Appetite for consumption
In the past, Shanghai’s cultural hub has been a target of several top global food and beverage chains looking to expand business in the ever-growing multi-cultural metropolis. And that looks set to be the case as the world’s top corporations continue to thrive in Shanghai’s consumer loving market.
Despite the continual rain in the past few weeks, customers have still lined up in front of Shake Shack, a New York City-based fast-food chain. And the unpleasant cold weather hasn’t deterred ice-cream lovers from queuing for a scoop of gelato at the Grom, a famous Italian gelateria. Shanghai is the fourth city in the world to have a Grom shop, after London, Los Angeles and Paris. And on Tuesday, Canadian coffee chain Tim Hortons opened its 4,850th store, and first in China, in People’s Square, when Tims opened its doors on Huangpi Road N.
For local consumers, the international brands have brought diversity and richness. And for the expats, who are working and living away from home, these franchises are bringing the flavors of home from afar.
Bernard Wun, 32, who works at SUIS Gubei as an IGCSE/IB Visual Arts teacher and serves as their creativity and culture coordinator, couldn’t contain his excitement about Tims’ opening.
“I first learned about Tim Hortons’ opening in Shanghai from another Canadian friend a few months before we went home last summer,” he said.
“At that time, I only thought it was a rumor, so you can imagine my delight when I found out a few weeks ago that it truly happened.
“I can’t speak for all Canadians, but a Tims has always kept me warm in the winter and I’m hoping it’ll do the same for me here in Shanghai too.”
While most people hype about Tim Hortons’ double-double, Wun’s typical order is a medium half-French half-coffee and a Canadian maple donut.
“I think it’s just the right amount of sweetness, but of course everybody has their own personal go-to,” he said.
Adapting to the Chinese market
China is a lucrative market when it comes to consumer spending and Chinese people are becoming more open to new ideas and try new things.
When Lady M opened its first shop in Shanghai on September 3, 2017, the average waiting time was three hours, and the business had to close briefly two days after opening its doors due to waiting line conflicts between customers.
The blockbuster launch in Shanghai was followed by the chain’s aggressive expansion in the Chinese market. Lady M now has five shops in Shanghai, three in Beijing and one each in Shenzhen, Nanjing and Hangzhou.
From 2018 to 2019, chains and franchises, including Shake Shack, Red Lobster, Stone Brewing, Texas Roadhouse, Zizzi, L’éclair de Génie and more have opened restaurants and shops in Shanghai, generating continuous buzz in the city’s food scene.
Localization is a double-edged sword. It could help a foreign brand blend in the local market, but hardcore fans of the brand might also question the authenticity. As food and beverage brands with globally established business operation and product development enter China, they must decide whether to meet up with the local taste and how to do it the right way.
Chicago craft beer brand Goose Island Beer Co opened the two-story Goose Island Brewhouse Shanghai in 2017 at the prime location of Fengshengli commercial complex. It set up a production line to serve freshly brewed beers and classic American food menu to Shanghai diners.
Beer is a very popular drink in China and the public’s appetite for craft beers has been increasing in the past few years.
Ronny Pu, brand experience operation director of ZX Ventures APAC North, said that China represents the future. He says it is undoubtedly the market with most potential for growth.
But the Chinese market is very competitive, at times, the food and beverage industry could see out-of-order, cut-throat competition.
“For us international enterprises that abide by all laws and regulations and don’t cut corners, the toughest challenge is to win the competition by constantly optimizing internal operation and innovation, lowering operating cost, increasing profit and enhancing the core competency of our enterprise,” said Pu.
In order for an international chain to stand firm in the Chinese market, the key is to respect traditional Chinese culture, understand the consumer psychology and behavior without losing the brand’s unique image and gene.
While restaurants could cope with the local taste by adjusting the recipes moderately and using signature local ingredients (like the previous hairy crab pasta with white truffle from L’Atelier de Joël Robuchon Shanghai and the fast food chain’s frequent innovative spins using Chinese elements), the brewhouse has done it with beers by launching the Chinese Beauty series — four craft beers named after the four Chinese beauties: Mistress Li (Li Shishi), Diaochan, Wang Zhaojun and Zhao Feiyan, which featured iconic Chinese ingredients like Sichuan peppercorn.
To further connect with the city of Shanghai, there’s the Line 12 series inspired by Shanghai metro.
Taco Bell’s re-entry into the Chinese market presented an interesting case of business positioning. Between 2003 and 2008, the American fast food chain opened four restaurants in Shanghai and Shenzhen under the Chinese name 塔可钟 and English name Taco Bell Grande.
The restaurants were an upscale version of Taco Bell and offered full-service, sit-down dining experience. Although Taco Bell Grande adjusted the flavors to cope with the local taste, the business model didn’t work.
Near the end of 2016, Taco Bell reopened in Lujiazui as a real fast food restaurant just like McDonald’s, Burger King and KFC.
It is now doing quite well in Shanghai and runs four restaurants at the city’s prime locations. There are usually waiting lines during lunch and dinner hours, and overall the chain has presented a modern and energetic dining experience.
Of course, the market has evolved greatly during the past decade, the consumers have also developed a taste for Mexican flavors. But Taco Bell has localized the menus and general experience, like taking the Year of the Pig celebrations to launch a pork and preserved vegetable taco/quesadilla.
In the fine dining sector, international names like Maison Lameloise and Wolfgang’s Steakhouse also found home in Shanghai in 2018. The second Joël Robuchon restaurant, Le Salon de thé de Joël Robuchon, was opened in Réel Mall last May.
Attracting local customers with a fresh feeling and buzz on social media isn’t a long-lasting solution.
For any businesses, the key is to maintain a stable customer base.
Not all big-name chains are successful. A Chinese appetite is greatly different from the Western tastes and the feeling of freshness can’t support a business.
In December 2018, British sandwich shop chain Pret A Manger announced its exit from the Chinese market and closed its two restaurants in Shanghai. After four years, the coffee, salads, soups and sandwiches weren’t enough to keep the brand alive in the city.
While the Shanghai operation came to a sad end, Pret A Manger is very successful in Hong Kong, and the ways they operated the brand in the two cities were different.
First, the two Shanghai branches were located in shopping malls, the K11 Art Mall and Jing An Kerry Centre, and both offered sufficient tables and seats. But in Hong Kong, there are many shops located in the MTR stations, where people can grab a bite to eat on the go conveniently.
The pricing of Pret A Manger in Shanghai was also slightly higher. A typical meal of a food item and a drink could put one person at around 70 yuan, while the customers had more cheaper options nearby.
Compared with the pricing in Hong Kong, Pret A Manger’s menu in Shanghai was the same in number or only higher. For example, the banana & honey granola yoghurt bowl is sold for HK$26 (US$3.31) in Hong Kong, versus the 28 yuan (US$4.19) in Shanghai. Then, consider the per-capital income gap between the two cities.
Hard Rock Café, an entertainment themed restaurant chain founded in London 47 years ago with a massive global presence, only survived in Shanghai for one year after it opened in 2017. Both locations in Shanghai and Hangzhou were shut down on July 28, 2018, leaving employees and suppliers unpaid.