MCD earnings: McDonald’s expands in China

Even as numerous international consumer brands shrink their footprints in China, McDonald’s is bucking the trend thanks to consumers like Yue Ma.

Over the May Day holidays, Yue showed up at the U.S. fast food giant’s newly opened McDonaldland store in Beijing’s Chaoyang Park — one of the few stores countrywide that reintroduced the chain’s classic strawberry and vanilla milkshakes on May 1.

The businessman, who was born in the 1980s, told CNBC he came not only for the shake, but also the childhood memories.

“McDonald’s left a great first impression for those eating Western fast food for the first time,” he said. “Nowadays we have so many options in fast food, Western or Chinese, but for me, 70% of the time, I go to McDonald’s.”

 While brands like Starbucks, Nike, and LVMH struggle in the country, McDonald’s is supersizing its presence. The chain plans to have 10,000 stores in mainland China by 2028, from over 7,700 at the end of 2025. Only the U.S. has more McDonald’s stores than China.

The market is a big source of the company’s unit growth. Half of its new stores last year were in mainland China.

The China business is part of what the U.S. company calls its international developmental licensed markets segment, where same-store sales rose 3.4% in the first quarter, McDonald’s reported Thursday. A majority, or 52%, of McDonald’s China business is owned by Chinese investor Trustar, a private equity unit of Citic Capital.

 The McDonald’s brand benefits from nostalgia in China. The country’s first McDonald’s opened in 1990, and the iconic golden arches captured the excitement of China’s opening to the world and rising wealth.

Last summer, when McDonald’s brought back the classic shake for a limited period, it went viral. The company announced this year that the milkshake — in vanilla and strawberry flavors — would be made available again at only 44 stores in 15 cities, including Beijing, starting in May. The shake had been discontinued in China in 2014.

 “I remember having this shake the first time as a kid,” Zhu Ming told CNBC after picking up his vanilla shake at the Chaoyang Park store with his girlfriend. “We drove half an hour here to get it.”

 And now McDonald’s is riding the new spirit of the times — affordability in a down economy.

 Foreign brands, once predominantly viewed as superior quality to local businesses, have in recent years suffered as homegrown brands improved and Chinese consumers turned to local labels due to both nationalism and lower prices.

Yet McDonald’s has maintained its reputation for international standards in food quality and consistency while managing to compete on price.

McDonald’s has its own version of what the Chinese call “the poor man’s meal.”  The one-plus-one combo can get a customer a burger with a drink or a dessert for as little as 14 yuan ($2.06).

The menu is a mix of classic standbys like the Big Mac and frequently refreshed local additions like honey barbecue chicken bones or a dragon fruit McFlurry. Those items appeal to Chinese consumers always looking for the new thing—even when it is a traditional McDonald’s milkshake.

A lot of Chinese people see McDonalds as good quality on a budget, including against local rivals like Tastien.

“The Chinese consumer’s mindset is not just about pricing, it’s more about value,” said Tracy Dai, director of operations at Shanghai-based branding consultancy China Skinny. “McDonald’s is slightly more expensive, but you think about the experience and then about taste and the quality you get from that, there’s definitely more value.”