Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors. The Fast Food Industry all Cut down Their Prices in Droves in China - During the former ten months of 2008, the fast food industry all increased their prices continuously due to the successive increases of the prices of the commodities. The prices of the foreign fast food had been increased for three times in 2008. However, in the latter half of 2008, especially from October, the prices of the domestic food raw materials were dropped obviously in China, leading to the reduction in the costs of the fast food, meanwhile, because of the dim global economic situation; many restaurants had to take the preferential promotion measures to attract the customers and stimulus the consumption.


Under the international financial crisis, the competitions in the fast food market become fiercer in China. Since McDonald’s released its first round of price decline in February 2009, KFC had taken price reduction measures in larger scale from May 2009, in which the largest reduction rate reached 33%.


It is reported that the activity of saving money every day released by KFC will be made experiments in 49 cities, such as Shanghai, Guangzhou and Fuzhou etc; the activity of choosing preference at random will be made experiments in Shenzhen, Tianjin, Chongqing and Suzhou, covering the municipalities, provincial cities and town cities, in which 7 special items will be released during the activity of choosing preference at random, including Zinger Burger, New Orleans Roasted Wing and Egg Tart etc. Apart from enjoying the preference in the single product, the customers can also choose and match free.


Since 2009, the price reduction voice become higher and higher in the fast food industry in China. McDonald’s, which had dropped the prices for three times in last year, announced the reduction in the sales prices of four leading combos and the release of 9-Yuan products all over the country in February and April, in which the reduction rate all exceeded 30%. After the reduction, the prices of the same products had been low than the prices ten years ago. The reduction in the prices of the western style fast food brought pressures to Chinese style fast food. From 29th April to 9th June, Kungfu Catering Management Co., Ltd is not only releasing new dishes in the 313 stores, and also launch the spread and promotion activities and issue special discount vouchers in various large cities, student cards and white-collar preferential cards directed against different groups. The Yonghe King also releases a specialty every day at the price concession by 20 to 40 percent and the ultra valued choice activities covering 126 stores all over China.


The western style fast food, like KFC and McDonald’s, all transfer the profits, which is the results of the aggravation of the market competition in the domestic peer market. Recently, the local fast food have changed the situations of low class, poor services and environments and brought huge challenges to the western style fast food through introducing the advanced management concepts and operation means. Meanwhile, the hot sales of the home-made fast food in the supermarkets also occupy the market shares of the western style fast food. It is a wise move for the western style fast food to take promotion measures so as to maintain the market share and stabilize the customers under international financial crisis. 


More and fresher promotion measures will take up this year apart from the price reduction. For example, some Chinese style fast food stores release the preferential cards or send specialty, which all become the most common promotion means. The domestic economic environment is still not very promising this year in China. The figures showed that the international financial crisis has affected the fast food industry and the customers have poor confidence on the consumption. The battles between Chinese style fast food and the western style fast food become fiercer so as to stimulate the consumption and attract the attentions. It is inevitable to take place the price competitions in large scale. It is viewed that the price competition will become the normal competition situation of the fast food industry in China.


In recent years, the management structure focus of the catering industry in China has shown the inclination towards the families and the wage earners. The international financial crisis may speed up the process.


Under the influences of international financial crisis, the customers of partial restaurants have turned to the medium and high class fast food. Therefore, the financial crisis brings not only crisis to the fast food industry in China, but also more opportunities. The consumption groups and market scale of the fast food industry all will become larger.


Source: China Research and Intelligence

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Eileen Gu