Competition gearing up in China's fast food industry

In a nation that has taken pride in the delicacy and diversity of a cuisine which dates back thousands of years, it is astonishing that foreign fast food chains like Kentucky Fried Chicken (KFC) and McDonald's have dominated the fast food industry in China. Over the past two decades, domestic competitors have come and gone, but now a new round of competition is gearing up in China's fast food industry.

November 12, 1987 was a milestone in the fast food industry in China. That was the day KFC, the world's leading fast food chain, having failed in Hong Kong in 1975, made its first foray into the Chinese mainland. It was three years before the global behemoth McDonald's came to China and built its first outlet in Shenzhen.

KFC's entry marked the beginning of the fast food industry in China. Many Beijingers still recall the opening day of the first KFC store. It was in a three-story building of 1,100 square meters in Qianmen, about a five-minute walk from Tian'anmen Square. It is still the largest KFC store worldwide, by floor space.

The line of consumers wanting to purchase the 12-yuan KFC hamburger or 8-yuan fried chicken, or those just wanting a glimpse of the store, extended 50 meters down the road to Tian'anmen Square. On that day, the Qianmen store sold out its 2,200 buckets of fried chicken and made 83,000 yuan.

Chinese fast food chains are still overshadowed by their foreign counterparts, even with lower prices and food tailored to a Chinese palate. KFC and McDonald's continue to occupy the biggest share of the market, with KFC leading the way.

Since 2001, the competition has been heating up again. Chinese fast food chains have been growing and accounted for 80 percent of the restaurant industry in 2007.

Many of the Chinese fast food chains have been updating and standardizing their systems. In September 2005, Lihua Fast Food invested 3 million yuan to establish its own factory in Nanjing, introducing an automatic production line which standardizes the taste of its the cooked rice. The company later built factories in Changzhou and Beijing.

Kungfu Catering, one of the largest Chinese fast food chains which opened its 200th store last year, announced last October it will be standardizing the operation of all its stores with the help of South China University of Technology to ensure that each food order is of the same quality and can be delivered in 80 seconds.

"The Chinese fast food industry is maturing, and standardization is the only way to compete with foreign fast food chains,"says Li Yaguang, deputy secretary-general of China Cuisine Association.

It is still not easy to gain an edge as foreign competitors continue to expand aggressively.