War on Foreign Fast Food

According to a reporter in Wuhan, the "quick-growing chicken" incident presents an opportunity for Chinese restaurant chains to hasten their rise and grab market share from foreign fast food chains.

The reporter visited several McDonalds outlets in Wuhan, China and found that the prices of many items had been increased by 10-to-20 percent. According to industry people, customers stopped buying from the main chicken supplier (implicated in the pharmaceutical scandal). This limited the supply of the "white feather" chicken used by McDonalds, raising the price of chicken about 20 percent. McDonalds says the prices were raised due to higher operating expenses and labor costs.

Some local people say this incident will chisel away market share from McDonalds and KFC. The reporter claimed to see few customers in McDonalds restaurants visited around noon time, because of "chicken phobia." A student interviewed by the reporter said, "Even if they claim to have inspections, there is still a shadow of doubt."

A local fast food operator sees an opportunity in the crisis. He says that there is really not that much difference between the local and foreign restaurant chains despite the foreigners' image of strict standards. He says the local chains have a lower cost structure since they buy from local chicken suppliers and pay lower rent by putting outlets in residential areas, bus stations, and near schools instead of expensive shopping malls. He says his chain plans to open a lot of stores this year to increase market share.

A Wuhan business professor says local fast food has been growing rapidly since 2011 and there is a shift away from the foreign chains. He says that the foreign chains were viewed as mid- or high-end eateries when they first arrived in China and now they have a relatively high cost structure due to their high rents and operation costs. This puts pressure on their profit margins.