Company Trend Analysis - McDonalds Ramps Up China Expansion - OCT 2017

BMI View: McDonald ' s is preparing to break into China ' s Tier III and IV cities, as consumers in these areas become wealthier and have greater levels of disposable income to spend within the food service sector. McDonald ' s China expansion will enable the company to continue to grow, as it faces slowing demand in its domestic market of the US, as growing numbers of American consumers embrace the ' healthification ' trend.

McDonalds has announced it will focus its next round of expansion in China on Tier II and IV cities, doubling its number of restaurants in the country from the current 2,500 in 2017 to 4,500 by the end of 2022 (making China the largest market outside of the US for the company). This strategy comes after McDonalds set up a strategic partnership with the state-backed conglomerate CITIC Ltd and private equity firm, the Carlyle Group.

The new strategic partnership announced a series of development initiatives termed "Vision 2022" that aims to achieve double-digit sales growth annually through the opening of 500 stores per year. Vision 2022 includes plans to increase McDonald's portfolio mix in Tier III and IV cities to form approximately 45% of all McDonald's restaurants in China, while boosting delivery capacity and introducing a "digitalised and personalised" dining experience.

Rising Spending On Restaurants
Restaurant & Hotel Spending (CNYbn)
e/f = BMI estimate/forecast. Source: National Bureau of Statistics China, BMI

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