Foreign brands also end up grabbing "poor guys"

New Retail Business Review

·June 11, 2024 11:27

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It's so easy to win back the hearts of consumers.

Which restaurant has not yet been caught up in the popular "poor guy combo"?

No one expected that this term, which became popular during the COVID-19 pandemic in 2022- originally just a joke for young people to discover low-priced meals around them and make fun of themselves - has now become a true operational benchmark and wealth code for major food companies, especially well-known chain food companies.

To what extent was it once outrageous?

Sam, the purchasing base for the living needs of middle-class families in China, has a "poor three piece set" of 21.9 yuan 1.59kg eggs, 23.9 yuan 7 sets of bagels, and 59.8 yuan 16 Swiss rolls. The high-end Chinese food chain brand Xinrongji, with an average cost of over a thousand yuan per person, has launched a weekday lunch single person package priced at 398 yuan, attracting a large number of young people to arrange a "poor guide" on how to eat well. Wagas, a bowl of salad that can easily cost 70 or 80 yuan, has been purchased by Tiktok and other groups at half the price, and has become a "must for poor people" for delicate white-collar workers.

It is not important to explore the real and fake poor here. The trend is indeed that from high-end to mid-range, and even affordable restaurants are using price reductions to attract traffic.

In May, two major fast food giants, KFC and McDonald's, respectively labeled themselves as "poor guys". First, KFC launched a 9.9 yuan special burger, including original chicken burgers, spicy chicken leg burgers, New Orleans grilled chicken leg burgers, and Old Beijing chicken rolls. Then, McDonald's immediately followed suit and launched a daily "ten yuan burger" two-piece set of burgers and drinks for several consecutive weeks, which is even more cost-effective.

In foreign fast food, of course, it's not just KFC and McDonald's that end up opening up. Starting from mid May, Dexter has also launched a half month long "9 yuan per day" activity, where burgers and drinks can be randomly paired. Earlier this summer, Burger King had already launched the "Wednesday King's Day" event, offering a free pairing of burgers and snacks/drinks for 9.9 yuan.

What's even more surprising is that on Weibo's hot search, with the entry "The wind of 9.9 yuan has finally swept up to Starbucks", in the face of the price war sparked by Luckin and Coodie, can't even Starbucks, which has always been held, withstand it?

Why have foreign chain catering giants who have been in China for many years also begun to bend down and compete for "poor people"?

Foreign brands are the "king of understanding"

To be honest, the description of these brands' "beginning to end" is not accurate. After all, from KFC's Crazy Thursday to McDonald's Happy Meal, they can all be considered as pioneers of the "poor guy package" that has made a name for themselves. They started to end, pointing more towards their entry into this low price war in the catering industry with a more localized attitude. Specifically, they solved the demand for a regular meal for working people at an extremely low price.

Start with KFC's Crazy Thursday. KFC first launched an event in 2018 and hired celebrity endorsements. The products were mostly chicken nuggets, French fries, and burgers priced at 9.9 yuan, but they did not receive much response.

Then, in 2021, by chance, "V I 50" crazy Thursday game literature began to emerge on the Internet. KFC timely seized the hot spots and put it into operation, such as holding the "Crazy Four Literature Contest" in the live broadcast room. Until today, under the dual role of luck and effort, it has become an enduring symbol of the "poor package" industry.

Of course, the element of luck accounts for a larger proportion. It is also the Pizzahut of Yum! China, and there is also the "Scream Wednesday" activity, which has a much weaker popularity and spread.

McDonald's "Suixinpai" was launched in 2019, initially priced at 12 yuan. It was paired with beverages/new venues such as McPherson Chicken Burger, Double layered Cheese Burger, and McPherson Chicken Burger. Once launched, it captured the minds of people in the "McPherson" market.

Now, from the 9.9 yuan special coupon to the two optional items priced at ten yuan, both have broken the price bottom line of the traditional "poor package" for the two mentioned above. This is also a concrete manifestation of their entry into the current popular price war.

However, when we are attracted by discounted packages, it is easy to overlook that in fact, the prices of wheat and corn have been increasing over the years. A typical example is McDonald's casual pairing, which was launched in 2019 at a price of 12 yuan. In 2021, it was raised to 12.9 yuan, and at the beginning of last year, it was adjusted again to 13.9 yuan.

Incomplete statistics show that in the past three years, McDonald's and Ken's have each increased their prices no less than three times. KFC has seen three consecutive increases in 2021, with hamburgers, combos, and other items raising prices by 0.5-2 yuan. McDonald's combos have even increased prices by five or six yuan. McDonald's latest price increase was at the end of last year, with nearly 90% of its hamburger snack products expected to increase by 0.5 yuan, and the Maixiang chicken combo by 2 yuan. Overall, the average increase is about 3%.

New Retail Business Review Photography

The increase in raw material and labor operating costs is the direct cause, and considering inflation and the difficult environment of the past three years, these price increases seem reasonable.

But the question is, for Ken and Mai, who have been in China for over 30 years, how long can they maintain their competitiveness with the continuous price increase of hamburgers and French fries in the competition of developed local noodle fast food categories?

On the other hand, the rise of similar local fast food brands such as Tasting and Wallace is further exacerbating the anxiety of McDonald's and Ken's. Undoubtedly, in terms of brand recognition and scale, Tastin and Wallace are not yet able to compete head-on with Mai and Ken, but the two that have emerged from the lower tier market are also territories that Mai and Ken need to continuously cultivate. McDonald's China CEO Zhang Jiayin once bluntly stated that outside of first and second tier cities, the lower tier market will be McDonald's key deployment area.

Under the influence of various external factors, KFC's 9.9 yuan special discount coupon and McDonald's 10 yuan two piece optional coupon are not fundamentally different from their successful "Crazy Thursday" and "Match Your Heart" promotions. Apart from their affordable regular prices, occasional "small favors" given to consumers are important means of maintaining brand loyalty.

This move can also be seen in IKEA.

Recently, "I can do it again" is the real reaction of consumers to IKEA on social media. In the past two years, IKEA, which is accustomed to announcing price increases due to increased raw material and transportation costs, has suffered frequent setbacks in its reputation. Recently, IKEA, which has entered a discount period from May 23rd to June 26th, has launched a major discount of at least 50% off on hundreds of classic products. On social media platforms such as Xiaohongshu, there are many people who are eager to make purchases.

However, more importantly, IKEA has also started to promote the trend of "poor guy packages". During the period from May 10 to May 31, IKEA launched the "Half Price Friday" activity, including the Italian cheese and meat paste noodles, sausage platters and other packages, which were sold at half price. The most affordable Swedish Rice-meat dumplings rice was only 9.9 yuan.

It's really that easy to win back the hearts of consumers.

How long can I play the Poor Ghost Package?

It should be noted that the Poor Ghost Package is not only popular in China. Recently, McDonald's announced the launch of a $5 package in the United States, which includes a McDonald's cheeseburger/chicken sandwich, small fries, beverages, and a four piece set of McNuggets. The event will last for a month, which is also a choice McDonald's has been forced to make in response to declining store traffic and consumers becoming increasingly unwilling to pay high costs for dining out.

Such extreme low prices clearly indicate that various enterprises have sacrificed their profits. For example, in the first quarter of this year, the operating profit margins of KFC and Pizzahut under Yum! China both declined, with KFC dropping 1.9% and Pizzahut dropping 1% year on year, because of the increase of cost-effective products to promote the growth of customer flow.

Therefore, giants such as Ken and Mai often only dare to launch such activities within a limited time frame. In other words, 9 yuan and 9 yuan are really unsustainable. In this process, the fierce competition in the catering industry has made this trend even more tragic.

Last year, after McDonald's announced a one yuan increase in the price of its free pairing, Burger King continued to play memes on Weibo, and its "9.9 yuan free pairing on Wednesday King's Day" campaign launched last year continued. Burger King has been promoting itself in a suicidal way. In addition to its 9.9 yuan discount, it has also launched a cooperation activity between two burgers priced at 9.9 yuan on platforms such as Meituan, which once led many "Maimen" followers to defect to "Hanmen". In the United States, shortly after McDonald's recently launched a $5 package, Burger King also announced the launch of a $5 promotion. In addition, in May, Dexter also followed suit and launched a half month long "9 yuan daily" hamburger snack combo.

Tuyuan Burger King and Dex official Weibo accounts

The volume is endless.

The catering industry is too difficult. There are many practitioners, and the entry threshold is not high. Enterprises with similar positioning are very likely to enter the same river, not to mention these vastly different foreign fast food.

Nan Cheng Xiang, a community chain catering company that has become an internet celebrity, launched a low-priced small hot pot last year with a pure vegetarian pot that costs 22.9 yuan to eat. It is the leader of the "poor set meal" in local restaurants and has quickly gained followers.

The New Retail Business Review noticed that chain brands that are also positioned as community catering are well suited, and have also launched the same self-service hot pot at stores such as Zhichun Road in Beijing, priced at 22.8 yuan, with a slightly more variety of vegetables than Nancheng Xiang. In addition, the meat priced at 19.9 yuan per serving compared to Nanchengxiang has been set at 16.8 yuan for its palatability.

Nowadays, with the reduction of package prices and the return to the weekday afternoon market price of 40 to 50 yuan, the gap with Nancheng Xiangmen has been lowered, and the latter, who has been lying in the comfort zone of cost-effectiveness, has also been under comparative pressure.

When we look back and review, the 9.9 yuan trend first started in the coffee industry, led by Coodie and fought by Luckin, and was forced to continue until this year, when it brought in all the Starbucks it had been holding.

From a unit price of 30-40 yuan per cup to 9.9 yuan per cup, it is still a bit difficult for Starbucks to lower its profile at once. Therefore, various wool discounts from platforms such as Ele.me need to be added to achieve such a low price. However, nowadays, ordinary users in Starbucks mini programs are indeed continuously fed a large number of optional coupons for 39.9 yuan per cup and 49.9 yuan per cup.

Image Source Starbucks Mini Program

Previously, Starbucks cancelled the promotion of a 15 yuan value breakfast. Starbucks is very conflicted.

The result of rolling back and forth is that even important player Luckin cannot withstand it. Since the beginning of this year, many consumers have noticed that Luckin Coffee's 9.9 yuan discount has been continuously shrinking. On the one hand, it was a coupon that was originally available for almost all products, with only designated products remaining available, and the rest returning to the 20 yuan price range. On the other hand, there are also restrictions on store usage.

Luckin's performance speaks for itself. After achieving its first profit in the first quarter of 2022, just two years later in the first quarter of this year, Luckin once again entered a loss mode, with a net profit loss of 10 million yuan, compared to a net profit of 680 million yuan in the same period last year.

Except for Luckin, Tim, Manner, and others who once participated in the 9.9 price war, have quietly taken down the 9.9 promotion. However, only franchisees know how difficult it is for Coody, who is threatening to continue, to continue.

epilogue

I can't help but think of various subsidy wars in the past few years, including food delivery and taxi services. After burning completely, it was a void. The characteristic of the catering industry, which is characterized by a continuous succession and the Yangtze River pushing the waves ahead, may reduce the probability of this situation occurring, but it is ultimately not benign.

The wind of the poor package continues to blow, and consumers are indeed delighted to see it. However, can meal companies ensure that there is no unwavering price increase and harvest in the future?

This article is from the WeChat official account "New Retail Business Review" (ID: xinlingshou1001). The author is Beihai, and the editor is Ge Weiwei. 36 Krypton is authorized to release.

The viewpoint of this article only represents the author himself, and the 36Kr platform only provides information storage space services.

洋品牌们，也下场抢“穷鬼”