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The changing tastes of China’s consumer class

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It wasn’t long ago in China when you’d impress a date with a romantic evening at Pizza Hut.

Not anymore. China’s got a new middle class.

“And they’re really trading up,” said Shaun Rein, author of “The End of Cheap China.” “They’re looking for more premium, healthier food destinations. So companies like Starbucks and Pizza Express are absolutely booming in the country.”

The Chinese market isn’t as easy as it used to be. When Yum Brands entered the country in 1987 with its first Chinese KFC restaurant, it had almost no competition. Nearly three decades later, Yum – which also runs Pizza Hut — is making more in China than it does back home in the U.S. But now Yum has spun off its China division into a separate company. A big reason is the changing tastes of the Chinese consumer, who prefers more refined dining from, say, Pizza Express (purchased from the Brits by a Chinese equity firm last year) to a fast-food chain.

Dozens of boutique Chinese brands, including hot pot sensation Hai Di Lao, have crowded the market, appealing to younger Chinese who are looking for a more personalized and upscale dining experience. That’s one reason Starbucks has dethroned KFC as the dominant western brand in China’s food and beverage industry.

“It’s all about matching flavor to your own personality,” said Tom Doctoroff, CEO of the Asia/Pacific Region for advertiser J. Walter Thompson. “This is something that kills two birds with one stone. One, it has the scale of a famous brand, but also it is very personalized to reflect who you are.”

But that doesn’t mean Yum Brands’ nearly 7,000 KFCs and Pizza Huts in China are suddenly empty. China’s steady stream of new consumers will likely continue for years to come.

“Who are those consumers?” said APCO’s Jim McGregor, author of “One Billion Customers.” “Those are the migrant workers who are moving into the city at a rate of 13 to 15 million people a year, and they’ve got to make them consumers in order to drive this economy.”

And as long as China’s economy keeps growing, those new consumers might well look to KFC and Pizza Hut for their first date nights.

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