Can McDonald's steal Yum's China crown?

The expansion of McDonald's in China has been rapid: from one restaurant in 1990 to more than 700 now, McDonald's is expecting to have 1,000 branches in China by the time the 2008 Olympics -- which it is sponsoring -- kicks off in Beijing. The first drive-through McDonald's in China opened just a few months ago, and the company, recognising the increasing maturity of the business environment there, has just begun to operate on a franchise basis. But while it is the first name in fast food in the Western world, McDonald's has always played second fiddle in China to rival Yum Brands, which operates Pizza Hut, Taco Bell and, most importantly, KFC. Yum was first into the market, has more outlets, with the total in China now numbering over 1,500, and has broader geographical coverage. While McDonald's has adapted its menu to suit local tastes, with bean sundaes and rice among the dining options, Yum benefits from having a more localised menu and an all-important preference among most Chinese for chicken rather than beef. But the McDonald's experience for the Chinese consumer is, after all, as much about the tables, lighting, service and packaging as it is about the food. Consumers don't go to McDonald's for a Chinese meal. But the fact is that Yum, which recently launched an even more local fourth fast-food brand, East Dawning, is going gangbusters while McDonald's tags along behind. Recognising that its profits in China have not been what they perhaps should be, McDonald's brought in three hard-hitting executives from the US and Australia to boost its Shanghai-based management team last year. Former global marketing exec Gary Rosen has been made VP/chief marketing officer for China, operations and franchising boss Jeffrey Schwartz has become senior VP, China, and the man who turned around the brand's fortunes in Australia, Guy Russo, is now president, Greater China. In its favour also is the fact that the nutritional issues that have cast a shadow over McDonald's in other markets are much less of a problem in China, and the fact that the brand is seen as trustworthy and family-friendly. sm