Page 202 - 2015_WhitePaper_web
P. 202
5 White Paper on the Business Environment in China
attempting to remove stars from their 5-star ratings in a bid Journal in December 2012.27
to “win back business from politicians.”20 Competitors McDonald’s is reportedly aiming to reach
“Among the about 700 ve-star hotels in China,” writes e 2,000 outlets across the nation by 2013, having increased
Wall Street Journal, “average occupancy sagged ve percentage investment in 2010 by 25 percent and planning a further 40
points in the year to mid-2013, to 50 percent, according to percent increase in investment over 2011.28 In August of that
government gures cited in China Tourism News. e gures year, the company announced its rst developmental licensee,
show room revenue o 11 percent in the period, while dining Kunming North Star Group, what will help the brand expand
receipts plunged nearly 19 percent.”20 on the Mainland.29
Somewhat sti ingly, the ChinaTourist Hotel Association— McDonald’s, like Yum!, also reported lower China same-
the government agency that hands out the stars—says that, store sales in 2012 but only for October.27
“ ere’s no such thing as ‘downgrading stars.’” If ve-star
properties choose to change their ratings, says the association, More recently, Reuters reported that the growth of
they will be considered unrated instead.20 McDonald’s, Yum! and others had been hit as “Chinese
consumers are increasingly opting for healthier alternatives in
Beijing’s new-found austerity has not threatened more food and drink.”30
tourism-oriented projects, however. After a brief delay, the $5
billion Chimelong Hengqin Bay resort and theme park21 was Yum’s sales also fell after CCTV ran a report accusing
scheduled to open on January 14, 2014. Located near Macau, some of the rm’s poultry suppliers of misusing antibiotics
the project features a roller coaster, a whale shark tank and a as well as the April 2013 outbreak of bird u. Signi cantly,
lavish 1,888-room hotel.22
e Shanghai Food and Drug Administration investigated
“While some extravagant infrastructure projects in China the chicken contamination incident. It did not bring a case
have turned into white elephants,” explains Reuters, “the odds against Yum China and did not assess a ne—see below
are on Hengqin’s side largely due to the support of the Beijing for on CCTV’s apparent editorial campaign against foreign
government and the island’s proximity to the millions of enterprises in China.31
tourists who throng to Macau every year.”21
Sugared beverage manufacturer PepsiCo is also investing
Cruise tourism, introduced to China fewer than 10 years heavily in the PRC, but in infrastructure and R&D. A total of
ago, has seen rapid growth. In that time, “ ve terminals have $2.5 billion amount is reported to be going toward building
been built at an estimated cost of more than 4.5 billion yuan additional production capacity in four provinces by 2012, in
($735 million),” with “three [more] under construction and addition to a research and development center tasked with
another six [in] the pipeline.”23 developing new products for the Asian market, agricultural
production and spending on branding.32
Despite expanding capacity and nearly 10 percent growth
in port calls by international cruise lines, China Cruise & In late November 2011, China Daily reported the
Yacht Industry Association vice president Zheng Wei-hang company’s plans to open 10 to 12 new manufacturing plants
told Reuters that rapid construction had eliminated pro ts across a greater number of Mainland provinces over the
and that “all ve established cruise terminals have su ered coming three to ve years.33
losses mainly as a result of excessive investment by municipal
authorities in building landmark structures that have yielded Meanwhile, e Coca-Cola Company opened three
insu cient returns.”23 bottling plants in 2010 (in Inner Mongolia, Henan and
Guangdong), which brought the total number to 42 in the
e other end of the hospitality spectrum, catering, has PRC alone,34 and in September 2011 announced a planned
(and will likely continue to) see strong growth as well. Yum!, investment of $4 billion before 2014, most of which
the management group primarily known on the Mainland for will be spent on improving its bottling and distribution
its Pizza Hut and KFC franchises, in 2009 stated its intent infrastructure.35
to open 500 new restaurants that year—one-third of its total
worldwide openings.24 Similarly positive, Yum!’s second quarter Following up on its 2011-2014 investment plan, in late
2010 earnings were up 33 percent in China, compared to 10 2013 Coca-Cola announced its intent to an additional $4
percent in the United States.25 More recently, the company billion to build more manufacturing plants in China between
opened 92 additional restaurants in the rst quarter of 2011 2015 and 2017.30
and saw its adjusted operating pro ts grow 18 percent.26
A Coca-Cola spokeswoman noted that the company “is
Despite “same-store sales in China [dropping] 4% in the also open to deals with local rms.”30
fourth quarter [of 2012], compared with a jump of 21 percent
the same period a year earlier,” Yum!’s intent to open 700 “ e beverage market is quite competitive right now and
stores over the course of 2013 was reported by the Wall Street Coke is going to have to do a lot more acquisitions rather than
growing through organic growth,” commented a Shanghai-
202 based analyst. Nevertheless, market data indicates that “Coca-
Cola is still the leading drinks maker in China [and] held 16
attempting to remove stars from their 5-star ratings in a bid Journal in December 2012.27
to “win back business from politicians.”20 Competitors McDonald’s is reportedly aiming to reach
“Among the about 700 ve-star hotels in China,” writes e 2,000 outlets across the nation by 2013, having increased
Wall Street Journal, “average occupancy sagged ve percentage investment in 2010 by 25 percent and planning a further 40
points in the year to mid-2013, to 50 percent, according to percent increase in investment over 2011.28 In August of that
government gures cited in China Tourism News. e gures year, the company announced its rst developmental licensee,
show room revenue o 11 percent in the period, while dining Kunming North Star Group, what will help the brand expand
receipts plunged nearly 19 percent.”20 on the Mainland.29
Somewhat sti ingly, the ChinaTourist Hotel Association— McDonald’s, like Yum!, also reported lower China same-
the government agency that hands out the stars—says that, store sales in 2012 but only for October.27
“ ere’s no such thing as ‘downgrading stars.’” If ve-star
properties choose to change their ratings, says the association, More recently, Reuters reported that the growth of
they will be considered unrated instead.20 McDonald’s, Yum! and others had been hit as “Chinese
consumers are increasingly opting for healthier alternatives in
Beijing’s new-found austerity has not threatened more food and drink.”30
tourism-oriented projects, however. After a brief delay, the $5
billion Chimelong Hengqin Bay resort and theme park21 was Yum’s sales also fell after CCTV ran a report accusing
scheduled to open on January 14, 2014. Located near Macau, some of the rm’s poultry suppliers of misusing antibiotics
the project features a roller coaster, a whale shark tank and a as well as the April 2013 outbreak of bird u. Signi cantly,
lavish 1,888-room hotel.22
e Shanghai Food and Drug Administration investigated
“While some extravagant infrastructure projects in China the chicken contamination incident. It did not bring a case
have turned into white elephants,” explains Reuters, “the odds against Yum China and did not assess a ne—see below
are on Hengqin’s side largely due to the support of the Beijing for on CCTV’s apparent editorial campaign against foreign
government and the island’s proximity to the millions of enterprises in China.31
tourists who throng to Macau every year.”21
Sugared beverage manufacturer PepsiCo is also investing
Cruise tourism, introduced to China fewer than 10 years heavily in the PRC, but in infrastructure and R&D. A total of
ago, has seen rapid growth. In that time, “ ve terminals have $2.5 billion amount is reported to be going toward building
been built at an estimated cost of more than 4.5 billion yuan additional production capacity in four provinces by 2012, in
($735 million),” with “three [more] under construction and addition to a research and development center tasked with
another six [in] the pipeline.”23 developing new products for the Asian market, agricultural
production and spending on branding.32
Despite expanding capacity and nearly 10 percent growth
in port calls by international cruise lines, China Cruise & In late November 2011, China Daily reported the
Yacht Industry Association vice president Zheng Wei-hang company’s plans to open 10 to 12 new manufacturing plants
told Reuters that rapid construction had eliminated pro ts across a greater number of Mainland provinces over the
and that “all ve established cruise terminals have su ered coming three to ve years.33
losses mainly as a result of excessive investment by municipal
authorities in building landmark structures that have yielded Meanwhile, e Coca-Cola Company opened three
insu cient returns.”23 bottling plants in 2010 (in Inner Mongolia, Henan and
Guangdong), which brought the total number to 42 in the
e other end of the hospitality spectrum, catering, has PRC alone,34 and in September 2011 announced a planned
(and will likely continue to) see strong growth as well. Yum!, investment of $4 billion before 2014, most of which
the management group primarily known on the Mainland for will be spent on improving its bottling and distribution
its Pizza Hut and KFC franchises, in 2009 stated its intent infrastructure.35
to open 500 new restaurants that year—one-third of its total
worldwide openings.24 Similarly positive, Yum!’s second quarter Following up on its 2011-2014 investment plan, in late
2010 earnings were up 33 percent in China, compared to 10 2013 Coca-Cola announced its intent to an additional $4
percent in the United States.25 More recently, the company billion to build more manufacturing plants in China between
opened 92 additional restaurants in the rst quarter of 2011 2015 and 2017.30
and saw its adjusted operating pro ts grow 18 percent.26
A Coca-Cola spokeswoman noted that the company “is
Despite “same-store sales in China [dropping] 4% in the also open to deals with local rms.”30
fourth quarter [of 2012], compared with a jump of 21 percent
the same period a year earlier,” Yum!’s intent to open 700 “ e beverage market is quite competitive right now and
stores over the course of 2013 was reported by the Wall Street Coke is going to have to do a lot more acquisitions rather than
growing through organic growth,” commented a Shanghai-
202 based analyst. Nevertheless, market data indicates that “Coca-
Cola is still the leading drinks maker in China [and] held 16
