Has Western Fast Food Hit a Wall in China?

It appears that the Chinese population is beginning to realize that western fast food is unhealthy and too expensive.

From The Los Angeles Times:

Reporting from Shanghai -- Down an alley from a KFC, McDonald's and Pizza Hut in Shanghai, Li Hong sat inside a dingy little storefront that serves full-course dinners for a dollar.

Her tray was filled with cabbage, carrots, potatoes, a chicken leg and rice, plus soup. A Western fast-food meal would have cost her three times that much, said the young woman, who works as a sales clerk. "Why should I go there?" she said.

In the U.S., fast-food chains often thrive in tough times. But not so in China, where Western quick-service food isn't the cheapest stuff in town and, in target markets like Shanghai, there's too much competition. Plus, a growing number of consumers see it as unhealthful.

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Reacting to the competitive and deteriorating market, McDonald's has cut prices significantly in China.

McDonald's Corp. (MCD) is slashing menu prices by nearly one-third for some items in China amid the country's sputtering economy.

Among the new offerings is an "Everyday Super Value Meal" that includes combo meals for 16.5 Chinese yuan ($2.41) and some individual items for CNY6 ($0.88).

McDonald's said these new prices and meals will save customers up to 32.6% off previous prices.

The fast-food giant is also offering a loyalty card that gives customers 20% off certain meals at the company's 1,050 China locations.

I can't say that I'm that surprised that Chinese people may move away from eating western fast food as much as they have been.

First, western fast food joints in China aren't cheap. In America, when you eat the crap that fast food places serve up you at least don't have to spend much money. That can't be said for China.

In Xi'an, a bowl of my noodles (臊子面) from my favorite little restaurant costs 6RMB. The sandwich (肉夹馍) that the restaurant also serves costs 3RMB. And then a bottle of Fanta costs 1RMB. So at this place, I can spend 10RMB and be absolutely full on delicious food.

There are literally thousands of restaurants all over Xi'an serving noodles, dumplings, fried rice, and other Chinese staples for between five and ten RMB a plate.

For comparison, the cheapest meal at the KFC down the street from my apartment is 20RMB. And more often than not, spending 20RMB there won't fill me up. McDonald's might be a bit cheaper now, but it is still at least 50% more expensive than the little restaurants that dot Xi'an's streets.

In addition to being more expensive, the food served at fast food restaurants is obviously junk food. I believe that Chinese people eat healthy compared to the people from middle America where I grew up. Nearly every Chinese person I've met is at least conscious about the benefits of eating a balance of fruit and vegetables. They generally don't eat as much of the greasy and fatty food which are staples of American "cuisine."

There are so many more western fast food restaurants in Xi'an now compared to when I came here three years ago. There are three KFCs, two McDonald's, one Pizza Hut, and one Subway all within about a twenty minute walk from my house. McDonald's and Subway are not as ubiquitous as KFC, but I've seen a lot of signs advertising their opening of new restaurants for the coming year.

KFCs, on the other hand, are everywhere in Xi'an. I cannot emphasize how many you will see if you take a bus from one part of the city to another. I can think of at least two places in Xi'an where there are KFCs on each side of the street facing each other. In my opinion, KFC has over-saturated its market here. I don't see how there is room for growth in Xi'an for the company.

I can't imagine that Chinese people's tastes for western fast food will evaporate overnight, but I'll be curious to see how much growth is left in an economic crisis for restaurants that serve food without nutrients and charge twice the amount of a normal Chinese meal.