LINDA WERTHEIMER, HOST:
McDonald's is not usually considered health food, but in China it is. The big burger chain is rolling out a new ad campaign that touts the safety and quality of its food.
To talk about why this approach might appeal to Chinese consumers, we called Shaun Rein in Shanghai. He is the head of China Market Research and he studies Chinese consumer behavior. Mr. Rein, thank you for joining us.
SHAUN REIN: Thank you for having me, Linda.
WERTHEIMER: I'm looking at an ad here which is part of the new McDonald's campaign with lots of beautiful color vegetables, you know, rain falling on tomatoes, that kind of thing. Here, let's play the ad.
(SOUNDBITE OF MCDONALD'S ADVERTISEMENT)
UNIDENTIFIED WOMAN: McDonald's (Foreign language spoken).
WERTHEIMER: So what was the message in this ad?
REIN: Well, the advertisement was very smart, Linda, for McDonald's. They wanted to use nice healthy looking food for the Chinese consumer because Chinese are petrified of the food supply chain. They understand that McDonald's probably isn't healthy because it's fatty and could cause obesity, which is becoming a big problem in China. In a country that deals with food scandals seemingly on a daily basis, like melamine and milk, people are gravitating towards McDonald's and other Western fast food brands because they trust them as being healthy. And so this advertisement is saying that for a natural healthy lifestyle, you need to eat McDonald's food.
WERTHEIMER: So what they're talking about is not so much what we would think of as health food but wholesome food, food that is clean.
REIN: Exactly. So they are viewing it as wholesome, clean, hygienic food. When you look at a lot of the street vendors in China, they used cooking oil that's from the sewers because still a lot of Chinese restaurateurs are very poor. And so they exist on literally pennies a day in profits. And so they really cut corners.
WERTHEIMER: Well, for everyday Chinese, how do they look at McDonald's apart from health questions? Is it a restaurant that you would go to any time, every day, inexpensive? Or is it some kind of a treat, maybe expensive?
REIN: It's more of a slight aspiration play. I think if you want more of a real aspiration that would be young brands like Pizza Hut. Pizza Hut is a very nice restaurant. They are decked out with artwork, very comfortable seating arrangements, and that's a place where you go for business meetings or on date night. McDonald's is becoming that. They've been renovating a lot of their outlets in the past two years, and I have to say they're pretty nice. They're as nice as Starbucks now.
WERTHEIMER: So China's economy is slowing down and that's affecting big American corporations in China. How does McDonald's do? How does it compete?
REIN: Well, there has been a slowing economy in China, but the problem is not that serious. You see, McDonald's China's same source sales went up 2.2 percent last month, but KFC actually grew 9 percent. So the consumer market is still growing relatively strong.
WERTHEIMER: So their competition is not so much Chinese restaurants or Chinese businesses but American businesses in China.
REIN: Exactly. McDonald's is competing head-to-head against KFC and some of the larger Chinese chains, like Ajesa(ph) noodles. And what you're seeing is because the food and beverage market growing so strongly in China, is that you're having a lot of other Western brands that are coming in, so Dunkin Doughnuts, Burger King, even Krispy Kreme are all announcing large investments into the China market.
WERTHEIMER: Shaun Rein is the founder of China Market Research Group. He spoke to us from Shanghai. Thank you very much.
REIN: Thank you very much, Linda.
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