Lessons from China: A Tale of Two Mega Brands
Back in 2012 scouring content for the Skinny, it seemed almost every week there was another article praising KFC’s success in China. It was the Western pin-up brand; finding the much sought-after balance that tempted the masses with its alluring foreignness, but localised its offerings just enough to appeal to Chinese tastes – with the menu sporting old favourites like congee.
For every 10 bucks spent on fast food in China, KFC accounted for 4. It had almost 4,000 restaurants, with another 16,000 planned. There were movie placements, celebs munching on drumsticks, lovebirds courting one another over buckets ... then Bird Flu and a series of scandals happened.
KFC has never really recovered from the dark days of '13. In 2014 the menu was 'overhauled' for the first time in 27 years, there's been a refresh of some decor, but if you were to go into most KFC restaurants in China they still bear a stark resemblance to the golden years pre-2013. China, Chinese consumers, and their tastes on the other hand have changed - dramatically. A simple scan of restaurants on Dianping or a stroll through a city mall or restaurant street and it becomes clear that there has been an evolution in China's hospitality sector. La Liste's annual ranking of the world's restaurants noted the big trend is the rise of restaurants in China who are meticulously preparing and presenting food, and charging real money for it.
Contrast KFC with another mega-chain from America - Starbucks. Over recent years, the coffeehouse chain has constantly adapted to Chinese consumers and their ever-shifting expectations for newer, shinier offerings. They have played well to Chinese consumers' inherent need for status from what they purchase, opening cafes in highly visible spots in city streets and premium office building foyers where they will be seen sipping on their Green Tea Crème Frappuccinos. The look and feel of cafes have also evolved to keep up with changing tastes, with some of the latest cafes having fit outs that wouldn't look out of place against some of the fine dining establishments on Shanghai's Bund.
Starbucks has always played to Chinese love of all things digital and typically been an early adopter and innovative user of technology. In the early days of WeChat, it cleverly used the limited functions by encouraging fans to send emoticons reflecting their mood, receiving a short music clip related to that mood. A little later in the game they accepted WeChat Pay with some alluring features such as the ability to gift friends and family a drink or two.
Last week's launch of Starbuck's mega reserve roastery in Shanghai is one of its most exciting initiatives yet. In addition to a beautiful fitout, complete with contemporary Chinese elements, the venue plays true to the 'New Retail' movement that is fast making its way into the bricks & mortar landscape. Integrating the Taobao app, augmented reality brings Starbuck's story to life in a format that China's millennials love. The app also allows them to skip the queue and buy merchandise, which improves both customer experience and the likelihood of increased sales and advocacy purchases.
Much like KFC was before 2013, Starbucks has become a much-cited case study - with good reason. It illustrates how brands can successfully keep up and stay relevant to the ever-changing needs of Chinese consumers through offline and online initiatives and product offerings. Their lessons don't just apply in the hospitality trade, but are applicable for any foreign or local brand trading in China. Go to Page 2 to see this week's China news and highlights.Here are this week's news and highlights for China:
Chinese Consumers
Foreign Businesses Chase Opportunities as Chinese Economy Shifts Gears: According to American Chamber of Commerce in China and European Union Chamber of Commerce in China, 69% of surveyed US businesses plan to expand investment in China in 2017 while one third of EU companies see China among their top three choices to locate their research and development units. Nevertheless, although China says it’s open for business, foreign firms find it’s not that simple.
Shenzhen Overtakes Guangzhou as Biggest Economy in Southern China’s Guangdong Province: New calculation methods for GDP has seen Shenzhen slide past Guangzhou to rule supreme on GDP stakes, growing 9.1% from last year to more than ¥2 trillion ($302 billion) versus Guangzhou's ¥1.98 trillion. Shenzhen's GDP puts it higher than Malaysia and South Africa and closing in on Hong Kong's $321 billion. Since 2013, Shenzhen has invested more than 4% of its GDP on R&D - similar to South Korea and Israel and eclipsing Hong Kong's 1%.
Welcome to Sex Toy Street: Why a Sleepy Riverside Town in China is Rebranding Itself as ‘Happy Town’: On a much smaller scale, the local government in Yucheng - best known for its grapes, mulberry trees and turtle ponds - signed a ¥10 billion ($1.5 billion) deal to develop a “Happy Town” that will include a sex toy shopping street, a sex exhibition centre and an “adult-only” hotel.
Lego Wins Its First Copyright Court Case in China Against Bela: A Chinese court has ruled products from Bela who makes knockoffs of Lego's famous coloured blocks, infringed upon Lego’s copyrights.
Food & Beverage
Photos: The World’s Largest Starbucks is 30,000 Square Feet and Just Opened in China: Starbucks Reserve Roastery opened in Shanghai - the company's second such roastery, and twice the size of the first in Seattle which opened in 2014. The destination sells coffee beans from over 30 countries, coffees prepared in a variety of ways and European pastries from Princi. Starbucks has also partnered with Alibaba to create an augmented reality feature on the Taobao app which allows users to point their phone at a feature in the roastery and learn more about it, order coffee and buy things.
Japan And China Dominate The List Of World's Top Restaurants, As Per The La Liste Ranking!: Japan still dominates the country table with 138 restaurants in the top 1,000 of the French classification La Liste, but China is closing the gap fast with 123. The big trend is the rise of Chinese haute cuisine. Beijing's Huai Yang Fu at Andingmen is the first Chinese restaurant on the list at number 32, with the top-3 Mainland restaurants all being in the capital. Shanghai's Ultraviolet was 4th.
Chinese Experts Refuse to Back Claim that Wong Lo Kat Herbal Tea Increases Life Expectancy: Experts and scientists have refused to endorse a claim by a Chinese herbal tea company that consuming their product can increase life expectancy by 10% as tests have only been carried out on rats and they could not be sure if the findings would translate to humans.
JD.com Pitches Trudeau on Drone Fleets to Deliver Seafood: JD wants to deploy a fleet of drones in Canada to airlift seafood from East Coast processing plants to the airport, cutting out land-haul costs and speeding up the process in its bid to deliver more Atlantic lobsters, prawns and clams to Chinese consumers.
Digital China
Your Guide To Chinese Social Media: A brief description on WeChat, Weibo, Baidu Tieba, Zhihu, Douban, Tianya, Jinjiang, Hupu, Ironblood, Guokr, Renren and Kaixin.
Apple's Cook Optimistic that Apps Pulled in China Will be Back: Apple is optimistic that some of its popular apps removed from its China App Store this year to comply with government requests will be reinstated, according to Tim Cook who spoke at the Fortune Forum in Guangzhou.
Chinese Tourists
Flight Deal with China Could Boost Scottish Firms: A deal between the UK and China will allow 50% more flights between the countries, with the new services ring-fenced for hubs outside of London.
Health & Beauty
L'Oreal is Confident China's Selfie Revolution Will be Good for its Business: "China is much ahead in the digital revolution and the selfie is making you really be willing to improve your self-expression. This is why [there's] a boom in make-up, a boom in hair colour [products]. You want to have your individual personality, your individual appearance, your self-expression. And this is a huge trend we're seeing in China, with a scale of hundreds of millions of people," says L'Oreal China CEO Stephane Rinderknech.
Education
E-Sports: How China's Video Gamers Went from Couch to Classroom to Career: With Chinese universities offering courses in computer gaming, what was once a route to flunking exams is now a way to a lucrative career. 85% of e-sports-related job posts across the country remain unfilled, because of a shortage of talent.
Environment
China Assumes Green Power Mantle, Leaving Germany, US Behind: Chinese exports of environmental goods and services surged ahead of Germany and the US, according to German report which shows how the climate change fight is shifting international trade. China’s share of the global market for protection against climate change more than tripled over the 13 years to 2015 with China commanding about 16% - about $71 billion of exports.
Cars
China Will Lead an Electric Car Future, Ford’s Chairman Says: China will be the best market to develop and sell electric vehicles, supported by Government investments and regulations that encourage electric vehicle production according to Ford executive chairman William C. Ford Jr. Ford plans to introduce 15 battery electric or hybrid car models in China by 2025. The plans were followed by the announcement of a strategic partnership with Alibaba based around developing a direct sales channel to reach consumers in China and exploring possibilities of cloud computing for big data analysis, digital marketing services and using Alibaba’s AliOS operating system.
That’s the Skinny for the week! See previous newsletters here. Contact China Skinny for marketing strategy, research and digital advice and implementation.
