Fast-food chain McDonald's will continue to invest in developing innovative products for the China market this year to stimulate consumption, according to a top official.
The company plans to launch around 15 new products this year, the same as last year, but in the affordable range for Chinese consumers.
Starting the lineup would be McCafe, the company's newly developed coffee made from Arabica coffee beans, which will debut on Wednesday in seven major Chinese cities. It is also McDonald's first new product in the nation this year.
The Chinese fast food industry has been hit severely by the financial crisis, especially during the last quarter of 2008 due to the relatively high prices, especially for customers in the third-tier cities and other regions.
"McDonald's has no plans to reduce its spending on research and development (R&D) initiatives for China," said Kenneth Chan, chief executive officer, McDonald's China.
Since Chinese consumers are now more sensitive to prices due to the economic slowdown, "Super Value will be our main focus this year", he said.
"As the China business grows, the R&D expenditure will also grow," said Leslie Bailey, director, McDonald's Food Studio and Menu Solutions APMEA (Asia-Pacific, Middle-East and Africa).
The Hong Kong-based R&D center is one of the three McDonald's has worldwide. Japan is the company's largest center in the APMEA region, China, the second largest, also has a considerable share of the R&D budget.
McCafe, which was a runaway hit in the US and Europe, is being sold in some Chinese cities like Beijing, Shanghai, Shenzhen and Wuhan. The coffee is priced at 7 yuan, almost one-fifth of that available in Starbucks, and expected to be a new profit driver in China, said an executive on condition of anonymity.
"Not only will it generate profits, but also push up sales of other McDonald's products like snacks, potato chips and hamburgers," he said.
Chan refused to comment on the competition against Starbucks, saying that "McDonald's is providing greater accessibility to mass consumers by supplying a great coffee at a great price. We are confident that sales would be strong".
McDonald's will launch four types of sundaes and some snacks at affordable prices this year, said Audrey Cheung, senior director, Supply Chain Management, McDonald's China.
Since late last year, McDonald's has rolled out a series of promotions to encourage local consumption, and Super Value is one of the largest it has launched. Comprising of four set menus priced at 16.5 yuan, Super Value has got excellent response and will now run through the whole year, although it was initially planned for only one month.
"The promotions and value strategy has helped McDonald's counter the financial crisis," said Richard An, general manager, corporate communications at East Balt China.
(China Daily June 2, 2009)
