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U.S. French Fries Heat Up China’s Fast Food Industry
By Jacob Cee and Susan Theiler
In the last three years,
China’s rapidly changing lifestyles and eating habits have
resulted in a booming fast-food industry. Chinese consumers,
especially those who live in large urban areas, have accepted
Western-style fast-food restaurants that serve french fries and
other popular side dishes as a way of life in China. As a result,
the popular American food has become a huge success story,
creating a growing market for U.S. frozen potatoes.
Since 1995, China’s direct imports of french fries from the United States have increased tenfold, while at the same time, the volume of french fries shipped to China through Hong Kong has tripled. As more consumers eat at Chinese fast-food and Western-style restaurants such as McDonald’s and Kentucky Fried Chicken, these numbers are expected to increase.
The United States, with a 97-percent market share, dominates the Chinese market for french fries. In marketing year (MY) 1997, the United States exported about 2,500 metric tons of frozen french fries to China valued at $2.2 million. It’s estimated that another 8,000 to14,000 tons of french fries, or 50 percent to 75 percent, are transhipped into China through Hong Kong.
Fast-Foods Grow in China
China’s french-fry consumption trend is very different than it was just a few years ago. Before the invasion of the fast-food industry, french fries were portrayed as a luxury food item. They were associated with Western-style restaurants located in or near fancy hotels, consumed only by the most affluent Chinese people. Since french fries were basically unknown to most Chinese, the demand at that time was very small, and the quality of french fries served to customers was never a serious consideration.
But today, french fries are a booming business in China. Chinese families visit fast-food restaurants to please their children. In fact, when it comes to eating out, children are basically the decision makers. Chinese teenagers and young adults are no different than their counterparts in the United States–they enjoy the crispy taste of french fries along with other fast foods. A fast-food order of french fries in China costs about $.60 to $1.80 and is the key to Chinese french fry consumption.
McDonald’s and Kentucky Fried
Chicken consume a 70-percent share of the french fry market in
China.
Now that Chinese consumers have tasted tasty American french fries in restaurants, they want to enjoy them at home. The retail market for packaged frozen french fries is larger in northern China, in part because the Chinese are accustomed to reusing their cooking oil to deep-fry their products due to the introduction of fast food restaurants.
Some Chinese potato suppliers are confident that the market for packaged frozen french fries will continue to grow, despite China’s value-added tax of 17 percent on frozen potatoes, which still constrains imports. On the brighter side, in 1997, China reduced its import duties on frozen french fries from 45 percent to 25 percent.
Marketing U.S. French Fries
Over the past few years, groups such as the U.S. Potato Board have been actively promoting high-quality U.S. french fries. The U.S. Potato Board frequently offers educational training, seminars, trade shows and joint promotions such as food sampling with local Chinese supermarkets, fast-food chains and Western-style restaurants. By advertising on radio and television, in newspapers and printed materials and through public relations events, sales missions and trade shows, the U.S. Potato Board is working to increase the sales of U.S. frozen french fries.
U.S. exporters are beginning to realize that, in China, sales and education go hand-in-hand. Chinese traders need information on food handling practices such as how to properly store frozen french fries until they are distributed to restaurants and supermarkets. Such practices can also help reduce the costs of importing french fries into China for traders and suppliers by reducing losses of french fries that are not stored in cold temperatures.
U.S. exporters interested in tapping into the Chinese market for frozen french fries should contact:
Office of Agricultural Affairs
Attention: Agricultural Marketing Specialist
USDA-FAS Agricultural Trade Office
U.S. Consulate Guangzhou
c/o Department of State
Washington, D.C. 20521-4090
Phone: 011- 8620-8666-3388 Ext. 1461
Fax: 011-8620-8666-0703
E-mail: ato@gitic.com.cn
___________________________
Jacob Cee is an agricultural marketing specialist and Susan
Theiler is the director of the USDA-FAS Agricultural Trade Office
in Guangzhou, China.
Fast Food restaurants, a Way of Life
Just like Americans, working Chinese couples enjoy dining out as a welcome break from the daily routine of home cooking. Chinese children, especially teenagers, enjoy a weekend night out with their friends by combining their social activities of window shopping and entertainment with a visit to the nearest fast-food restaurant.
In 1997, the Hong Kong Trade Development Council estimated that China’s fast-food sector was valued at more than $3.6 billion. A year earlier, a Hong Kong-based market research company estimated that China’s fast-food market sales could be as high as $4.8 billion, with 20 percent of the total earned by Western fast-food outlets.
Fast-food restaurants with strong brand name images, such as McDonalds and Kentucky Fried Chicken, are more popular than Chinese-style fast-foods because they are known for quality control and good store management. Western-style fast-food outlets also provide a novelty in contrast to traditional Chinese cooking.
Market research conducted by the Asia Market Intelligence Company suggests that Western-style fast-food consumption will continue to grow in China at an annual rate of more than 46 percent over the next 3 years, while at the same time Chinese fast-foods are projected to grow only 15 percent.
Guangdong Providence, where more than 60 million people live, is China’s single largest market for fast-foods. China’s largest fast-food outlet is Kentucky Fried Chicken, with more than 250 outlets, while McDonald’s is fast approaching 200 restaurants.
The success of Western-style fast-food restaurants will continue to serve as a catalyst for the future development and improvement of the Chinese fast-food sector. China’s Ministry of Internal Trade has allocated $1.2 million for a campaign to help China improve its domestic chain-store management and fast-food production.
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