FAST FOOD AND FOOD DELIVERY BUSINESSES IN CHINA

FAST FOOD IN CHINA

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The Chinese fast food industry was worth $48 billion a year in 2004. In 2021 it had an estimated value of $162.2 billion. Fast food has become popular as income levels have risen, people are more in a hurry and working harder and have more money but less time to cook. A survey by A.C. Nielsen in the late 2000s found that 41 percent of people interviewed eat at a fast food restaurant at least once a week, compared to 35 percent in the United States.

Fast food is not a new idea in China. A fast food restaurant was opened some 1,000 years ago in China and still serves customers to this day. Paintings from the Song Dynasty (960-1279) depict informal restaurants crowed with people. Today China is filled with fast, cheap food, much of it from street vendors. Middle class Chinese are finding it increasingly difficult to find the time for big sit down meals any more and prefer eating out or eating prepared food at home.”The lifestyle is changing,” a restaurant executive told Time magazine. “People are getting more urbanized and busy, with less time to cook at home.” On average, one fast food restaurant opens in Beijing every two days. Western fast food is considered more sophisticated and more hygienic than Chinese fast food but is is also blamed for China’s increasing obesity problem and rising rates of diabetes and high blood pressure.

Carrie Gracie of the BBC News wrote: “Just 50 years ago, if a Chinese had declared a preference for American food, it might have cost them their liberty, if not their life... But by the 1980s, foreigners were being welcomed back. Which is why, 20 years ago, I attended the opening of the first McDonald's restaurant in Beijing. Now it feels as if there is American fast food or coffee on every corner. [Source: Carrie Gracie BBC News, October 9, 2012 ***]

Explaining the appeal of Western style fast food restaurants like McDonald’s a college student told the Washington Post, “If you go to one of these traditional Chinese restaurants there are big differences between one and another, and you have to know where you are and what to order. Here, there’s a standard. A familiar taste. You always know what to expect.” A couple of girls at KFC said, “Chinese food, that’s all I ever ate when I was growing up. I want something different.”

Supermarket fast food and food courts are also very popular. Popular items in supermarkets include instant noodles and microwavable frozen dumplings that cost about 70 cents a bag and comes in dozens of varieties, including pork, celery, shrimp and vegetarian. Jiayang Fan wrote in The New Yorker, “In China, food courts are on the rise precisely because they fulfill the urban Chinese’s desire to eat eclectically and economically, without the fuss and mess of preparation. In Kunming, a Yunnan city, the food court in the basement of a newly opened Walmart resembled nothing so much as a college cafeteria. [Source: Jiayang Fan, The New Yorker, January 14, 2015]

Websites and Sources: Wikipedia article Wikipedia ; Good Academic site on regional cuisines kas.ku.edu ; China.org Food Guide china.org ; Travel China Guide travelchinaguide.com ; China.org Rice Culture Article china.org ; Eating China Blog eatingchina.com/blog ; Imperial Food, Chinese Government site china.org.cn; Wikipedia article on History of Chinese Food Wikipedia ; Chopstix chopstix.com ; Asia Recipe asiarecipe.com ; Chinese Food Recipes chinesefood-recipes.com : Food Tours in China, China Highlights China Highlights Books: “Beyond the Great Wall; Recipes and Travels in the other China” by Jeffrey Alford and Naomi Duguid (Artisan, 2008) features travel stories, political analysis and recipes from Tibet, Xinjiang, Guizhou, Inner Mongolia and other places off the beaten track in China.

Burger King, Baskin-Robbins and Jollibee in China

There are around 500 Starbucks in China. Baskin-Robbins has more than 90 locations in China, including shops in Beijing, Shanghai, Xi'an, Hangzhou and Zhengzhou. Baskin-Robbins opened its first outlet in Beijing in the late 1990s. In 2008, it announced plans to open 50 outlets in the Shanghai and Xian areas over the next five years. As of June 2021, there were 396 Yoshinoyas — a Japanese beef bowl chain — and 193 Dairy Queen outlets, including ones in Beijing and Tianjin municipalities, Hebei, Liaoning, Heilongjiang, Jilin Provinces and Henan, and the Inner Mongolia Autonomous Region. Other American fast food restaurants found in Beijing include Shakey's Pizza and Carl Jr. Maybe they are not there anymore. In recent years U.S. restaurant chains have seen their market lead in China challenged by a growing lineup of Asian competitors such as Ting Hsin International Group’s Dicos eateries and Yoshinoyas mentioned above.

Burger King has more than 1,300 outlets in 150 cities in China and has been operating in the country since 2012. In June 2012, around the time it opened its first outlets, AP reported: “Burger King is setting its sights on China. The world's second largest hamburger chain says it will open 1,000 restaurants in the country over the next five to seven years. It's the largest multi-unit development deal in Burger King's history. There are currently just 63 Burger King restaurants in China. Burger King, which has more than 12,500 restaurants worldwide, said that its China expansion is a joint venture with the Kurdoglu family, which runs 450 Burger King restaurants in Turkey, and private equity firm Cartesian Capital Group. The Kurdoglu family currently operates Burger King's largest international franchise. [Source: Candice Choi, AP, June 15, 2012]

It's just the latest international expansion deal for Miami-based Burger King at a time when the fast food industry at home is becoming increasingly crowded. Earlier, the chain announced plans to open several hundred new locations in Russia. It made a similar expansion deal with a franchisee in Brazil last year. In the past year 80 percent of Burger King's new stores have been in Europe, the Middle East and Africa. Burger King, which has seen its market share in the U.S. decline in recent years, was taken private by New York investment firm 3G Capital in late 2010. The company has since been overhauling its operations. In the U.S. the company is focusing on modernizing restaurants. In April it launched its biggest menu expansion, which included fruit smoothies, snack wraps and salads.

Philippines-based Jollibee had 402 outlets for different restaurants in 2021. In 2013, Sunshine Lichauco de Leon wrote in Forbes: In China, Jollibee opened a Jollibee in Xiamen in 1998 but had to close it three years later. So instead of building its own brand, Jollibee decided to buy already-popular brands and work to improve their strength in the marketplace. Jollibee opened more than 100 Yonghe King fast-food outlets in China 2011 and 2012 and had 288 there in 2013; it bought the noodles, rice and dim sum chain in 2004. With its 52-outlet Hong Zhuang Yuan chain, a congee brand purchased in 2008, Jollibee improved the taste of the food, redesigned the restaurants and introduced new products. In March 2012 it paid $6 million for 55 percent of Chinese beef noodle chain San Pin Wang, which now has 39 stores. Overall sales for Jollibee’s China operation rose 20 percent in 2012 [Source: Sunshine Lichauco de Leon, Forbes, February 11, 2013]

Kentucky Fried Chicken in China

Kentucky Fried Chicken is by far the most popular fast food chain in China. It has more than 5,000 restaurants in 1,100 cities in China. As of 2016, KFC held 11.6 percent of the fast food market share in China, according to Euromonitor, far ahead of McDonald's 5.6 percent KFC was the first American fast food chain to launch in China. opening its first China branch in 1987. It soon became not only a symbol of Western food but also a sign of a reforming economy and openness to the world. The first outlet — a three-story, 3,600 square-foot restaurant, KFC's largest branch, with seating for 500 people, was near Beijing's Tiananmen Square. The restaurant was instantly a smash, customers formed long lines to get inside for months after it opened. [Source: Harrison Jacobs. Business Insider, March 9, 2019 ++]

The facial features of Colonel Saunders have been altered slightly to make him look more Asian. As of 2015, there were 4.600 Kentucky Fried Chicken restaurants in over cities in China. This is up from 2.100 outlets in 2010 and 1,759 outlets in 2005. Kentucky Fried Chicken was the first Western fast food chain to arrive in China and still is the most popular restaurant franchise in China. The first KFC opened in 1987. By 1997, it had 100 outlets in 33 cities. In 1999 it had 320. By 2007, a KFC oulet was opening at a rate of about one a day. Kentucky Fried Chicken's biggest Chinese competitor is Fast Food Dajiang. The first drive-thru in Beijing — a Kentucky Fried Chicken — opened in 2003 in a suburb popular filled with young professionals. KFCs in China offer fried dough and preserved egg porridge alongside the usual boxes and buckets of chicken. Many customers don’t even buy chicken.

Harrison Jacobs wrote in Business Insider: “Key to KFC's success in the country has been catering its menu to local tastes. I tried a number of dishes at a KFC restaurant in Beijing and found the food to be tastier and fresher than its American counterpart. While KFCs in China serve fried chicken, they also serve a variety of local dishes like egg tarts, congee (rice porridge), and the "Dragon Twister." KFCs were often places for youth and the rising middle class to hang out. It still had that feel when I visited. There were many families casually eating lunch, teenagers using the restaurant as a hangout spot, and a couple college students working on homework. Most people weren't waiting in line for the counter like I was. Most were instead scanning the QR code on the wall and ordering and paying on their phones. QR codes are ubiquitous in China. Restaurants often don't even have paper menus anymore. The cashier fished out a laminated English menu for me from below the counter. There were a ton of unfamiliar options, including a shrimp sandwich, matcha ice cream, congee, and soy sauce wings. I saw a promotion for these sushirritos and asked if I could give them a try. Unfortunately, the sushirritos and the congee are both only for breakfast. Alas, next time. ++

Eating at Kentucky Fried Chicken in China

Harrison Jacobs wrote in Business Insider: “I ordered: a 10-piece wing bucket (five soy sauce, five fried), a Dragon Twister, a chicken-and-seaweed rice bowl, an egg tart, a chicken salad, peach oolong tea, and something called nine lives juice drink. I started off with KFC's tried and true, the chicken. The soy sauce wings were crispy and fried well, with no breading. The sauce was just a light glaze, enhancing the crispy skin and giving a not-overpowering salty-sweet flavor. The meat was tender and moist. Next, I tried the fried chicken. The breading was fairly similar to KFC fried chicken in the US, though the pieces were smaller. But when you bite in, there is a peppery, spicy kick. I usually layer on condiments. I didn't touch one with this chicken. There was plenty of flavor and it was far less greasy than KFC fried chicken in the US. It's worth noting the marketing materials on the bowls here. They were all done with classic Chinese figures. [Source: Harrison Jacobs. Business Insider, March 9, 2019 ]

I was most excited for the Dragon Twister: fried chicken prepared ala Peking Duck, in a thin pancake with spring onions, cucumbers, and sweet bean sauce. It did not disappoint. The pancake was thin and flaky while the bean sauce was pretty close to authentic. The spring onions added a crunchy freshness. I scarfed this down. The chicken bowl was most similar to Japanese donburi. The rice underneath is seasoned with a little soy sauce and seaweed, which gives it a salty, fishy flavor — a popular taste in Asia. The chicken, bone-in leg and thigh dark meat, was flattened so much it looked almost like a steak. The chicken was covered in a coated in a Teriyaki-like glaze that was much heavier than the wing sauce. Surprisingly, the skin was still crispy. The meat tasted very fresh.

While KFC offered a ton of desserts, I opted for the humble egg tart, which comes with your combo instead of a biscuit. This might have been the best egg tart I've had in China — and I've had it in Hong Kong and Macau, where the dish originates. A sacrilege, I know. The pie crust was perfectly flaky, while the eggy middle was creamy with a light glaze of sugar over the top. The peach oolong tea was the clear winner here. It was very lightly sweetened. Overall, KFC in China was light-years better than in the US. The food tasted fresher, less greasy, and more thought out. Usually after eating KFC, I feel bloated and like I'm oozing oil. I felt great after eating KFC in China.

Yum Brands — Owner of Kentucky Fried Chicken and Pizza Hut — in China

Kentucky Fried Chicken is owned by Yum China, which is affiliated with Louisville-Kentucky-based Yum Brands Inc. The company has made lots of money from its restaurants. Yum Brands had more than 6,400 restaurants in China, including 4,600 KFC restaurants and 1,100 Pizza Hut restaurants in China as of 2015. Pizza Huts and KFCs are regarded as trendy rather than cheap places to eat and this attracts people with money. In Beijing, people are sometimes turned away at Pizza Hut because they don’t have reservations. As a result they are at least twice as profitable as U.S. outlets. The $500,000 or so necessary to start up an outlet can be recouped in two years compared to five or six years n the United States. In 2018, Yum Brands launched KPRO, a health food restaurant, in Hangzhou to test the country's concerns about food safety and growing interest healthy lifestyles.

Yum Brands spun off its China restaurants in October 2016. Yum’s China began trading as a separate company in November 2016 on the New York Stock Exchange under the ticker symbol YUMC. Chinese investment firm Primavera Capital and an affiliate of Alibaba Group Holding Ltd said in September 2016 they would buy a stake in Yum China for $460 million. At that time Yum’s net income soared 48 percent to $622 million, or $1.56 per share, helped by lower taxes, gains from selling restaurants to franchisees, lower food and paper costs and other items. [Source: Reuters, October 6, 2016]

Yum Brands ran Pizza Hut, and Taco Bells as well as KFCs in China. It was the biggest restaurant operator in China, with 2,400 outlets in 2006. Pizza Hut had 261 restaurants in China in 2005. It pioneered the concept of delivering food to homes. Yum-brands is marketing American Chinese food and American-style delivery through its East Dawning chain of restaurants.

Yum Brands says the Chinese market was its main earnings driver for many years. Yum brands opened around 600 new restaurants in China in 2011. Profits were slightly down in the same period as a result of higher commodity and labor costs. It opened 168 new restaurants in China in the first quarter of 2012. In 2008, Yum operated 2,500 KFCs and Pizza Huts with $2 billion in sales. At that time Yum was opening about 500 KFCs and Pizza Huts a year. It grew at a clip of 36 percent in China, Taiwan and Thailand in 2006 and said it hoped to have 20,000 outlets one day. China accounted for more than 25 percent of its profits compared to near zero at the end of the 1990s. By the late 2000s, the company was making more money in China than it was in the United States.

Yum Brands and KFC Scandal

KFC and Yum China, suffered from a tainted meat scandal in 2014 and problems with avian flu in 2016. In April 2010, customers at Kentucky Fried Chicken outlets became angry and overturned tables and had be dispersed by police when KFC outlets refused to take coupons downloaded from the Internet, saying they were fake.

Yum Brands was badly hurt after state television reported in December 2013 that some poultry suppliers violated rules on drug use in chickens. Yum said KFC sales in China plunged 37 percent the following month. KFC launched an effort to tighten control over product quality and eliminated more than 1,000 small poultry producers from its supply network. In 2014, Yum Brands reported a fourth-quarter loss as its recovery China from a tainted meat scandal was taking longer than it expected. AFP reported: “The parent of KFC, Pizza Hut and Taco Bell restaurant chains said it had a net loss of $36 million in the October-December quarter compared with a net income of $321 million a year ago. The company said its earnings were affected by the July tainted meat scandal involving a former supplier, after a strong first half of the year. "Our top priority is to recover sales in China and capture the significant profit leverage we have in this business," said Greg Creed, Yum's chief executive. See Bad Meat Scandal, Food Safety [Source: AFP, February 4, 2015; Associated Press, July 21, 2014]

KFC and Yum Brands have also been a victims of international tensions — namely the South China Sea issue. In 2016, Reuters reported: Yum Brands blamed tensions over the South China Sea for an unexpected dip in quarterly sales at its established China restaurants. “But Shaun Rein, managing director of Shanghai-based China Market Research Group, said Yum’s KFC, with more than 5,000 stores across China, was a lightning rod for anti-U.S. protests. “We estimate sales dropped 15 to 25 percent in some of the cities because a lot of the protestors were looking for a big American brand to attack, to protest against. So they did have to shut a lot of stores in North-east China, ” he said. ““The big challenge for them is, will there be lingering anti-American sentiment?”[Source: Reuters, October 6, 2016]

McDonald’s in China

left McDonald's has about 2,500 outlets in China, about half as many as KFC. In 2016, it held 5.6 percent of the fast food market share in China, according to Euromonitor, compared to KFC's 11.6 percent. McDonald’s is not cheap. A large order of French fries costs $2.50. By contrast you get a plate of eight pork buns for 25 cents. Many people go there and don’t order anything. Inevitably you will find people studying and sleeping there.

In 2017, McDonald’s Corp. agreed to sell a controlling stake in its China and Hong Kong operations to a group of investors — “Chinese state-backed conglomerate Citic Ltd., Citic Capital Holdings and U.S. private-equity firm Carlyle Group LP — for about $1.7 billion. The total value of the deal was $2.08 billion, McDonald’s keeping 20 percent and the partners saying they plan to add over 1,500 outlets in next five years in smaller Chinese cities. ““Citic and Carlyle’s resources will allow McDonald’s to expand rapidly and refurbish old restaurants, which is expensive to do, ” Ben Cavender, a Shanghai-based analyst at China Market Research Group, told Bloomberg. “Given that McDonald’s lags behind KFC in terms of store count in China, we can expect them to expand aggressively and invest heavily.” [Source: Bloomberg News, January 9, 2017]

China was McDonald's third-biggest and fastest-growing market in the early 2010s as measured in number of restaurants and new restaurant openings. About 200 to 300 McDonald’s opened up in China every year at that time. As of 2012 McDonald's had more than 1,400 restaurants in China. As of early 2010 it had 1,100 restaurants in over 110 Chinese cities, and 60,000 employees. This is up from 600 outlets in 2004. McDonald’s plans to have 2,000 outlets by 2014. Items on the menu include pork burgers, spicy beef wrapped in dough, and red-bean-paste ice cream sundaes. The China Mac, a hamburger marinated in black pepper sauce, was introduced before the Olympics. Yao Ming is one the company’s top pitchmen. Explaining its appeal a marketing representative told the Washington Post, “It’s a decent place, it’s clean, they have music...There’s the feel of a Western experience.”

History of McDonald’s in China

McDonald's opened it first outlet opened in 1992 on Wangfujing Road in Beijing. After teh restuarant opened it was besieged with long lines of customers waiting for Big Macs and Chicken McNuggets. Party elite took their children there; young men trying to make a good impression took their dates there; families had their picture taken with Ronald McDonald out front; party cadres even held banquets there while ordinary people came to gawk and window shop. By 2001, there were 69 McDonalds in and around Beijing (by contrast there were only 63 in Paris). The government requires the McDonald’s in Beijing to pay some strange fees for things like family planning, flowers for city streets, advertisements telling people to be more polite, and river dredging. McDonald’s and China Petroleum & Chemical collaborated to produce some fo China’s first drive-through restaurants.

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Chinese kids love McDonald’s. According to a study at three Beijing elementary schools, nearly every student was familiar with the name McDonald’s and some pupils said they eat there 10 times a month. One couple in Shanghai couple told the Washington Post, “It’s not nutritious, and they don’t have the variety that a Chinese restaurant would have. But children like it, so we’re here.” The lack of nutrition doesn’t seem to bother some adults. A 24-year-old woman told the Washington Post, “It's convenient and it tastes good. I don’t care whether its healthy or not.”

McDonald’s has been the target of protests and litigation. After being criticized for paying low wages McDonald’s raised wages by up to 56 percent in 2007. A lawyer in China sued McDonald’s because the receipts it gave out were mostly in English, arguing that not having the receipts in Chinese violated the “consumer’s right to know.”

In April 2010, McDonald’s opened a $250 million Hamburger University in Shanghai, whose main purpose is to train new restaurant managers and encourage skilled Chinese managers to stay with the company. Tim Fenton, McDonald’s president for Asia, said, “It’s because of China’s strategic importance to McDonald’s that we have chosen to have our new Hamburger University in Shanghai. We have to stay ahead of the people curve.” Most of the courses at the institution are on management and business not flipping burgers or making fries. Some courses can count for credit at accredited universities.

China’s Homeless Find Shelter at McDonald’s

Javier C. Hernández wrote in the New York Times: “He woke to the cry of the morning janitor. “Put your shoes on!” she said. “Put your shoes on!” She rattled a chair. “This isn’t your house! Sit up!” Ding Xinfeng’s eyes blinked open. Dawn had yet to break, but inside a 24-hour McDonald’s restaurant in central Beijing, more than a dozen homeless people had begun their daily routines. Mr. Ding lifted his head, revealing a mess of food stains and decorative slogans on the table in front of him. “Wake up every morning with the thought that something wonderful is about to happen, ” one read. Mr. Ding could not read the English, but he said he liked the warmth of this table, in this corner, in the peace of McDonald’s, the place he had called home for several years. [Source: Javier C. Hernández, New York Times, December 31, 2015]

“Every night across East Asia, in major cities like Beijing, Hong Kong and Tokyo, an invisible class of people — shut out of shelter systems, scorned by their families, down on their luck — turn to a beacon of Americana for a warm, dry place to sleep.By day, the McDonald’s restaurants host birthday parties and book clubs. By night, when the floors have been mopped a final time and the pop music turned down, they become sanctuaries for the downtrodden, who pounce on half-eaten hamburgers and stale French fries, and stake out prized sleeping spots in padded booths. Often called McRefugees, they vanish at sunrise, some combing their hair with plastic forks before slinking outside into the masses.

“While other restaurants might kick them out, McDonald’s generally embraces wanderers like Mr. Ding, who have flocked to the chain as it has rolled out more 24-hour locations in Asia. More than half of the 2, 200 McDonald’s restaurants in mainland China are now open 24 hours a day. McDonald’s has spent decades cultivating an image of community here, building bright, stylish restaurants and adjusting menus to local tastes. In addition to the standard burgers and fries, the Beijing outlets serve taro pies and soy milk with fried bread. Many restaurants have become neighborhood institutions, symbols of status and cleanliness, popular spots for study groups, business meetings and leisurely chats.

Dunkin Donut and Doughnut Shops in China

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Dunkin' Donuts currently has more than 11,000 outlets in 36 countries around the world, but only 16 in China. In 1996, Dunkin Donut leased out part of the Great Hall of the People to launch it's first Beijing donut shop — renamed the Dange Ken Sweet Rings Shop. For promotion Dunkin Donuts often hires men to stand outside their outlets in donut suits. In October 2005, Krisby Kreme Doughnuts announced it was going to open up 35 outlets in three cities in China. Reporting from Shanghai, Keith B. Richburg wrote in the Washington Post, “Doughnut shops, once a rarity here, have proliferated across the city, with a huge number of rivals — including American giants Dunkin’ Donuts and Krispy Kreme — now battling for supremacy in the race to give Shanghai’s middle-class consumers their morning coffee-and-sugar fix. [Source: Keith B. Richburg, Washington Post July 18, 2011]

The opening of so many doughnut shops in so many locations is a testament to Shanghai’s growing affluence and the belief that young Chinese with more disposable income will be hankering for more leisure food. As China has opened its doors to the world, American fast-food chains such as KFC, McDonald’s and Starbucks have exploded here, mostly in wealthier cities and coastal areas, with varying degrees of success. So an American-style doughnut, with a cup of coffee, would seem a perfect fit for China’s modern, on-the-go city lifestyle.

Dunkin’ has the most ambitious plans. The company opened its first store in China in November 2008, and announced plans to have 100 across the country within 10 years. There are now 40 in China, with 18 here in Shanghai, according to Frederick Sze, Dunkin’s managing director for greater China. “We are number one in the U.S., and we want to be number one in China also,” Sze said. Krispy Kreme, Dunkin’s main U.S. rival, came one year later, and snagged a prime location on a popular pedestrian restaurant street just off fashionable Nanjing Road. The 3,000-square-foot, two-story store has couches, wireless Internet and an open viewing window onto its “doughnut theater,” showing the sugary dough rings rolling off a conveyor belt. Local chief executive Jujing Lim said there are plans for three new Krispy Kreme outlets in Shanghai, and his team is still scouting for the best locations. The oldest of the group is Mister Donut, a brand which largely disappeared from the United States but remains strong in Asia under its Japanese corporate owner. Mister Donut has been in Shanghai since 2000 and has eight outlets in the city. And there’s an Australian usurper, Donut King, which arrived in 2008 and now has 11 stores in Shanghai, plus several local versions of the doughnut shop, such as the Taiwanese-run Cafe 85 C.

In January 2015, Dunkin’ Donuts said it planned to open more than 1,400 restaurants in China. Angela Chen wrote in the Wall Street Journal, “Dunkin’ Donuts said it will partner with Golden Cup Pte. Ltd., which will open and operate the Chinese restaurants over the next two decades. Golden Cup has rights to expand Dunkin’ in places including Beijing, Macau, Hong Kong and Guangdong, the company said in a news release. Canton, Mass-based Dunkin’ currently has 16 restaurants in China, and about 2,200 across the Asia Pacific region.” [Source: Angela Chen, Wall Street Journal, January 8, 2015]

“The first new restaurant in China is expected to open in the fourth quarter of 2015. Golden Cup Pte. Ltd is a joint venture between Jollibee Worldwide Pte Ltd., part of the largest food-service network in the Philippines, and Jasmine Asset Holding Ltd, an Asian investment firm, the company said. The new agreement, the largest in the company’s history, is the latest piece of the chain’s international plans. The company already operates in 36 countries.

Doughnut Saturation in Shanghai and Do Chinese Even Like Doughnuts?

But others look at the swelling number of doughnut shops here wonder if it’s just too much,” Keith B. Richburg wrote in the Washington Post. ‘some shops have disappeared. Many others appear mostly empty at peak hours — and Chinese customers seem more interested in the drinks than the sugary doughnuts. And following the lessons of other American retailers, the doughnut shops are finding that some of their best-sellers would be barely recognizable back home, like Dunkin’s dried pork and seaweed doughnut, or the doughnut made with dried Bonito fish. Retail industry analysts think Shanghai’s once-languid doughnut market might already be saturated. Some speak of an ensuing “doughnut war,” which might leave just a few survivors. "We’re going to need a U.N. resolution very soon — they’re going to have to declare a sugar-free zone over Shanghai,” said Paul French, the British-born founder of a market research company, Access Asia, that focuses on the retail sector. “There’s too many, because we’re starting to see them close down.” [Source: Keith B. Richburg, Washington Post July 18, 2011]

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“But what isn’t at all clear is whether Chinese consumers particularly like doughnuts.The average Chinese breakfast might consist of congee, or rice porridge, maybe some soybean milk, sometimes fried noodle, or perhaps a dry roll or bun. The idea of something as sweet as a glazed or cream-filled doughnut in the morning would seem an anathema to many local palates. “I’m not a big doughnut lover, and I only have one once a month,” said a 28-year-old woman working as a marketing manager, who stopped by Krispy Kreme on a recent Friday. “There are too many calories, and they’re too sweet, unacceptably sweet, especially the chocolate ones. But the doughnut looks really cute!”

Several of the doughnut shops appear empty in the mornings, when they should see heavy traffic. Dunkin’, like some of the other chains, is discovering that coffee and other drink offerings, including jasmine green tea and lichi green tea, are more popular than doughnuts. Krispy Kreme, meanwhile, is offering its quarters, with easy chairs and quiet surroundings, as a place to relax, surf the Web and enjoy a huge variety of cream-filled doughnuts at a more leisurely pace. “People stay a long time,” Lim said. Here in Shanghai, he said, “we position ourselves differently than in the West.”

Still, the pessimists think the doughnut might have a hard time finding a toehold in China — as evidenced by the largely empty doughnut stores, and the number of leftovers on the shelves at closing time. “It’s one of those food concepts that has singularly failed to set the country alight,” said French, the retail analyst. French noted the biggest obstacle yet: In Shanghai, police officers seem to prefer smoking cigarettes to taking a doughnut and coffee break. “They haven’t cracked the cop market,” he said.

Food Delivery Business in China

China's e-commerce market, the world's largest, reached the $1 trillion mark around 2020. A good chunk of it is food delivery done primarily on electric motorbikes by mostly male migrants dressed in bright colors and with required helmets. Meituan Waimai drivers wear canary-yellow T-shirts with kangaroo logos. Couriers for Ele.me, which means "hungry?" in Chinese, wear deep blue. Baidu Waimai employs about 20,000 delivery workers in Beijing alone."Where offline services didn't meet certain standards, online took off, " said Gong Zhenbing, chief executive of Baidu Waimai. [Source: Jessica Meyers, Los Angeles Times, September 18, 2016]

China’s food delivery economy has grown significantly in the past few years. Meituan is the largest food delivery business in China, delivering an average of 15 million to 20 million meals a day. Backed by Chinese tech giant Tencent, Meituan went public in Hong Kong in 2018, raising $4.2 billion in its initial public offering. Ele.me is the second largest food delivery service in China. It was fully acquired by Alibaba in 2018, reported a considerable rise in gross merchandise value (GMV) in 2020. [Source: SupChina 2020]

Meituan reached $100 billion in valuation amid the coronavirus pandemic in May 2020. Rita Liao wrote in TechCrunch: Meituan's shares hit a record high, bringing its valuation to over $100 billion. The Hong Kong-listed giant, which focuses on food delivery with smaller segments in travel and transportation, is the third Chinese firm to reach the landmark valuation. Tencent and Alibaba respectively topped the number back in 2013 and 2014. Tencent-backed Meituan saw shares rally after it earmarked a smaller-than-projected decrease in revenue during Q1 and a net loss of $220 million after three consecutive profitable quarters. [Source: Rita Liao, TechCrunch, May 26, 2020]

“While nationwide lockdowns might have increased the need for food delivery, Chinese consumers have been tightening their belt amid a worsening economy triggered by COVID-19. Overall food delivery transactions slid as a result. Meituan also had to pay incentives to delivery riders who work during the pandemic and subsidies to merchants to keep their heads above the water. There's one silver lining: While Meituan's daily average number of transactions dropped by 18.2 percent to 15.1 million, the average value per order jumped by 14.4 percent as delivered meals, which were conventionally seen as a habit for office workers, became normalized among families that stayed at home. In the first quarter, a large number of premium restaurants joined Meituan's food delivery services, and they could continue to attract bigger ticket purchases in the post-pandemic era.

Food Delivery Guys in China

Jessica Meyers wrote in the Los Angeles Times: Young migrant workers like He Zhigang, a shy 29-year-old from Henan province, are fueling a new industry in China, part of a thriving e-commerce market that tethers cheap labor through increasingly sophisticated technology and the ubiquity of smartphones. And they're everywhere — helmeted kids in oncoming traffic, at restaurants, blazing down sidewalks on their scooters.Baidu Waimai, where He works, employs about 20,000 in Beijing alone. [Source: Jessica Meyers, Los Angeles Times, September 18, 2016]

“These modern-day mailmen — and they're usually men — pick up prescriptions, flowers, laundry, coffee, condoms and groceries, and carry someone's desires through congested city streets. "I'm free when I'm on the road, " said He, who wears his work ID card like a necklace and carries a fanny pack full of small change. "Nobody tells me what to do." Every day, he covers northwest Beijing's tech hub, his red uniform zipping past Internet start-ups and high-rise apartments on a customized Du Shi Feng scooter. He counts about 30 customers in his daily dance between canteen and office, restaurant and residence. He knows the shop that reeks of black vinegar and the apartment building with the yappy dog.

The young driver remembers the day the rain turned the streets to rivers and he couldn't make any of his deliveries on time. A woman opened the door and handed him a towel. He doesn't usually tell stories; this one he repeated twice. Since starting the job a year ago, "I've become more chatty, " he said, before drifting into silence. He tried his luck in Beijing when a gold-mining business back home fell through. A friend told him about the wai mai "knights, " the term Baidu labels its drivers. He left his wife and 4-year-old son in Henan, a densely populated central province about 385 miles south of Beijing. Now he delivers from 9:30 a.m. to 9 p.m., with a three-hour break in the afternoon.

Chinese generally don't tip, so He relies on Baidu for his paycheck. Employees start at about $520 a month, but can earn more than double that, as He does, with incentives for speed and service. The average monthly income for China's migrant workers last year was about $460, according to the National Bureau of Statistics.

Making Food Deliveries in China

Jessica Meyers wrote in the Los Angeles Times: “He Zhigang's eyes pleaded with the elevator dial as he stood waiting on the ground floor. The red numbers wouldn't budge. He glanced at his phone. The elevator. The phone. He pushed back his helmet, lifted the delivery bag of steamed buns and prepared to run up 20 flights of stairs. The elevator doors opened. He exhaled. [Source: Jessica Meyers, Los Angeles Times, September 18, 2016]

“The hungry office worker probably won't remember who brought him lunch on a Friday afternoon, or that it was 11 minutes and 20 seconds before the allotted time. Maybe he'll notice the colorful uniforms that flood Beijing streets and think of the beef noodle soup that came still too hot to eat, or the deliveryman who screeched past on an electric scooter and nearly took out his driver's side mirror.

“The lunchtime rush that Friday morning began at 11 o'clock. He grasped his phone in one hand and his scooter's handlebars in the other. A Styrofoam container in the front held spots for hot drinks; he delivers more Starbucks than dumplings. He watched an order pop up on his phone, then darted down the street to a noodle shop in an unmarked office complex. He grabbed the food, tucked it in an insulated pouch and traveled three blocks to an identical office complex, an orchestra of efficiency guided by algorithms. Security kept him outside, standing in the sun. He checked his phone. More orders popped up. Eventually, a woman came out, took the soup, muttered thanks, and walked away.

“The dinner crush had commenced by 6 p.m. when He walked into a west Beijing mall. He'd just passed a bag of noodles to the hand that emerged from an apartment door. Now he needed to pick up a plate of sashimi, which he'd never eaten. Lines of Japanese, Korean and Yunnan restaurants occupied the mall's top floor, begging for customers who weren't there. Instead, red-shirted wai mai drivers poured out of the elevator. Blue shirts came from the right. Yellow took the escalators.nThese drivers may not benefit from China's economic rise as much as their customers, but they've secured a spot in a country where opportunity comes and goes quickly. There was pride in He's voice when he told the waiters: "I'm the deliveryman." He picked up the sushi, nodded at the other drivers, and got back on his bike. Hungry people were waiting.

Dangers and Inhumane Working Conditions Faced Food Delivery Guys in China

Delivery driving is a dangerous because their employers pressure them to make the deliveries quickly to do so the drivers run red lights, drive against traffic and weave in and out of lanes. They are also forced to work long hours with hardly an days off.

In 2020 SupChina reported: “An exposé (in Chinese) published by Chinese magazine Portrait on September 8 details the exploitative and dehumanizing working conditions faced by Chinese delivery workers on a day-to-day basis. The piece is based on a six-month investigation and cites a number of current and former delivery workers, and management staff at major food delivery companies. According to the article, food delivery workers are often given an unreasonably short amount of time to complete orders, and are expected to ride recklessly and break traffic rules. [Source: SupChina, September 9, 2020]

“The heart of the problem, the article argues, is that food delivery workers are actually slaves to faceless algorithms, designed to put company performance above the well-being of workers, without factoring in uncontrollable variables like weather and real-time traffic conditions. “Last week, Meituan and Ele.me — the top two food delivery services in the country — responded with open letters to the public, vowing to make significant changes in how they assess employees’ performance and to treat them with more respect.

“Meituan announced (in Chinese) that it would improve its algorithm to prioritize its drivers’ safety and add eight more minutes to the estimated time for each delivery for the sake of unforeseen factors. It also promised better benefits for its workers and their families. While Meituan was widely applauded for its practical measures, Ele.me shot itself in the foot with what’s seen by many as an insincere response. In a vaguely worded statement (in Chinese), Ele.me asked its customers to be more patient with their orders. The only concrete measure mentioned in its response, though, was to add a feature that allows users to voluntarily extend wait time by five or 10 minutes.

Image Sources: Beifan.com , Perrechon blog, Nolls China website http://www.paulnoll.com/China/index.html ; Wiki commons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated October 2021


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