If the hundred-yuan burgers are not selling well, do the 9.9-yuan burgers have a new opportunity?

As Shake Shack closes stores in China, the survival dilemma of high-priced hamburger brands has attracted attention. This article explores the reasons for the poor sales of 100-yuan hamburgers and analyzes whether this has brought new opportunities for mass brands such as McDonald's and KFC.

Why are hamburgers that cost 80 yuan not selling well anymore?

Recently, as the "Tesla of the hamburger world" Shake Shack has closed stores one after another in the domestic market, the topic of high-priced hamburgers not selling well has become a hot search on Weibo, sparking heated discussions.

Since opening its first store in Shanghai five years ago, Shake Shack has quickly become popular, with long queues of people waiting at its stores. The brand has even announced that it plans to open 79 stores in China by 2031.

Reality has dealt Shake Shack a heavy blow, especially since 2024, when Shake Shack's offline stores have been closed many times, and its store in Guangzhou Taikoo Hui was recently closed.

There are many reasons why Shake Shack has difficulty in attracting young people, including high prices, average taste, and consumption downgrade. However, we need to think about whether the failure to sell high-priced burgers will bring opportunities to new and old giants such as McDonald's and Tustin?

Judging from the actual performance of major brands today, this is not entirely true.

1. The 100-yuan burger is no longer worth the money

When it comes to Western fast food brands represented by hamburgers, most people's first reaction is McDonald's, KFC, etc. However, in the past few years, there has been a craze for exquisite burgers in the hamburger industry, the most representative of which is Shake Shack, which is called the "Tesla of the hamburger industry" by consumers.

Public information shows that Shake Shack, a hamburger brand from the United States, is known locally as the "New York God-level hamburger". It opened its first store in mainland China in Shanghai in early 2019.

Two slices of bread, a piece of beef, plus tomatoes and lettuce, a seemingly simple burger costs at least 40 yuan to buy in a Shake Shack store, and the most expensive burger can be sold for 85 yuan. In addition, it also includes a 40 yuan milkshake and a 34 yuan serving of French fries. Shake Shack's average customer spending exceeds 100 yuan, which is more than three times the average per capita consumption of ordinary fast food restaurants.

Despite this, when the Shanghai store first opened, there were long queues of customers coming, with a record of queuing for 7 hours and daily revenue exceeding 300,000.

Image source: Xiaohongshu

Consumers’ love for Shake Shack can be seen everywhere on Xiaohongshu, and many celebrity bloggers have posted their check-in notes. Shake Shack has become an Internet celebrity brand in the domestic hamburger industry.

The popularity of the stores grows day by day wherever they go, including in Beijing, Shenzhen, Wuhan and other places, where the queues at the first stores often start at an hour.

According to data from Narrow Door Catering, Shake Shack will open 15 and 12 stores in 2022 and 2023 respectively. As of early September this year, the total number of Shake Shack stores in China has reached 45.

There are many competitors in the Western fast food industry, so why can Shake Shack sell at such a high price?

From the very beginning, Shake Shack's positioning was different from traditional giants such as KFC and McDonald's, focusing on high-end fast food.

100% pure beef patties, handmade rather than pre-fabricated, stores located in core business districts with an emphasis on dining experience, and unremitting efforts in brand promotion. Although it is about eating hamburgers, Shake Shack has also created a high-end and fashionable experience.

Image source: Shake Shack official Weibo

However, after entering 2024, Shake Shack's internet celebrity halo gradually faded, and its exquisite burgers became less popular.

According to the initial store opening plan, Shake Shack expected to open 79 stores in the mainland by 2031, an average of 6 new stores per year. The actual situation is that only 3 new stores have been opened since 2024, and 3 stores including Wuhan Tiandi, Hong Kong Elements and Guangzhou Taikoo Hui have been closed, with a net increase of 0.

In terms of performance, according to the second quarter 2024 financial report disclosed by Shake Shack, revenue was US$316 million, a year-on-year increase of 1.44%; net profit was US$10.382 million, a year-on-year increase of 43.74%.

Judging from the data alone, it is still on an upward trend, but Shake Shack's performance growth comes more from the US market and the opening of franchise stores, and its domestic market performance has declined significantly.

In fact, Shake Shack is not the only boutique burger brand that is having a hard time.

As one of the representative brands of fine hamburgers, Habitat Burger, known as the "Hermes of the hamburger world", had 7 stores in Shanghai at its peak, but now all of them have been closed;

Carl's Jr., a veteran giant, announced that it would close all its stores in Shanghai due to external factors, and said it would not open new stores in China. Other brands that once became popular, such as Five Guys and Charlie's, are no longer popular now.

2. McDonald's, is this your chance?

To some extent, Shake Shack's popularity in China is actually in line with the general trend of consumption upgrading. Consumers are willing to pay a premium for high quality and brand.

As rational consumption and cost-effectiveness begin to become mainstream, the living space for high-priced hamburgers is becoming increasingly narrow. But will this bring new opportunities to popular brands such as McDonald's and KFC?

First, let’s compare their actual market performance.

The financial report shows that McDonald's revenue in the first half of 2024 was US$12.659 billion, a year-on-year increase of 2%, and net profit was US$3.951 billion, a year-on-year decrease of 3%. In particular, the revenue and net profit in the second quarter of this year were both lower than expected, and same-store sales fell year-on-year for the first time since the fourth quarter of 2020.

Image source: McDonald's China official Weibo

McDonald's is like this, and KFC is not much better. According to the financial report, KFC's parent company Yum China's revenue in the first half of 2024 was US$5.64 billion, a year-on-year increase of 1.24%; net profit was US$499 million, a year-on-year increase of 2.67%. Among them, KFC brand revenue was US$4.244 billion, accounting for 75.2% of the total revenue.

Judging from the data alone, the overall performance of both McDonald's and KFC in the first half of the year has basically remained stagnant. The declining popularity of high-priced hamburgers has not brought significant performance growth to the traditional giants. In the opinion of industry insiders, the main reason may be that the target audiences of both parties are not completely the same.

In order to reverse the situation, Shake Shack officially opened its new store in Shanghai Huiju on September 24, and also cooperated with the ATP Shanghai Rolex Masters to launch co-branded products. In contrast, McDonald's is naturally not idle either.

Since 2024, McDonald's China has publicly stated many times that it will achieve the goal of 10,000 stores by 2028. As of the first half of this year, McDonald's has more than 5,400 restaurants in China, doubling the number in 2017. The overall goal for 2024 is to open 1,000 new stores.

KFC has already exceeded the 10,000-store mark in the domestic market a long time ago. As of the first half of the year, the number of stores has reached 10,931, and the company will continue to actively expand its stores in the future.

Image source: KFC China official Weibo

It is undeniable that for chain restaurant brands, offline store expansion is a direct means to seize the market. However, in the current fierce competition, opening stores alone is far from enough.

McDonald's CEO Chris Kempczinski has previously expressed his views on competition in the Chinese market, "Chinese consumer confidence is relatively low at present. Consumers are actively seeking discounts in the entire consumer goods sector, including fast food. We have noticed a clear shift in consumer behavior."

From the consumer's perspective, the most direct feeling is that McDonald's and other companies are offering more and more promotions.

McDonald's launched the "10 Yuan Burger" promotion in January, May and July this year. Each promotion lasted for two weeks and covered different meal combinations.

In addition, the "1+1 combo" that countless workers call the poor man's meal has never been interrupted. In addition to the weekly "Crazy Thursday", KFC launched a 9.9 yuan hamburger and a 29.9 yuan weekend meal this year, which reduced the average customer unit price by 7%.

The increase in promotional activities can naturally attract consumers who have switched to other brands due to various factors such as consumption downgrade, allowing McDonald's to maintain its competitiveness in the current situation where Western fast food chains are everywhere. However, it is not only McDonald's that has promotions. The challenge also lies in the pursuit and blockade of local brands represented by Tustin and Wallace.

3. The high-end road is difficult to take, so 9.9 yuan is the best solution?

According to iMedia Consulting data, the scale of my country's Western fast food market will be 368.78 billion yuan in 2023, a year-on-year increase of 36.3%. Among them, the scale of hamburger category has exceeded 100 billion yuan. It is estimated that the overall market scale of Western food will reach 427.78 billion yuan in 2024.

Image source: iiMedia Research

The market prospects are good, so why are high-end hamburgers the first to fall behind?

The first and most important reason is the high price. In fact, the target audience of fast food such as hamburgers is mostly young people. However, research results show that more than 80% of consumers are willing to pay between 15 and 50 yuan for Western fast food, and less than 5% can accept a price of more than 70 yuan.

Secondly, the repurchase rate of online celebrity brands represented by Shake Shack is low, and most consumers are more for experience and checking in. If you search for Shake Shack as a keyword on Xiaohongshu, many consumers complain that it is too oily and has a mediocre taste.

Coupled with occasional food safety issues and changes in overall consumption trends, it will become increasingly difficult for Western fast food, represented by hamburgers, to move towards high-end status.

It is difficult for hamburgers to become high-end. As the price war in the industry intensifies, even McDonald's has been hit. In fact, since the new tea brands started the 9.9 yuan war, the entire consumer market seems to have entered the 9.9 yuan era, and the hamburger industry is no exception.

As early as 2022, Burger King, a fast food chain giant also from the United States, launched a promotion called "Wednesday 9.9 King's Day", where consumers can choose a burger + snack or drink for 9.9 yuan every Wednesday.

In August this year, Burger King continued to increase its efforts, reducing the price of many signature products to 9.9 yuan for four consecutive weeks; on May 15, Dicos officially announced the "9.9 yuan for any two items every day" event; Wallace even launched a limited-time discount of 4.8 yuan burgers before, covering more than 20,000 stores across the country...

Among them, we have to mention the local Chinese hamburger brand Tustin. Public information shows that Tustin, founded in 2012, initially focused on pizza. Due to poor market feedback, it did not start selling hamburgers until 2017. In 2019, it declared itself the "creator of the Chinese hamburger."

With an average price of more than 10 yuan per person and a taste comparable to that of KFC and McDonald's, Tustin has expanded rapidly across the country with its extreme cost-effectiveness and franchise model. In 2022 and 2023, 2,316 and 3,772 new stores were opened respectively. In 2023, the average monthly store opening exceeded 300. As of the end of August this year, the number of Tustin stores has reached nearly 8,000.

Image source: Xiaohongshu

Endless promotional activities and the crazy expansion of brands focusing on cost-effectiveness, but this does not mean that 9.9 yuan can be the optimal solution for hamburger brands. Just as the new tea and coffee tracks that are in full swing now have begun to backfire on brands.

After all, long-term low-price activities can easily form a price anchor in the minds of consumers. Nowadays, drinking coffee should not exceed 9.9 yuan, which has become the benchmark for most consumers. The same is true for the hamburger market.

Some time ago, the topic of second-hand equipment recycling became a hot topic on Weibo. A recycler said, "More and more Chinese hamburger restaurants have closed down this year. Whether they are franchise brands or copycat stores, they all want to take advantage of the popularity and engage in price wars."

If the price is too high, no one will be interested; if it is too low, it will fall into vicious competition. In the future, perhaps only brands that truly understand consumers will be the first to find a balance in this field.

Written by | HH Edited by | Yang Yong Source | Hydrogen Consumption Product ID | HQingXiaoFei
This article is written by the author [Hydrogen Consumption] of Operation Party, WeChat public account: [Hydrogen Consumption]. It is originally created/authorized to be published on Operation Party. Reproduction without permission is prohibited.

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