Opening Case: Colonel Sanders Is No Chicken!

Kentucky Fried Chicken (KFC) was the first American fast-food restaurant to enter China, opening its first outline there in 1987 in Beijing.^[1] KFC’s US archrival, McDonald’s, didn’t open a restaurant in China until 1990.^[2] Despite initial marketing mistakes—like its “finger lickin’ good” slogan being mistranslated into Chinese characters that meant “eat your fingers off”—the company grew and thrived.^[3] Today, KFC has 2,872 restaurants in China, which generate over $2 billion in sales for its parent company, Yum! Brands.^[4]

The main factor contributing to KFC’s success in China is its localization strategy. Let’s see how KFC did it.

When KFC first entered the Chinese market, Chinese law stipulated that foreign companies could only operate in China if they had a local partner. KFC selected partners who had connections to government, so that it could benefit from their resources and contacts.^[5] KFC learned a lot from its local partners, and once joint ventures were no longer required, KFC chose a leadership team that knew Chinese culture intimately. Rather than sending expatriates to China to lead the expansion, for example, KFC selected people who had “an understanding of China and the Chinese cultural context ‘so deep that it is intuitive,’ to understand the Chinese people’s ‘mixed feelings, of love and hate about the West, to understand Chinese history, language, the influence of Confucianism, Buddhism and Taoism, this is especially important if you are in the consumer goods industry,’” said Warren Liu, former vice president of development at KFC China and author of the book KFC in China: Secret Recipe for Success.^[6] This leadership team recommended that KFC follow a strategy of localization: offering local Chinese food options on the menu to appeal to local tastes. For example, instead of serving coleslaw, KFC offers bamboo shoots and lotus roots. Likewise, it sells a sandwich in the style that Peking duck is served, simply substituting fried chicken for the duck.^[7] The extent of KFC’s product localization is extensive, from preserved Sichuan pickle and shredded pork soup to a Chinese-style porridge called congee for breakfast.^[8]

KFC’s promotional marketing is similarly steep in Chinese culture. As Yu Cui and Zhang Ting explain, “China is a society with relatively high collectivism, where people have a high sense of identity to the traditional culture and traditional food. Since the family members in China often share the similar value and most Chinese people consider that it is necessary to keep on the wonderful family traditions, such as respecting, loving and supporting the elderly, helping others, friendship between individuals and so on. Thus, many advertisements of KFC in recent years try to reveal the background of common Chinese families.”^[9]

KFC emphasizes speed and convenience rather than chicken. “Choosing to eat at fast food restaurants like KFC doesn’t necessarily indicate a desire for Western flavors,” said Sun Min, a local government official who eats at KFC because speed and convenience are his top priorities when choosing a place to eat.^[10]

Selecting the right place or location for its outlets is also important for convenience, and KFC is opening stores at a pace of nearly one a day in China, to be close to wherever its customers are.^[11] KFC also developed its distribution system quickly, right from the start, and its parent, Yum! Brands, owns those distribution centers. Owning its own distribution centers lets Yum! Brands grow it restaurants efficiently as it expands into 402 cities in China.^[12]

For the future, David Novak, CEO of Yum! Brands (which owns Pizza Hut and Taco Bell in addition to KFC), said he envisions eventually having more than twenty thousand restaurants in China. “We’re in the first inning of a nine-inning ball game in China,” Novak told investors in a conference call in February 2010.^[13]