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Fast-Food Fight Rages in China : Restaurateurs Aim at Potential Market of 1.2 Billion People

November 20, 1995|RONE TEMPEST | TIMES STAFF WRITER

FUZHOU, China — Zhu Honglin is on the front lines of the world's biggest food fight, and the 26-year-old manager of the Ding Gua Gua ("The Top") fried chicken outlet here in the capital of Fujian province describes the battle as "very fierce."

Just around the corner from her 200-seat restaurant is a 300-seat KFC outlet that opened last December. The hegemonic KFC motto is played incessantly on local radio: "To Be First in the World in Good Taste." Diagonally across the intersection is a 290-seat McDonald's.

Only eight years after the first such restaurant opened in China, the battle for the fast-food market of the world's most populous country is under way. At stake are the palates of 1.2 billion Chinese, a growing number of whom have enough disposable income to spring for a $3 fast-food meal.

Besides American fast-food giants--PepsiCo's KFC (and Pizza Hut); McDonald's; Shakey's, and Jack in the Box (coming soon)--there is a platterful of domestic and foreign wanna-bes.

The rivals have such names as Glorious China Chicken; Rogers (no relation to Roy); California Fried Chicken (no relation to California); Texjiana (no relation to Texas), and Chicken Treat. Franchises hail from Taiwan, the Philippines, Hong Kong, Australia, Indonesia and the United States.

"Our biggest advantage over the Americans," said Ding Gua Gua manager Zhu, "is that we make our foods more to Chinese tastes. We use Chinese herbs."

In one corner of Zhu's restaurant, a young couple dote over their son, who wears a Young Pioneers Communist youth league kerchief as he chows down on a platter of spicy chicken necks, French fries and--incongruously, to a Western eye--popcorn. A Taiwanese pop singer croons in the background.

Because of China's one-child policy, the country's pampered offspring, known colloquially as "the little emperors," are often the most important target for fast-food franchises. "It operates on a formula of 6 to 1," observed Louis Tong, president of the Hong Kong-based SRG China marketing research company, which has been tracking the growth of fast food in China. "Every child has six people--two parents and four grandparents--all vying for his or her attention. If a child demands to be taken to McDonald's, six people jump to the call."

The largest of the home-grown chicken chains, Rong Hua Ji (Glorious China Chicken), features mung beans, preserved cabbage and a pungent dish of paper-wrapped chicken. A full meal--including four pieces of chicken, vegetable soup, fried rice and mung beans--costs 25 yuan, about $3. So far, the Shanghai-based chain has 13 branches. But its management has an ambitious strategy to install one of their restaurants near every new KFC.

"That's our plan," Hua Yuanming, Rong Hua Ji general manager, said in a telephone interview. "It doesn't mean we will be able to pull it off." At last count, KFC had more than 63 outlets in 28 cities across China.

Timothy M. Lane, the president of PepsiCo Restaurants International Asia, said that by 1997 the company intends to run 200 KFC restaurants in 45 cities. Recently, PepsiCo's Pizza Hut chain announced plans to open 150 restaurants by 1999.

"China presents a potentially enormous opportunity," said Lane, who added that one of the main problems of operating in this country is keeping up with the sheer volume of business. "Most of our restaurants average between 10,000 to 12,000 transactions a week. Some even top 20,000 a week. In the United States, 2,000 a week is about average. Granted, it is a high-class kind of problem to have. But it means that our facilities are strained from the moment we open. . . . We have to deal with crowd control and other problems not faced in other countries."

McDonald's, with 40 outlets in China, aims for 600 by 2003. The New China News Agency reports that the expansion would include 100 restaurants in the capital, Beijing.

The proliferation of fast-food outlets has changed the face of China. Gates of Heaven are outnumbered by Golden Arches, Forbidden Cities by secret formulas. What began as an experiment in 1987 when Kentucky Fried Chicken opened the first Western fast-food restaurant in China at Beijing's Tian An Men Square has mushroomed into one of the fastest, most competitive growth markets in China.

"People have more money," said Tong, the Hong Kong market researcher, "Time is becoming more of a precious element. The demand for convenience is definitely there. People want self-service shops, supermarkets and fast food."

When fast-food chains first appeared, they were considered more a novelty than a regular spot to dine. Students participating in the massive 1989 pro-democracy demonstrations in Tian An Men Square dined on Kentucky Fried Chicken to make a political point. Chinese by the millions flocked to the initial franchises to sample something from the West.

But fast-food operators now say they depend more on repeat customers. "It is not a case of feeding everyone in China just one time," PepsiCo's Lane said.

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