McDonald's, the workers are about to be unable to afford to eat
01. The price has risen again
This New Year is a sad beginning for the followers of Maimen.
Zhang Li, a white-collar worker living in Guangzhou, found that her favorite McDonald's became more expensive overnight. McSpicy Chicken Leg Burger rose from 24 yuan to 24.5 yuan, Plate Roast Chicken Leg Burger rose from 25 yuan to 25.5 yuan, and double-layer cod burger became 26 yuan, up 1 yuan.
Previously, there were voices on the Internet that McDonald's was going to raise prices. McDonald's responded that in combination with the recent changes in operating costs, McDonald's China has adjusted the prices of some products from December 27, 2023, with an average increase of about 3%.
"Although I am mentally prepared, the price increase still feels a bit unacceptable. Zhang Li said that since the school period, she has been a loyal McMen believer, and she must consume a McDonald's meal once a week, and when she travels, she has to take a taxi to the local McDonald's to try it, "Other people go to Haidilao for their birthdays, and I go to McDonald's for my birthday." ”
But now, the price increase has made Zhang Li a little disappointed with McDonald's.
According to the "city boundary", McDonald's this round of price increases in Beijing, Guangzhou, Shanghai and other parts of the country at the same time, covering many categories, such as the big chicken steak in Beijing from 14 yuan to 14.5 yuan, Shanghai's Maixiang chicken package from 25 yuan to 27 yuan, the most popular star single product McSpicy chicken wings have also generally risen by 5 cents, the current price is 15 yuan.
Although the price of "1+1 matching" has not changed this time, it is a little conscientious, but according to Zhang Li's recollection, the package is actually quietly becoming more expensive, only 12 yuan when it was first launched in 2019, rising to 12.9 yuan at the end of 2021, and rising again to 13.9 yuan in January 2023.
As a well-known foreign fast food brand in China, McDonald's is not cheap. Taking Beijing as an example, a single-person lunch order is more than 30 yuan for a four-piece set of plate roasted wings, plus a delivery fee of up to 9 yuan, it costs more than 40 yuan. Some netizens complained that they couldn't afford McDonald's with a monthly salary of 20,000 yuan.
In November last year, "McDonald's milk 1 cup of 23 yuan" was also scolded on the hot search, and some netizens said that the price of a cup of milk at 23 yuan in McDonald's stores was just to heat up the cheap pure milk and put it into the store cup. In response, McDonald's said that hot milk is priced at a flat price, and the price at the train station store will be slightly higher.
"It's not uncommon for train station stores to be priced highly. A catering practitioner commented that what is really exposed behind the incident is that consumers are becoming more sensitive to price and are increasingly pursuing cost performance.
Unexpectedly, just over a month after the controversy, McDonald's openly announced a price increase.
As for the reason for the price increase, McDonald's said that it was "combined with recent changes in operating costs". McDonald's has not separately disclosed the cost of the Chinese market. But in its home market of the United States, McDonald's has benefited from price increases. In the fourth quarter of 2022, McDonald's global comparable sales increased by 12.6%, beating analysts' expectations of 8.6%. Among them, the United States increased by 10.3%. Executives admit that one of the reasons for the good performance of the U.S. market is the strategic increase in menu pricing.
"Costs involve many aspects, and expenditures such as raw materials, operations, and labor have almost only risen in recent years. Lin Yue, chief consultant and catering analyst of Lingyan Management Consulting Company, analyzed to the "city boundary". He believes that "McDonald's price increase is not large, and it is not obvious to consumers, but it will help it maintain a relatively healthy profit level, which is an important strategic value for expansion." ”
But consumers don't think so, and McDonald's price increases seem to be working against everyone's increasingly conservative consumption habits.
"Then don't go, anyway, there are KFC, Burger King, Tustin, why do you have to eat McDonald's. Some consumers said that in their eyes, the price increase is only one aspect, and McDonald's has gone even further by forcing Coke and other beverages in many packages, which is very unreasonable, which is a disguised price increase.
02. The Chinese market is "full of money"
Back on October 8, 1990, when McDonald's first entered Chinese mainland, McDonald's opened its first store in Guanghua Building, Jiefang Road, Shenzhen, and the memories of a generation of McMen people began.
According to media reports, the store has red floor tiles throughout, as well as the iconic Uncle McDonald's bench. On the opening day, all 500 seats were filled, and the queue of diners stretched from the second floor to the first floor and from the lobby to the door. The staff had to pull up the rope to control the number of people entering the store to maintain order on the scene.
For a long time after that, McDonald's was a novelty for most people, and adults ate one meal to improve their lives, and children told their friends that they could eat McDonald's once a week, which was about showing off their financial resources.
▲ (The first McDonald's in Chinese mainland located in Shenzhen)
Despite this, KFC is the predecessor in China's foreign burger market, and KFC has opened 6 stores in China when the first McDonald's is sought after by the citizens of Shenzhen.
In 2014, McDonald's China held a press conference, announcing that the total number of restaurants in China would exceed 2,000, and the number of old rival KFC stores in China exceeded 4,000. In the face of the huge disparity, McDonald's China has set a flag to open 300 new stores in 2014, which will set a new record for the number of McDonald's stores opened in a single country.
It turns out that shouting slogans is not enough. In 2017, three years later, the number of McDonald's stores in China is still only about 2,200.
The change stems from an important decision in January 2017, when the Tianyancha App showed that McDonald's Global sold its 80% stake in the China business for $2.08 billion, and eventually, the Carlyle consortium formed by CITIC and CITIC Capital became the receiver and won the franchise rights of the Chinese mainland and Hong Kong business for 20 years, and the "Golden Arches" was born.
After CITIC and Carlyle took over, the first problem they focused on solving was to open a store. At the same time, McDonald's China's localization and digital capabilities have also improved, with the former helping McDonald's reduce operating costs and the latter expanding McDonald's customer traffic.
Perhaps even McDonald's itself did not expect that its deal with Carlyle would follow up six years later. In November 2023, McDonald's Global announced that it would buy back Carlyle's entire stake in the Golden Arches, and the transaction is expected to close in the first quarter of 2024. The official price of the transaction was not disclosed, and some media pointed out that it was $1.8 billion, and McDonald's was once again optimistic about the Chinese business between the sale and the purchase.
Back in April last year, it was reported from Bloomberg that Carlyle was considering bringing in new backers for its investment in McDonald's China and seeking a valuation of about $8 billion to $10 billion for McDonald's China. In other words, compared with the transaction price of $2.08 billion six years ago, the valuation of McDonald's China business has increased a lot.
After the completion of the transaction, McDonald's Global CEO also fully affirmed McDonald's China, "China is now the second largest market for McDonald's in the world and the fastest growing market. The number of restaurants exceeded 5,500, doubling from 2017. China's growing consumer demand presents us with tremendous opportunities, and we will continue to benefit from its long-term development potential. ”
"By increasing its shareholding, McDonald's can be more deeply involved in operational decisions in the Chinese market to meet the development needs of the Chinese market. A catering investor said, "It can be said that the price increase mentioned above is the first measure after the equity change." ”
Not only that, McDonald's has also set an ambitious plan to increase the number of restaurants in China to 10,000 by 2028, replacing the United States as its largest market. It is reported that more than half of the 7,000 new international restaurants planned to open in the future through authorized partners are in China.
Although the goal is ambitious, but, can McDonald's achieve it smoothly?
03. It is not easy to continue to increase China
"McDonald's has decided to expand aggressively, which has a lot to do with the current competitive environment and consumer trends in the Chinese market. The above-mentioned catering investors believe.
According to the statistics released by the National Bureau of Statistics, in January ~ November 2023, the national catering revenue will be 4,748.5 billion yuan, an increase of 19.4% year-on-year, which has exceeded the annual income in 2022. In order to make money from Chinese foodies, "expanding the scale and sprinting to 10,000 stores" has become the goal of many chain restaurant companies in 2023.
Specific to the Hamburg track, "City Boundary" noted that up to now, KFC has exceeded 10,000 stores, and its parent company Yum China plans to maintain more than 1,200 net new stores per year for KFC in the next three years, and the proportion of franchise stores will increase from 10% to 15%-20%.
▲ (McDonald's and KFC stores often appear next to each other)
Not to be outdone, the number of Wallace stores has exceeded 20,000, more than the sum of KFC McDonald's, and the county's "dark horse" Tustin has opened more than 4,000 stores in three years, and the current number of stores is more than 6,700, catching up with McDonald's.
In this regard, Lin Yue believes that McDonald's main rival in China is KFC, and in recent years, it has been constantly trying to localize, get close to the C-end, optimize the dining scene, and iterate the operation mode of coffee and cold drinks. But McDonald's opponent is not only KFC, but also the fast-rising Chinese burgers and Chinese fast food should also attract enough attention.
In his opinion, "McDonald's is wise to continue to increase its weight in China, but the road will not be too easy." Because its own advantages are no longer so obvious, such as the innovation of Western-style fast food, the attractiveness of the brand to the new generation of consumers, and the influence of the chain model in the business circle.
On the contrary, "Chinese brands have a strong enough strategy to overtake McDonald's." The rapid expansion of Wallace and Tustin over the years illustrates this. Lin Yue said.
City Boundary understands that Wallace has a set of store expansion, opening stores through a "cooperative association" model, delegating shares to employees or trained external collaborators, so that they can form a community of interests with the company. The store operator has a strong sense of ownership and a low store closure rate. Through this organic growth model, the company has expanded rapidly from more than 200 stores in 2006 to more than 20,000 today.
Tustin, on the other hand, adopts a brutal low-price strategy, with a spicy chicken leg burger only 8.9 yuan after a discount, and a three-piece luxury single meal only costs 19.8 yuan. This method is very effective in the current low-desire consumption environment, and the narrow door restaurant eye shows that as of now, Tustin has reached 6,732 stores nationwide, with township stores accounting for the majority, and gradually advancing to first- and second-tier cities.
In contrast, Li Yingtao, a senior analyst of the new consumption industry at Analysys, saw the entanglement from McDonald's. McDonald's is a proper civilian fast food in the United States, and Li Yingtao believes that McDonald's wants to maintain its brand positioning with the U.S. headquarters, which means that it is becoming more and more low-end in the Chinese market, and its gross profit margin is getting lower and lower. At the same time, McDonald's wants to maintain its brand status and image, so it has upgraded its stores and increased the price of its products, which is contrary to its original positioning and out of touch with other markets around the world.
"In China's increasingly competitive market, the performance of a tangled and unable to operate at full strength is bound to fluctuate or even decline. Li Yingtao emphasized.
What is certain is that compared with other fast food brands in China, McDonald's still has advantages. According to the above-mentioned catering investors, McDonald's is most affirmed by the circle for two points: one is high brand awareness, and the other is the high degree of product standardization and relatively stable quality.
"You have to admit that McDonald's still has two brushes. A McMen believer who was unimpressed with McDonald's price increase said, "McSpicy Chicken Leg is the No.1 in my mind forever, and no other company can replace it." ”
He used an apt analogy, today's McDonald's China, like the post-80s generation who grew up with it, after entering the middle age stage, a sense of urgency and anxiety followed, which forced it to constantly make changes and attempts.
(Zhang Li is a pseudonym in the article)
Author | Chen Chang
Edit | Chen Fang
Operations | Liu Shan