Creating a company is hard, but creating a market is harder. The China Observer recently looked at how companies such as Proctor & Gamble and Campbell’s Soup were doing just that in China. KFC, now part of Yum! Brands, had to do the same thing in China, creating a market for Western fast food that did not previously exist. Since KFC’s initial entrance in 1987, others like McDonalds have followed – but none can match the successful operational model Yum! Brands has implemented in the Middle Kingdom. Yum! Brands success rests on the three key pillars of KFC, Pizza Hut, and increasingly local investments.
Pillar I: KFC – Western Fast Food For the Masses with Chinese Characteristics
KFC is Yum! Brands’ channel to reach China’s mainstream consumers – offering a combination of foreign flavor with localized tastes, and all at reasonable prices. In an interview with Warren Liu, former VP of Yum! Brands Greater China, he told me, “KFC has been positioned in China as a Western brand, even an American brand, with Chinese characteristics – a conscientious decision made at the beginning of KFC’s initial entry into China in 1987. Over the years, KFC China’s branding strategy has been modified through product localization and differentiated marketing practices. While McDonald’s entered China in 1990 and has remained a distinctively American brand since, KFC’s success can be attributed greatly to the fact that it has re-positioned itself over time as a foreign brand with local characteristics. From an advertising perspective, specifically TV advertising, the divergence in branding strategies is rather pronounced. While McDonald’s continues to focus on the young and hip by placing emphasis on individual expression, relying on young sporting stars and pop stars as brand spokespersons, KFC expanded its target market focus to include family and friends of all age brackets, reflecting its business volume growth and brand maturity in the process.”
Pillar II: Pizza Hut – Western Casual Dining for the Middle Class Urban Consumer
Contrary to what you may be accustomed to in the United States, Pizza Hut in China offers a radically different dining experience catering to Chinese white collar workers by providing high-end casual dining. According to this article, “Pizza Hut is the cheapest of the cheapest restaurants in the United States, but in China, Pizza Hut is seen as a classy, up-scale place for dining.”
There are multiple excellent articles that have been written on Yum! Brands success in China with KFC and Pizza Hut (like this one), but I would like to focus the remainder of this article on the local brands Yum! Brands has been incorporating into its restaurant portfolio.
Come back for Part II next week…
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