To shed light on foreign chains’ expansion activity, JLL has partnered with retail data collection specialist LocalGravity, which catalogues the location of retail stores across every city in China at regular intervals.
JLL and LocalGravity conducted a study on recent store openings by 32 well-known international F&B brands that are expanding their China presence. In this paper, we examine the brands’ expansion strategies in 2015 alongside a number of variables, ranging from their country of origin to the wealth levels of target cities. We then analyse the results to probe what factors can help or hinder global F&B giants in their efforts to conquer the China market.
The results contain lessons for new F&B entrants as well as brands at the early stages of expansion, and will ensure that their own plans can be informed by the experience of brands already established in China.
- Overall expansion rates for the brands studied were high at over 20% y-o-y in 2015. While anecdotal evidence gave signs of slower expansion in 2016, China’s strong consumer sector means F&B remains one of the country’s most active areas of growth.
- While expansion in coastal areas and Tier 1 cities continues, lower tier cities overall were more active with brands becoming more confident about farther afield regions. There is some risk in the less-wealthy provincial capitals, where many brands have over-expanded, having failed to assess the potential of provincial capitals individually.
- Smaller café-format shops selling coffee, tea and ice cream were the most active category, expanding at over 30% y-o-y in 2015.
- Regional bias is strong among most chains, especially in the south, and there is room to catch up in wealthy east China. Many brands have established a presence in eastern cities, but their demographics indicate potential for additional expansion.