BEIJING– McDonald’s Corp. is looking to beef up its image in China to lure diners amid an economic slowdown that could send them looking for cheaper alternatives.
The Oak Brook, Ill., company is overhauling a number of its China-based stores in places like Beijing, Shanghai and Guangzhou using a local designer, according to a company statement. It is also launching a new advertising campaign that focuses on Chinese aspirations and recruiting more locals to run its franchises in China. McDonald’s will also feature basketball star LeBron James in China-focused commercials later this year, the statement said.
The fast-food chain is also airing a three-minute ad that will appear later Friday, just after the widely watched evening news on China’s state broadcaster China Central Television. Both the length and time slot mark a rare purchase for McDonald’s. WPP PLC’s media-buying agency Group M estimates that time slot costs about $131,000.
The move comes as China’s economic growth slows. The country reported Wednesday that first-quarter growth fell to 7.4% from a year ago, its lowest level in 18 months and down from 7.7% in the fourth quarter. There is little sign that the economy will manage much faster growth in the near term.
China’s would-be burger eaters head to cheaper local restaurants, like noodle joints, as the speed of growth slows, executives told investors last year in conference calls. A McDonald’s Egg McMuffin with soy milk costs around 14 yuan, or $2.25, roughly double the price of buying steamed buns and soy milk at a street-side shop.
Last year, McDonald’s faced tough times in China, with comparable sales down 3.6% compared with 2012.
Industry experts say localizing is a good move for McDonald’s, which struggled initially in China because it didn’t localize its menu while other rivals did.
“This should help the company attract consumers that might otherwise be going to other restaurants,” said Ben Cavender, a principal at Shanghai-based consultancy China Market Research.
McDonald’s faces challenges in other markets. In Japan it named a new chief executive last August in an attempt to reverse falling sales and profits. It has shuffled its menu items, introducing free extra condiments, new breakfast plates and cheaper hamburger options. In its home market, the burger chain acknowledged in November that U.S. customers were rebelling against long wait times and menus that changed too often.
Chief Executive Don Thompson told investors in January that the company has emphasized value offerings in China and that “given the opportunities inherent in a growing, more prosperous middle-class, we also continue to grow through expansion in China. We opened 275 restaurants last year.”
McDonald’s has said it plans to open another 300 restaurants in China this year, adding to its nearly 2,000 in the country.
With new store designs incorporating wood and brick patterns pulled from China’s dynastic era, and a menu that added green tea ice cream this year and rice dishes last year, McDonald’s is signaling an attempt to look more Chinese. New commercials zero in on reaching customers who aspire to own a car and buy a house.
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