China offers “enormous room for growth” for foreign F&B brands, according to a new whitepaper from JLL China and retail data specialist LocalGravity.
The Foreign F&B Expansion in China report explores the trends behind foreign F&B operators expanding in China and the lessons these hold for upcoming market entrants.
With China’s middle class embracing foreign dining, Asian and Western F&B brands have expanded aggressively and become fixtures in China’s malls and shopping streets, says the report, which takes an in-depth look at the roll-out strategies of 32 international brands.
Key insights from the report:
· Overall expansion rates were high at more than 20 per cent year-on-year in 2015
· Foreign brands remain active in coastal and tier-one cities, and are also expanding with increased confidence in lower-tier cities and remote regions
· There is some risk in the less-wealthy provincial capitals, where many brands have over-expanded
· Cafe-format shops selling coffee, tea and ice cream were the most active category, expanding 30 per cent year-on-year in 2015.
- Regional bias is strong among most chains, especially in the south, and there is room to catch up in wealthy east China cities.
The JLL China report has also explored closure rates by format. Analysis has revealed higher closure rates in the fast-food segment relative to other formats.
Expansion potential has been explored to understand how store presence varies across city tiers. Of the 32 brands studied, many were found to have a strong presence in China’s top cities. However, “white spaces” across cities down to the third tier show there is an ample room for growth.
Furthermore, many of the foreign F&B brands appear to be concentrated in south China, with other parts of the country offering untapped potential.
“Many foreign F&B brands view the China market with understandable enthusiasm—after all, capturing even a small slice of the market translates into huge, absolute sales volumes,” says JLL head of retail research for Asia Steven McCord. “Yet the road to successfully taking advantage of the China opportunity is difficult, as some restaurant chains have discovered too late.”
“The China F&B market is now one of the world’s largest and fastest moving, but it is still quite fragmented with enormous room for growth,” says JLL China head of retail James Hawkey.