores, office stores, and various stores are large and small, some are next to McDonald's, next to KFC, next to Subway, and next to Tustin. When problems come, we have to face them and solve them one by one. Previously, Jia Guolong, founder and chairman of Xibei Catering Group, told the 21st Century Business Herald reporter.

After testing, Jia Guolong found that the biggest problem with Chinaburg was the type of store. "Among the more than 50 test stores, the profitability of small stores will be relatively better. He said.

In addition, Jia Guolong revealed that after running through the mode, China Fort will be open to the outside world to join. "In fact, he is a small entrepreneur, opening a small shop, and making a small amount of money safely. It's stable. He said.

KFC has also taken a fancy to this market. On the evening of November 12, KFC's official video account officially announced the launch of a new product "Pieburger", which replaces the hamburger crust with a freshly baked crust.

In addition to the product type, the highlight of the "pie burger" is the "low price". Since June 5 this year, KFC has launched cake and burger packages in some stores in Nanchang City, Jiujiang City, and Xinyu City, Jiangxi Province, and has expanded its scope to some KFC stores in Jiangxi Province, Fujian Province, and Henan Province since September 4.

The new "KFC OK three-piece set" includes: 1 rattan pepper-flavored chicken steak burger or old Beijing-style cake burger, 1 medium Pepsi Cola, 1 red bean pie/egg tart/1 medium fries, priced at 19.9 yuan. Qu Cuirong, CEO of Yum China, the operator of KFC in China, specifically mentioned the product at the earnings conference and said that its price is very competitive.

Objectively, the price war has affected KFC profits. According to the financial report, in the third quarter of 2023, KFC's revenue in China was US$2.19 billion, a year-on-year increase of 8%, the restaurant operating profit was US$400 million, and the restaurant operating profit margin was 18.6%, a year-on-year decrease of 2.0 percentage points, a decrease of 1.5 percentage points from the third quarter of 2019, and the operating profit was US$340 million, with an operating profit margin of 15.6%, a year-on-year decrease of 0.7 percentage points, and a decrease of 2.9 percentage points from the third quarter of 2019.

KFC's same-store sales during the period increased by 4% year-on-year, of which customer flow increased by 9% year-on-year, and customer orders decreased by 5% year-on-year. For KFC, this is the price that must be borne to maintain growth in the real market situation.

Such a competitive situation also tests Tustin.

Jia Guolong did not shy away from saying that Xibei's biggest advantage lies in the supply chain. "Behind the ability to make food delicious is a whole system. Including the management of raw materials, the management of processes, and the management of delivery. This underlying capability can be called '1+N', '1' is the supply chain capability, and N is the business that grows on (the supply chain), regardless of the retail of fast food. The abilities behind it are the same. He said.

KFC also has an accumulation in the supply chain. For historical reasons, it has a relatively complete supply chain management system. In terms of logistics infrastructure construction, Yum China already has 33 logistics centers by the end of 2022, and plans to reach 45-50 logistics centers in the next 3-5 years, of which about 30% are self-owned. All of the above is the shortcomings of Tustin, which has had food safety problems, and it is also the core problem that needs to be solved by fundraising.

Overall, Tustin on the tuyere has both risks and opportunities, but it is clear that the competition will be fiercer.

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