Fast food chain enhances investment in coffee market

Source: Global Times Published: 2020/11/16 14:11:30

File photo: VCG

The Chinese mainland's coffee market welcomes a new rival as fast food brand McDonald's announces it will accelerate its expansion, increasing competition in the already crowded coffee market. 

McCafé, McDonald's coffee brand, announced on Monday that it will invest 2.5 billion yuan ($379 million) over the next three years to accelerate expansion in the Chinese mainland coffee market, and that there would be more than 4,000 McCafés countrywide by 2023.

The investment will be put into upgrading the store layout, equipment, marketing and training, according to Phyllis Cheung, CEO of McDonald's China, who added that McCafé will first become a presence inside almost all McDonald's restaurants in Beijing, Shanghai, Guangzhou and Shenzhen this year, followed by other cities after that.

Compared to the majority of the brands whose coffee costs around 30 yuan per cup, McDonald's said it will be pricing its coffee at around 20 yuan per cup, and its offline network of cafes for customers to sit down and spend time in will be another advantage over its rivals, the company said.

China continues to be one of the largest growing markets for coffee shops, with the Chinese coffee market witnessing numerous fast-paced changes in recent years. 

In June, Luckin Coffee announced that it was suspending trading and would be delisted on the NASDAQ, but that more than 4,000 of its domestic stores across China would continue to operate normally.

UK coffee chain Costa has closed about 10 percent of its stores in the Chinese mainland due to falling customer numbers, according to media reports, and completely withdrawn its business in Qingdao, East China's Shandong Province.

Meanwhile, other brands are branching out into the market, including as renowned traditional Chinese pharmacy Tongrentang Group, that, in August, opened two fusion cafes that offer drinks and healthcare services in Beijing. Milk tea brand Heytea also announced last year that it was planning to march into the coffee market as well. 

US coffee chain Starbucks said that the Chinese market was its best performing for the third fiscal quarter, as branches in China reopened relatively early following the coronavirus outbreak. The chain now has more than 4,400 stores across China.

"We don't consider Starbucks a rival, but believe competition will make the market bigger," Cheung told the Global Times on Monday.

McDonald's introduced McCafé in China in 2009, and currently, there are more than 3,200 McDonald's stores in the country that already incorporate a McCafé.

KFC also started its coffee business in 2015, six years after McDonald's, but data from CBNData showed that the number of stores has already hit more than 6,500.

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