Humble beginnings

Mixue’s story begins in 1997 in Zhengzhou, a city in central China’s Henan province. Founded by Zhang Hongchao, the company started out as a small ice cream shop. Zhang’s vision was simple: to provide affordable, high-quality drinks and desserts to the masses. While other brands chased premium pricing and urban elites, Mixue focused on value for money, targeting students, young workers and smaller cities. This strategy proved to be a game-changer.

By keeping prices low – its signature ice cream cones sell for just 2 yuan (about 22 pence) – Mixue made itself accessible to a vast audience. Its menu, featuring bubble tea, fruit teas and soft-serve ice cream, is both indulgent and affordable. This combination of affordability and consistency has been key to its success.

Scaling at speed

Mixue’s expansion strategy is nothing short of remarkable. The company operates on a franchise model, which has allowed it to grow rapidly without the heavy capital expenditure typically associated with such expansion. Franchisees are drawn to Mixue’s low entry costs and strong brand recognition. The company provides extensive training and support, ensuring that every store maintains the same standards of quality and service.

This model has enabled Mixue to penetrate not only China’s megacities but also its smaller towns and rural areas. While Western brands often focus on affluent urban markets, Mixue has tapped into the vast potential of China’s lower-tier cities, where disposable incomes are rising, and consumer demand is growing.

But Mixue’s ambitions don’t stop at China’s borders. The company has expanded into Southeast Asia, Australia and even Japan, adapting its menu to local tastes while maintaining its core identity. This global outlook is another lesson for British businesses: think big, even if you start small.

The power of branding

Mixue’s branding is another cornerstone of its success. Its cheerful logo, featuring a snowflake and a smiling cartoon character, is instantly recognisable. The company has also embraced digital marketing, leveraging social media platforms such as WeChat and Douyin (China’s version of TikTok) to engage with younger consumers.

One of Mixue’s most successful campaigns involved user-generated content. Customers were encouraged to share photos and videos of their Mixue drinks, creating a buzz online. This grassroots approach to marketing has helped the brand build a loyal following, particularly among Gen Z consumers.

For British businesses, Mixue’s branding offers a valuable lesson: authenticity resonates. In an age where consumers are increasingly sceptical of traditional advertising, brands that can create genuine connections with their audience stand out.

Lessons for British businesses in China

Mixue’s rise holds several lessons for British businesses, particularly those looking to expand or compete in crowded markets.

First, affordability matters. In a cost-of-living crisis, consumers are more price-sensitive than ever. Mixue’s ability to deliver quality at a low price point has been central to its success. British businesses, especially in the food and beverage sector, could benefit from adopting a similar value-driven approach.

Second, don’t overlook smaller markets. While London and other major cities often dominate the UK’s retail landscape, there’s untapped potential in smaller towns and rural areas. Mixue’s success in China’s lower-tier cities shows that growth opportunities exist beyond the big urban centres.

Third, embrace digital innovation. Mixue’s use of social media and user-generated content highlights the importance of digital engagement. British businesses should consider how they can leverage social platforms (including Instagram, TikTok, and YouTube at home) to connect with younger audiences.

Finally, think globally. Mixue’s international expansion demonstrates the potential of taking a local brand to the global stage. For British businesses, particularly those with strong heritage or niche offerings, there may be opportunities to replicate this success abroad.

Challenges ahead

Despite its impressive growth, Mixue faces challenges. The bubble tea market is becoming increasingly crowded, with more upscale competitors like Heytea and Nayuki vying for market share. Maintaining quality and consistency across thousands of stores is no mean feat, and the company must continue to innovate to stay ahead.

There’s also the question of sustainability. As consumers become more environmentally conscious, brands are under pressure to reduce their environmental impact. Mixue has yet to make significant strides in this area, and this could become a sticking point as it expands further.

For British businesses, these challenges serve as a reminder that growth must be sustainable – both financially and environmentally. Brands that can balance rapid expansion with responsible practices will be better positioned for long-term success.

A sweet opportunity

Mixue’s rise is a testament to the power of a clear vision, strong branding, and a focus on affordability. Its story is particularly relevant for British businesses navigating an uncertain economic landscape. By learning from Mixue’s playbook, UK brands can find new ways to connect with consumers, explore untapped markets, and scale their operations effectively.

Mixue made its debut on the Hong Kong Stock Exchange on Monday, 3 March, raising $444 million in an IPO by selling 17 million shares in the deal at a fixed price of HK$202.5 each, with shares jumping as high as HK$298 on the first day of trading. But beyond the financial headlines, there’s a broader lesson here: in a world of constant change, businesses that stay true to their values while adapting to new realities are the ones that thrive. For British entrepreneurs and established brands alike, Mixue’s journey offers a refreshing dose of inspiration – and perhaps a hint of what’s possible with the right mix of ambition and strategy.

So, the next time you see a bright yellow-and-pink logo, take a moment to consider the story behind it. Mixue isn’t just serving up sweet treats; it’s serving up a masterclass in modern business.

The post What is Mixue and how did it become the world’s largest fast-food chain? appeared first on Focus - China Britain Business Council.

Western fast food was introduced into China in the 1980s when KFC opened its first outlet in Beijing. Since then, the sector has experienced substantial growth, with other international brands, such as McDonald’s, Subway, Domino’s Pizza, and Pizza Hut joining the market.

As of April 13, 2023, KFC has maintained 9,650 outlets in China. Meanwhile, McDonald’s has 5,746 outlets, Subway 718 outlets, Domino’s Pizza 613 outlets, Burger King 1,494, and Taco Bell over 50.

In the early 2000s, domestic fast-food chains began to emerge, offering Chinese-style fast food with a modern twist. For instance, brands such as Dicos and Yonghe King offered Chinese-style breakfast options, while Ajisen Ramen introduced Japanese-style ramen noodles to the Chinese market.

China’s fast food market is now among the largest in the world, demonstrating a continuing upward growth trajectory. In 2023, the market size of China’s fast-food industry is estimated to reach RMB 3,687.8 billion (US$536.33 billion).

What kind of fast foods do Chinese consumers like?

In 2021, hamburgers ranked third in popularity among the top 10 categories of online food and beverage orders, just behind milk tea and rice combo meals. Notably, Chinese hamburger brands that cater to lower-tier cities and offer lower per capita prices are also experiencing rapid growth, with brands like Dicos, Pailahamburg and Tasting Burger already boasting thousands of stores.

Furthermore, the boundaries between various culinary genres, such as main meals, fast food, Chinese cuisine and Western cuisine are gradually blurring, leading the catering industry to adopt a new era of integration. For example, Chinese brand Xi Bei has launched a new fast food sub-brand called Jia Guolong Wine-Air Buns, which offers a unique spin on traditional Chinese-style hamburgers using speciality buns from Tonglu, Zhejiang Province. Xi Bei, traditionally known for its main meal offerings, has been making inroads into the fast-food market in recent years. By introducing the easily standardisable roujiamo (a Chinese hamburger-style street snack from Shaanxi Province) as a breakthrough point, they are poised for rapid replication and expansion in the fast-food market.

According to recent data from iiMedia Research, more than half of Chinese consumers dine at Western-style fast food restaurants, while 40.4% of respondents prefer a blend of Chinese and Western-style fast food. Therefore, as Western-style fast food becomes increasingly popular and consumer preferences become more varied, restaurants that offer a fusion of Chinese and Western-style fast food are more likely to appeal to customers in China.

Trends driving changes in China’s fast-food market

Emphasis on healthier options and sustainability

The fast food industry in China is placing more emphasis on providing healthier options to consumers. Many fast food chains are offering more vegetarian and vegan options, as well as reducing sodium and sugar in their menu items. In addition, some chains are incorporating organic and locally sourced ingredients into their menus to appeal to health-conscious consumers.

Furthermore, sustainability is also becoming a key consideration for fast food chains in China. Many are implementing eco-friendly practices, such as reducing packaging waste, using renewable energy sources and promoting recycling. This not only appeals to environmentally conscious consumers but also helps fast food chains to reduce costs and improve their overall brand image.

Advances in technology

The fast food industry in China is rapidly evolving with advancements in technology. Many chains are adopting digital ordering systems, self-service kiosks and mobile payment options to improve efficiency and enhance the overall customer experience. Moreover, some chains are experimenting with automation and artificial intelligence (AI) to streamline operations and reduce costs. For example, some restaurants have implemented robots to prepare and serve food, while others are using AI to analyse customer data and personalise menus based on individual preferences.

These technological advancements enhance efficiency and provide valuable data insights for fast food chains. By collecting and analysing data from digital ordering systems and customer interactions, chains can better understand consumer preferences and make data-driven decisions to improve their overall operations and customer experience.

Growth of delivery and online ordering

The rise of delivery and online ordering platforms has hugely impacted China’s fast-food landscape. Many consumers now prefer to order food online and have it delivered to their door rather than dining in fast-food restaurants. This has led to a surge in delivery and online ordering services, with many fast food chains partnering with these platforms to reach more customers. Moreover, some chains are even developing their own delivery platforms to compete with third-party services.

As the market for delivery and online ordering continues to grow, fast food chains in China are adjusting their strategies to capitalise on this trend. Many are investing in digital marketing campaigns and optimising their menus for online ordering, while others are improving their delivery logistics to ensure timely and accurate delivery of food. These efforts are crucial in maintaining a competitive edge in a market that is rapidly shifting towards online and delivery channels.

Lessons for foreign investors

Location is notorious for playing a key role in guaranteeing the success of Western fast food brands in China, as they have excelled in securing prime locations in China’s top-tier cities, particularly near major sights. For example, KFC’s first restaurant was located on the edge of Tiananmen Square in Beijing. Acquiring real estate in heavily trafficked areas has been a crucial strategy for these companies. When fast food restaurants are located next to tourist sites in China, they can attract both foreign and domestic customers. Expanding into the inland regions of China, especially tier-3 and tier-4 cities with a growing middle class, is also a profitable venture.

On the other hand, experience has shown that adapting to local tastes is vital to the success of foreign brands in China. KFC is the best example of a fast food specialist that understood how to capture Chinese tastes while maintaining its American brand identity. Fast food restaurants in China offer pork chops, curry, and Chinese staples like congee and youtiao (a fried donut). In this respect, KFC demonstrates exceptional cross-cultural adaptation in China.

This post was originally published by Dezan Shira’s China Briefing as ‘The Recipe to Win China’s Fast Food Market’

The post How KFC and McDonald’s conquered the Chinese market appeared first on Focus - China Britain Business Council.