News

Chinese QSR market to pass $280B by 2017

May 24, 2013

According to a new report released by market insight firm Mintel, China's quick-service and takeaway market is expected to reach RMB 1.8 trillion ($283.4B U.S. dollars) by 2017, largely bolstered by rising economic power in lower-tier cities.

The value of the QSR market in China doubled between 2007-2012 to reach RMB 1 trillion with 80 percent growth in outlet numbers since 2007.

However, while outlets are expected to continue to see explosive growth in China, pace is actually slowing.

"Much of the growth to date has continued to benefit from a perceived 'novelty factor' enjoyed by fast food as the segment expands into smaller cities in China. The consumers in first- and a few second-tier cities where fast food has now been available for quite some time are becoming more attuned to the health issues often associated with fast food and are actively choosing healthier options when dining out," said David Zhang, China research analyst at Mintel.

He adds that greater transparency will be a key to maintaining market share, as Chinese consumers begin demanding more information about ingredient sourcing and food preparation following supply chain scandals.

"Widespread food scandals have meant greater scrutiny on all aspects of the food industry, and fast food outlets are not immune to this, fueling recent trends for organic and 'green' food products in the marketplace," Zhang said.

In addition, it seems that health is a growing concern for QSR customers too: less than half (40 percent) of Chinese QSR consumers perceive it as not being 'bad for them,' suggesting a need for expansion of healthy product lines and further education about the food industry.

Significant fragmentation in the market is also a challenge for industry players, according to Mintel. Yum! Brands Inc., operators of KFC and Pizza Hut, is the largest food group in the country, with 5,275 outlets nationwide in 2012. McDonald's expects to reach 2,000 locations in the country within the next year.

"For foreign fast food brands to compete with Chinese independent operations, they will need to diversify their product offering to include more Chinese-style food offerings. In order to compete, foreign brands will need to be innovative to appeal to Chinese consumers, either by further modifying their product ranges to include more Chinese flavors or by including new products specifically to appeal to a Chinese audience," Zhang said.

Though the market faces significant challenges, the industry can still expect robust growth in the near future, especially if QSR outlets are able to market their product offerings for different meal occasions, according to Mintel. Today, most of China's QSR customers visit for lunch (71 percent); breakfast, weekends, and dinner offer solid future potential, with 54 percent, 52 percent and 50 percent of respondents, respectively, having eaten these at QSR venues.

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