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AGENCY NEWS // FEBRUARY 14, 2013 //     

Jumping China's Great Food Wall

By David Wolf


China’s convenience food industry is undergoing rapid change. Nearly four decades after the first Kentucky Fried Chicken opened at the south end of Tian’anmen Square in Beijing, Chinese consumers are now spoiled for choices. Not only are KFC, McDonalds, Subway, 7-Eleven, and Starbucks building store networks that cover the nation, relative latecomers like Burger King, Yoshinoya, and Singapore’s Bread Talk are also making inroads into this increasingly competitive market.



But for each of the major convenience brands that have succeeded in China, there are two (or more) that have entered the market only to have their hopes for billions of new customers mercilessly dashed. Wendy’s, Jack-in-the-Box, Krispy Kreme, Dunkin’ Donuts, Nathan’s, TCBY, A&W, Popeye’s, Delifrance, and Taco Bell all arrived with great fanfare, only to disappear. Others, like Kenny Rogers’ Roasters, Auntie Annie’s, Mrs. Fields, Dairy Queen, Fatburger, and Orange Julius are all struggling with a tiny toehold in the market.


What stymied these companies was not the litany of market entry barriers faced by foreign companies in most other industries, but operational, structural, and, most important, communications mistakes that in retrospect could have been easily avoided. As recent news has proven, the most successful companies are not immune to missteps. KFC, which forms the heart of YUM Brands’ legendary success in China, has mishandled a communications crisis that now threatens not only its China business, but the health of its business worldwide.


While a full recounting of the successes and failures of each of the companies could fill a book, there are lessons from the history of the fast-food industry in China that can guide communicators serving multinational food brands.


1. Treat franchisee development as a communications challenge. Attracting the right franchisees and master franchisees is the first and most important communications challenge food giants face in China. Finding qualified franchisees with not only capital but also operational sophistication, marketing acumen, local knowledge, and the dedication to make their stores successful is surprisingly difficult in China. Given that two-dozen foreign franchisors and a growing number of domestic brands are all competing for the same candidates, the challenge can be daunting. The only way to compete is with a well-designed franchisee campaign in advance of market entry. Subway has been the leader of this effort, and its stores have excelled as a result.


2. Target early adopters. For a nation with a remarkable variety of cuisines, Chinese consumers are remarkably timid when it comes to adopting new fast food brands and categories. The answer is patience and wise marketing, and the first step is identifying and targeting early adopters. The most fertile ground for cultivating the customers that will drive early business and word-of-mouth are the larger cities populated with expatriates and with “sea turtles,” Chinese who have studied or worked in the franchisor’s home market and have returned with a taste for the product. Retaining a customer already earned is easier than bringing in new ones. Find those hidden customers among the Chinese population, and make them your evangelists. Starbucks placed its initial stores in Beijing near the diplomatic quarter and the headquarters of major multinationals. Expecting to open three stores its first year, it opened nineteen, including a stand-alone store on the grounds of the U.S. Embassy.  Yoshinoya established its first stores in neighborhoods with Japanese families, and then expanded from there.


3. Go guerrilla. Expensive advertising campaigns and even nationwide PR efforts represent wasted effort when a company is only opening a handful of stores in one city. Initial campaigns should be local, should emphasize unpaid media, and seek to develop buzz that will generate traffic. Once your initial citywide efforts have paid off and are generating pull for more franchises in the area, refocus efforts on a local campaign designed to build repeat business from patrons living or working in immediate proximity to the store. Yoshinoya has built its base by offering samples and coupons to passers-by.


4. Market for the franchisees. Because few franchisees will have marketing experience, until a franchisor has built a large base of franchisees, brands should expect to have to build and maintain their own marketing teams in China alongside those of master franchisees. Not only will this ensure the quality and consistency of marketing efforts, it will also ensure that those efforts will be run as efficiently and effectively as possible. Even after franchising began over a decade ago, McDonald’s has continued to guide marketing, PR, and advertising throughout China.


5. Invest in proactive communications resources. In addition to running PR and marketing campaigns to drive awareness and sales, communications teams should also monitor traditional and social media for potential issues, and should be able to mobilize quickly and professionally in the event that an issue comes to the surface. There will always be problems in China: restaurant managers who take short-cuts; vendor-related food quality scares; Consumer Day complaints that are picked up nationally; and the occasional politically-motivated backlash against foreign brands. Being prepared for these issues means having a highly-qualified, experienced, and senior communications executive in-country, and not relying on a relatively junior but earnest media relations manager.


6. Finally, Don’t Forget HR. As important as the franchisees are, local convenience food brands face constant challenges with staffing. As the labor supply peaks in China, franchisees will find themselves increasingly challenged to staff their stores. Human resources marketing must be constant, creative, and fully integrated with all PR and marketing efforts. Once managers start having to settle for unsuitable workers just to staff locations, the decline has begun. Both Starbucks and McDonald’s have managed to attract and retain higher-quality staff as a result of aggressive recruiting PR that integrated with internal HR activities.


Building these lessons into PR plans for expansion into China is essential. Equally essential is that in order to make these steps effective, senior communications professionals must be integrated into the planning process for a China expansion early on. This will ensure that these steps are not simply added onto the process, but that the lessons of past successes (and failures) in China’s fast food industry are integrated into everything the company does and says in the world’s largest market.

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