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McDonald's goes for niche stores

McDonald's Taiwan is looking to boost its stagnating sales by expanding into niche markets and opening "new-concept" outlets. These include a McCafe store in Tienmu and over a dozen McKiosk shops scattered around the nation.

The fast-food giant opened its McCafe-brand outlet last month on Tienmu's Chungcheng Road. The McCafe menu includes rice dishes, panini bread, French toast, English muffins, waffles, along with a variety of snacks and beverages.

Last year, McDonald's Taiwan set up 13 McKiosk carry-out snack bars selling ice cream, milk-shakes, sundaes and beverages.

"In an effort to cope with competition in the local fast food market, we decided to diversify the product line by developing new concept stores," said Ronnie Liao (廖幸安), a McDonald's Taiwan executive.

Poor sales and market saturation forced the Golden Arches to close 15 unprofitable stores and lay off 390 employees in November. McDonald's Taiwan still has 347 stores in operation.

McDonald's Taiwan reported NT$13 billion in sales in 2001, and last year's growth appears to have stagnated at about that same level.

One market watcher said the declining market position has forced McDonald's Taiwan to shift gears.

"McDonald's used to pay very little attention to niche customers when they dominated the mass market," said Shirley Huang (黃淑麗), secretary general of Taiwan Chain Stores and Franchise Association.

But with an increasing number of competitors joining the fast-food market including restaurant chains, individual food stands and convenience stores, McDonald's has no choice but to identify other markets to generate new sales, she said.

The tiny 33m2 McKiosks have been strategically located in downtown areas such as the Hsimenting movie district and the bushiban district near the Taipei Railway Station.

Of McDonald's 13 McKiosks, eight are located directly next to traditional McDonald's restaurants and the other five stand independently.

McCafe is designated to offer a wide selection of food and gourmet coffee in a bistro-like environment to lure customers, Liao said.

The prices fall between traditional McDonald's and coffee shops. For instance, a Cappuccino served in McCafe is priced at NT$80, and a meal set, including a beef curry rice and American coffee, is sold for NT$180.

This is not the first time McDonald's Taiwan has tried new ideas. Last July McDonald's opened up a McSnack restaurant near Taipei Chungshan Middle School Station of the Mucha MRT line.

After poor market acceptance, the outlet was closed five months later.

Despite the setack, executives are confident about McCafe's prospects.

"We've added a wide variety of choices to the McCafe menu," Liao said.

The McCafe's business model may soon be used to set up a McCafe section within traditional McDonald's outlets.

The concept of McCafe was firstly introduced in McDonald's Australia in 1993. There are now more than 300 McCafe's in operation around the world.
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