Burger King doesn't sell well 9.9 yuan package|Future focus

Author | Peng Qian

Edit | Dong Jie

The wind of the "Poor Ghost Course" is blowing through the restaurant world.

Following the launch of McDonald's 12 yuan set menu and Luckin Cudi vs. 9.9 yuan coffee, Burger King quickly caught up with this trend.

In June last year, Burger King officially launched a 9.9 yuan package, if you can catch up with Meituan's special group purchases from time to time, the cheapest can even buy two hamburgers for less than 8 yuan - you know, Burger King's previous Angus Cowburger series set price was as high as 49-57 yuan.

This led to a short-term spike in orders for Burger King. Meituan data shows that Burger King's 9.9 yuan special offer for two crispy chicken burgers has been online for 3 months and has sold more than 180,000 copies, another 11.9 yuan package has sold more than 140,000 copies by the end of August, and 35,000 copies of the new 12.9 yuan package has been sold.

However, after the excitement, Burger King's growth rate in China does not seem to have achieved a big reversal, and its parent company RBI Group is not optimistic about the Chinese market, RBI Group executives said at the earnings conference, "Because the number of net new stores in the Chinese market this year is at a low level, we now think the expected outlook of the market is not very certain." ”

This means that it may be difficult for Burger King to speed up in China in the short term.

Can't outrun McDonald's and KFC

F&B brands tend to grow faster by opening stores faster, but Burger King's new store expansion in China is not ideal.

In 2023, Burger King will only add 176 new stores in China, which is still lower than expected, although it is already the market with the largest number of stores. In August 2023, Korhan Kurdoglu, CEO of TFI Group (Burger King franchisee) and chairman of the board of directors of Burger King China, said that Burger King plans to open 200 new stores in the Chinese market every year from 2023, up from 300 previously.

But Burger King's opponents didn't stop. In 2023, McDonald's added 677 new stores, and KFC opened nearly 1,500 stores, which is the number of Burger King stores in China for more than 10 years a year.

Red meal big data shows that Burger King has 1,593 stores in Chinese mainland so far, covering 162 cities. McDonald's, the major Western fast food giants, has 6,528 stores, KFC has 10,044 stores, the more affordable Chinese fast food Tustin has 6,584 stores, and Wallace has opened 20,116 stores.

There is no advantage in scale, and an important reason is that Burger King has lagged behind at the starting point: it entered China late and does not have a first-mover advantage. In terms of time, Burger King (2005) lagged behind McDonald's (1990) for 15 years and KFC (1987) for 18 years before entering China.

The past decade or so has been the most important period for Chinese consumers to build their minds on Western-style fast food represented by hamburgers, fried chicken and fries. KFC and McDonald's fried chicken burgers and fries have become synonymous with Western-style fast food in the minds of Chinese consumers.

So far, Burger King China is still mainly operated by foreign capital. Since 2012, Burger King has been mainly operated in China by TAB Foods Investments (TFI), a large Turkish restaurant conglomerate.

But KFC and McDonald's are more local. The former has been operated by Yum China, a joint venture company, and is quite friendly in terms of team, menu, supply chain and franchise policy.

In 1987, when KFC first entered the Chinese market, it only offered 8 kinds of food: original chicken, chicken mashed potatoes, small bread, shredded salad, milk, canned Pepsi, 7-up, and coffee.

But in the following 30 years, KFC first catered to Chinese consumers in terms of taste, and then further developed the best-selling local products such as soy milk fritters and rice, and in recent years, even launched regional products with local characteristics in different parts of China, such as Wuhan hot dry noodles and crayfish burgers.

McDonald's has begun to accelerate its localization layout in recent years. In order to accelerate the sinking, in 2017, CITIC Shares, CITIC Capital Holdings, Carlyle Investment Group and McDonald's jointly announced a strategic cooperation, after which, McDonald's China changed its name to Golden Arches (China) Co., Ltd. According to the agreement between McDonald's and CITIC, the parties will cooperate to open new restaurants, especially in third- and fourth-tier cities.

Today, with a high degree of uncertainty about the future macro environment, RBI, which once wanted to make a big splash in China, is becoming more and more hesitant. In addition to Burger King, RBI's plans for another of its brands, Tims Hortons, have also changed. So far, Tims Hortons has only opened 900 stores, down from the original plan of 1,200.

Fast food "price war" into the Red Sea

RBI's initial positioning of Burger King in China was close to today's Shake Shack and Charlie's Pink Burger, cutting into the mid-to-high-end market.

From the pricing of its flagship star product, Angus Bullburg, we can get a glimpse of one or two: a single layer is 34 yuan - 35 yuan, and a double layer needs 45 yuan - 49 yuan. Although more cost-effective options are now available, they are still on the high side. McDonald's and KFC have always focused on hamburger drumstick burgers, with the former selling for 17-25 yuan and the latter at 19-24 yuan.

The pricing strategy has also led to significant regional differences in the location of brand stores. According to narrow-door data, up to now, Burger King's stores in the Chinese market are mostly distributed in Jiangsu, Zhejiang, Shanghai, Beijing, Guangdong and other regions, and the proportion of first-tier and new first-tier cities has reached 56.22%. KFC and McDonald's have a higher proportion of stores in third-tier cities and below.

With the advent of the era of parity, Burger King, which has not significantly improved the speed of opening stores, can only promote through continuous discount strategies, but this also makes Burger King lose its former price band advantage.

Red meal big data shows that Burger King's current customer unit price is 32 yuan, KFC has raised the customer unit price to 35 yuan with a richer product structure, and McDonald's is slightly inferior because of the lower price of the customer's unit price, but it is also maintained at about 28 yuan. But from the perspective of the industry as a whole, the unit price of Burger King is still higher than that of the more affordable Chinese fast food Tustin and Wallace, with the former having a unit price of 17 yuan and the latter around 18 yuan.

Subject to inflation, McDonald's has actually increased its prices slightly in recent years, and it has made several price adjustments in the Chinese market, and the prices of various meals have risen by 0.5 yuan to 3 yuan. But this did not hurt McDonald's sales in China.

As the cheapest of the three Western-style fast food giants, McDonald's had the most room to raise prices before. But Burger King doesn't have that advantage. On the one hand, its own selling price is the highest, on the other hand, its once mainstream customers, first- and second-tier middle-class consumers, are downgrading consumption, and the price increase is tantamount to accelerating the drive out of customers. Moreover, Burger King has not been as firmly established in the consumer's mind about fast food as McDonald's and KFC.

Despite the introduction of cheaper poor ghost menus, Burger King is also facing a slant from affordable fast-food brands such as Tustin, Wallace, and Saizeriya. These brands have a higher level of recognition in lower-tier markets, and they have a wider variety of lower-priced products than Burger King, rather than specific discount packages.

The lack of scale means that it is impossible to reach more consumers to form a consumption mentality, and the difficulty of adjusting prices means that sales and profits will be squeezed, and the Burger King China 9.9 package has attracted attention in the short term, but it is difficult to fundamentally change its dilemma in China.