American fast-food chain McDonald’s disclosed its expansion plan on 1 February, eyeing the enormous potential in China’s lower-tier cities with a record figure of 900 new stores set to open this year.
The fast-food giant released its 2022 financial report representing great financial performance over the last year, with the generated revenue totalling 23.18 billion USD, equating to a 5% growth year-on-year.
As outlined in the report, McDonald’s is ready to carry on its aggressive global expansion this year with over 1,900 new stores set to open. Almost half of which are expected to land in China, indicating the country’s exceptionally profitable climate in the fast-food industry.
According to 36Kr, a domestic media outlet, there are two main reasons why McDonald’s is focused on the Chinese market. First and foremost, the country’s tier-1 cities like Shanghai showcased a strong consumption resilience during the lengthy pandemic, with its retail industry sales increasing by 1% yearly in Q3 of 2022.
Additionally, new possibilities in China’s lower-tier cities are still to be unlocked as the overall consumption ecosystems there are not yet mature, thus, increasing penetration in these marketplaces has become the main focus for McDonald’s.
Meanwhile, McCafé which is a coffee concept owned by McDonald’s is also expected to launch 1,000 new storefronts in China in 2023, mainly covering tier-3 cities where coffee is gaining increasing popularity amongst local citizens. In order to cater to local consumers’ tastes, McCafé underwent a comprehensive upgrade in China last August, launching a series of beverages made with milk and coffee.
Thanks to its giant consumer base and developed business operation, McDonald’s possesses a strong ability to handle marketplace risks such as the pandemic. However, the fast-food giant still needs to pay attention to the changeable environment in the Chinese food industry, as the nation’s restaurant sales saw a yearly decline of 4.6% in the first 9 months of 2022.
Thus, during the process of setting a foothold in lower-tier cities, implementing promotional strategies to maintain existing consumers while appealing to new ones is of importance.