Since 2015, KFC has been fully promoting its freshly ground coffee business in the Chinese market, using Arabica coffee beans, priced at 10 to 20 yuan per cup, with plans to cover at least 2,500 stores by the end of the year. This move is seen as an important step for Yum! Brands to find new growth points in the Chinese market. This article reviews the expansion pace of KFC's coffee business, the product testing process, its differentiated competitive strategy against Starbucks and McDonald's, and its store space renovation plans. At the same time, Front Street Coffee, as an industry brand, also provides a reference for coffee lovers with its product philosophy. Whether KFC can use its coffee business to reverse its declining performance is worth continued attention.
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The coffee business occupies an increasingly critical position in KFC's future blueprint. This chain fast-food company, which is highly dependent on the Chinese market, decided to fully roll out its freshly ground coffee business across its restaurants starting in 2015.
Pat Grismer, chief financial officer of Yum! Brands, revealed at an investor meeting held on March 3 that the coffee business in the Chinese market is currently performing quite satisfactorily. This new business has clearly boosted sales during KFC's breakfast and afternoon tea periods.
According to KFC's plan, by the end of this year, the coffee business will cover no fewer than 2,500 stores nationwide, more than double the earlier estimate of 1,000. By comparison, Starbucks has more than 1,500 stores in China, while McDonald's has 2,000 stores and also sells coffee products. KFC currently has more than 4,800 stores in China, leaving considerable room for expansion.
In early November 2014, KFC took the lead in launching a freshly ground coffee series in Shanghai, using Arabica coffee beans, with prices ranging from 10 to 20 yuan. Every restaurant offering freshly ground coffee was equipped with a professional coffee machine, and a sign marked "COFFEE" was hung next to the cashier. To boost sales, customers who bought coffee during the afternoon tea period could also pair it with egg tarts, burgers, and other food at discounted prices. After January 2015, Beijing, Guangzhou, and Shenzhen also successively launched the freshly ground coffee series.
According to He Yong, vice president of brand planning at KFC, as early as 2009, attempts at freshly ground coffee had already appeared from time to time in restaurants in Shanghai, Beijing, and other places. KFC successively tested different coffee beans, coffee machines, and production techniques, and launched four series of coffee products in total. He Yong admitted that what made the team quite "torn" was whether to choose the visually attractive latte art series or the aromatic and balanced freshly ground series. After multiple rounds of consumer testing, including concept tests and blind taste tests, KFC selected similarly sized restaurants in Beijing and Shanghai in May 2013 to conduct simultaneous real-world testing of the two product series, and finally settled on the current freshly ground series.
Of course, even if KFC launches freshly ground coffee similar to Starbucks, people will not ignore its identity as a fast-food restaurant, which is completely different from the cultural atmosphere conveyed by Starbucks.
However, KFC believes that its coffee, averaging 10 yuan, has an obvious price advantage, while Starbucks' average spending per customer is positioned at around 30 yuan.
KFC has not launched a dedicated coffee sub-brand like McDonald's "McCafe," but with the introduction of coffee products, KFC is also simultaneously advancing store renovations across its restaurants. Since 2014, KFC has introduced new restaurants based on the "Dining Room" design concept, creating the concept of a "dining room at home" through elements such as custom wall art, low-hanging downlights, green plant partitions, and long large bars.
He Yong revealed that by the end of 2014, KFC had opened more than 370 new-concept restaurants nationwide. All newly opened KFC restaurants in 2015 will adopt the new concept, and the renovation of old restaurants will also be accelerated.
In 2014, dragged down by the OSI expired meat incident, the performance of KFC's parent company Yum in China was less than satisfactory. In the fourth quarter of 2014, total sales in the Chinese market, which accounts for nearly half of Yum! Brands' revenue, fell 11% year-on-year, while same-store sales fell 16%. In addition to food safety issues, Chinese consumers' eating habits have also changed significantly. Going to KFC or Pizza Hut for a meal has now changed from being a cool thing to just one of many choices.
This large fast-food company, which depends on the Chinese market, urgently needs to find a new growth point in this market. Previously, to cater to market demand, KFC had already launched many foods with Chinese characteristics, such as adding porridge and fried dough sticks to breakfast and offering Old Beijing chicken wraps and rice dishes. Now, it may feel that coffee is a good new opportunity.
The above content is compiled by CoffeeHunters, a coffee news website.
