Bottom line: Alipay’s move into Hong Kong through a tie-up with Marriott marks the start of a major global expansion for the online payment service, with Hong Kong the likely first stop due to its strong China ties.
Alipay in new Marriott tie-up
Homegrown Chinese electronic payments service Alipay is taking its growing rivalry with state-owned behemoth UnionPay to the global stage, with word of a major new move outside its home China market. That move will see Alipay follow a familiar route for many globally-minded Chinese companies, with a first stop in Hong Kong. It has Alipay forming a major new alliance in the former British colony with global hotel giant Marriott (NYSE: MAR), as the first stop on an overseas tour that could ultimately see the financial services affiliate of Alibaba (NYSE: BABA) challenge global names like Visa (NYSE: V) and MasterCard (NYSE: MA).
This latest move is part of a larger new tie-up between Marriott and Alipay, which is part of the Alibaba-affiliated but separately owned Ant Financial. The tie-up is mostly limited to mainland China initially, but significantly includes Hong Kong-based hotels. It also marks one of the biggest moves to date into Hong Kong by Alipay, which is better known as an electronic payments service used for smaller items usually costing $20 or less using shoppers’ online accounts and smartphones. Read Full Post…
Bottom line: Baidu’s tie-up with a major Japanese noodle chain looks like a smart move to build up its fledgling takeout dining business, though it will need to do more to win back investors concerned about its aggressive spending on O2O investments.
Baidu ties with Ajisen Ramen
A week after its stock was hammered by concerns about big spending on its online-to-offline (O2O) services, leading search engine Baidu (Nasdaq: BIDU) has found a major new ally for that part of its business in Japanese noodle chain Ajisen Ramen (HKEx: 538). This particular deal will see the Hong Kong-listed Ajisen and another investor pump $70 million into Baidu’s takeout dining service, providing a major supporter not only due to the investment but also the chain’s strong presence in major Chinese cities.
Baidu’s stock is still recovering from a hammering last week that saw the shares fall by nearly 20 percent to a year-low after it reported anemic 3.3 percent profit growth in its latest reporting quarter due to heavy spending on O2O services. (previous post) Such services include things like buying takeout restaurant food online, and purchasing items from real-world stores through group buying sites. Read Full Post…
Bottom line: Alibaba-affiliated Ant Financial is experiencing breakneck growth through its roll-out of a wide array of new products and services, and could be valued at up to $150 billion by the time it makes its IPO as soon as next year.
Ant Financial in Alipay offline campaign
A new report is spotlighting the rapid rise of Ant Financial, the financial services affiliate of e-commerce giant Alibaba (NYSE: BABA) that looks set to challenge not only domestic rival UnionPay but also upcoming drives into China by global giants Visa (NYSE: V) and MasterCard (NYSE: MA). Much of Ant’s incredibly rapid rise is tied to its core Alipay asset, which began life as an electronic payments service but is rapidly moving into other areas like credit card-style offline payments and savings account services.
The latest reports also contain a new figure on Ant’s valuation following its first major capital raising. That figure of $45 billion is substantially larger than an earlier figure of $30 billion that was contained in initial reports on the funding just a week ago. (previous post) But those earlier reports also pointed out the low valuation was based on shares that were probably sold at a discount to a big domestic institutional investor, perhaps for strategic reasons, and that the real value could be as high as $50 billion. Read Full Post…
Bottom line: KFC’s and McDonald’s latest moves to add high-tech elements to their China stores are a savvy way to update their images, and could help to attract a younger trendy crowd that has abandoned both chains in recent years.
KFC links up with Alipay
Leading global fast food chains McDonald’s (NYSE: MCD) and KFC (NYSE: YUM) are both in the headlines as we head into the heart of summer, each trying new high-tech approaches to reignite their faltering China stories. Announcement of these latest initiatives seems especially appropriate right now, as we’re approaching the first anniversary of a food safety scandal that dealt a major blow to both chains in China.
KFC’s deal will see it pair up with Alibaba (NYSE: BABA) to offer its affiliated Alipay electronic payments service at hundreds of its China stores. The McDonald’s news is similarly high-tech, and will see the chain extend its new state-of-the-art hamburger customization program to the China market. Read Full Post…
Bottom line: Caffebene could become the first big victim of an unsustainable Chinese coffee explosion, while KFC’s new lawsuit against rumor mongers reflects one of the many challenges it will face as it tries to rebuild its China image.
Caffebene China chief quits
A couple of new China fast-food headlines reflect the rapidly changing environment, as traditional players like KFC (NSYE: YUM) try to move upscale to attract consumers who now have many more choices than they did a decade ago. The upscale move has seen a massive explosion in premium coffee shops, which is behind one headline that has South Korean giant Caffebene showing signs of distress following its recent aggressive China expansion.
Meantime, the other more humorous headline has KFC suing 3 companies for spreading false rumors about its products on social media, including one saying it uses chickens that have 8 legs. On a more serious note, this story comes as KFC struggles to regain its skidding China momentum, and shows that Beijing isn’t the only one frustrated over the kind of rumor-mongering that regularly happens on popular services like Weibo (Nasdaq: WB) and Tencent’s (HKEx: 700) WeChat. Read Full Post…
Bottom line: A potential future spin-off of Yum’s China operations looks like a good move that would give the new company more focus, while McDonald’s China franchising drive also looks good if it can find the right partners.
Investors eye spin-off for Yum’s China unit
China was once the hot story for fast food companies like KFC and McDonald’s (NYSE: MCD), as Chinese consumers flocked to the concept of reasonably priced food that was served quickly in attractive restaurants with friendly workers. But that story has become quite stale in recent years, leading this pair of global heavyweights to look for new China stories to pump up their local business and excite investors.
KFC has been trying to achieve that goal through a major overhaul of its China restaurants over the past year, and now is back in the headlines as some investors call for its parent, Yum Brands (NYSE: YUM), to split off its China operations into a separate company. Meantime, McDonald’s is trying to bring some excitement back to its China story by rapidly accelerating the expansion of its traditional franchised store model in the market. Read Full Post…
Bottom line: Yum’s new upscale Italian restaurant looks like a smart concept for the China market, but a broader campaign to move its Chinese KFC stores upmarket looks like too little too late.
A year after announcing plans for a major overhaul of its aging Chinese KFC stores, Yum Brands (NYSE: YUM) is adding another prong to its China reboot with the launch of an upscale Italian eatery as it tries to to regain relevance in its most profitable market. Yum’s newest China restaurant brand, Atto Primo, is situated in the heart of the Shanghai Bund, home to some of the city’s oldest and most famous buildings and most expensive restaurants. Yum is calling the restaurant a “lab” for now, but I suspect it could quickly expand the concept with new outlets if it proves popular. Read Full Post…
A few food-related items, 2 in the news and one in my personal life, made me realize once more just how far China’s eating scene has advanced in the last 2 decades, especially in an increasingly international city like Shanghai. The 2 news items both involved coffee, which I wrote about a few weeks ago as I noted the recent explosion in new chains and coffee houses.
The latest twist has fast-food giant KFC joining the trend, with word that it’s rolling out a premium coffee product in a bid to boost its downscale image. If that wasn’t enough, Gubuli, a well-known local chain whose name is synonymous with baozi, or meat-filled steamed buns, is also entering the upscale coffee business through a new joint venture with Australian chain Gloria Jean’s. Read Full Post…
Bottom line: KFC’s plan to roll-out a low-cost premium coffee product looks like part of its broader plan to move its restaurants upscale, and could help it regain some momentum it has lost in China over the last 3 years.
KFC eyes low-cost premium coffee
It’s been nearly a year since struggling fast food giant KFC (NYSE: YUM) announced a much-needed overhaul for its China restaurants, and now we’re finally getting some details of changes to come with word of an interesting new plan to go upscale that takes aim at McDonald’s (NYSE: MCD). The new plan centers on coffee, with KFC aiming to find a new place at the low end of the premium market.
The move looks smart, since coffee has emerged as a hot and trendy product over the last couple of years in China. It also spotlights the fact that the fast-food market may be close to saturation in China’s largest cities. That means that KFC, McDonald’s and other large operators may be entering a new phase of their development where China looks more like the mature western markets where they are based, and they need to be more innovative to keep growing. Read Full Post…
Bottom line: Foreign-owned meat companies could lose their premium image over Chinese rivals after a Shanghai-based scandal over the summer, as foreign firms remain vulnerable to high scrutiny.
Tyson China expansion on hold
Just yesterday I wrote how foreign food makers generally enjoy a better reputation in China over their domestic rivals, but one glaring exception to that rule is the processed meat industry. The meat processors also used to enjoy a strong reputation, until a major food safety scandal erupted over the summer involving Husi Food, a unit of US meat processor OSI Group. Now the latest headlines are quoting OSI saying 6 of its China workers have been arrested in connection with the scandal. It has also confirmed layoffs of most workers at its Shanghai plant that has been idled since the scandal first broke. Read Full Post…
Two new headlines are casting a spotlight on the very different tastes that China can hold for foreign food firms, including the sweetness they often feel on entering the huge market for the first time. That particular taste is quite strong in the latest announcement from US salt giant Morton, which has just gained major new access to the market through a joint venture.
But the taste can often be far more sour for companies that have been in China for a while, as they experience the many challenges of doing business in the complicated market. That particular taste is in the latest headlines for global fast food leader McDonald’s (NYSE: MCD), which has reportedly hit a speed bump due to a dispute with a local partner as it tries to reignite its growth through a new franchising drive. Read Full Post…
