The “Made in China Burger" Trend

Shanghai, China - Chinese restaurant chain Tastien (塔斯汀) is one of the most recent rivals for Western fast food chains, such as KFC and McDonalds, transforming the Chinese fast-food landscape with its distinctly Chinese flair. Resembling an American fast-food restaurant, Tastien offers a burger, fries, and a drink. However, the burger proudly declares it is "Made in China." This adaptation signifies China's strategic response to Western fast-food giants like McDonald's. The restaurant is a testament to a broader trend where Chinese brands are increasingly challenging Western counterparts. At the Benelux Chamber of Commerce, we like to call this theory the “Made In China Burger Theory”.

A Shift in Consumer Preferences

China once represented a vast opportunity for Western brands – think about the rise of Apple stores in Shanghai, with their flagship store on Nanjing East Road. As the world's second-largest consumer market, its more than 1 billion shoppers were seen as a gold mine for Western companies. In Shanghai’s East Nanjing Road, Western brands like Ralph Lauren, Apple and Rolex used to dominate the landscape. However, recent trends indicate a shift, which has been going on for the past 5 years.

In the first quarter of 2024, Apple experienced a 19% decline in smartphone sales, while Chinese rival Huawei saw a 70% increase. Apple's revenue in China fell by 8% to $16.4 billion. Estee Lauder, Walmart, Carrefour and other Western brands have also reported struggles, with the latter closing numerous stores nationwide over the past five years. Western executives in China are increasingly concerned about their declining performance as local brands rapidly expand.

Local Brands Rising

According to WGSN’s China Consumer Strategists, younger Chinese consumers are gravitating towards brands that include traditional Chinese culture and style. This shift has allowed brands like Anta to make significant inroads into markets long dominated by Western brands like Nike. Anta, a sponsor of the Chinese Olympic team, resonates with Chinese shoppers as it aligns with a growing nationalist sentiment.

Chinese consumers are embracing new local brands, and many are not reverting to Western products. Anta's strong association with Chinese pride and bold expressions of nationalism appeals particularly to younger consumers who lack the same admiration for Western brands as previous generations.

Challenges for Western Brands

Western brands have capitalized on changing Chinese consumer tastes, but their supremacy is under threat. Starbucks, which largely created China's new coffee culture nearly 25 years ago, now faces intense competition from local rival Luckin Coffee. By the end of 2023, Luckin Coffee surpassed Starbucks as China's biggest coffee chain by sales and units. Luckin's success is attributed to its minimal staff model and significant price discounts, often up to 50% less than Starbucks.

Starbucks executives insist on maintaining their premium positioning and have avoided price cuts. However, sales have dropped 8% in the first quarter of this year, while Luckin's surged by 41%. This prompted Starbucks to lower its forecast for the year, causing a significant drop in its share price. Despite plans to make China its largest market, Starbucks is now in a race to win consumer wallets.

Luckin Coffee's rapid expansion into tier 2 and tier 3 cities has forged a strong brand story that resonates with the new Chinese middle class. The company opened more stores in a single year than Starbucks has in total across the country, now boasting nearly 19,000 locations.

Western brands have long enjoyed a dominant position in the Chinese market, but this era is coming to an end. The loss of China as a major market represents not only a financial setback but also a missed opportunity to cement brand presence in one of the world's largest consumer markets. The real challenge for Western and Benelux brands will be to adapt to this changing landscape while maintaining their core identities.

What’s next for Benelux companies?

Benelux companies and brands can leverage this wave of Chinese pride by strategically localizing their offerings to resonate with Chinese consumers. By incorporating elements of traditional Chinese culture, design, and values into their products and marketing campaigns, Benelux brands can appeal to the growing nationalist sentiment. For instance, collaborating with local artists to create unique product lines, celebrating Chinese festivals through special editions (think about Pierre Marcolini or Godiva’s mooncakes), and emphasizing sustainable practices that align with local environmental concerns can foster a stronger connection with consumers. Furthermore, establishing partnerships with popular local brands and influencers can enhance visibility and credibility, helping Benelux companies to not only enter but thrive in the competitive Chinese market.

Source: Wall Street Journal.