Analysis-‘Lovin’ it’: McDonald’s raises China bet, bucking Western firms' derisking trend
By Casey Hall
SHANGHAI (Reuters) -The decision by McDonald's to take greater control of its China business and expand aggressively in the face of a consumer slowdown and geopolitical tensions seems risky — but the potential pay-off is great, analysts say. Last month, the U.S.-based burger maker cut a deal to repurchase the 28% stake in its China business Carlyle Group (NASDAQ:CG) took in 2017, giving it a 48% share in $6 billion worth of operations that include Hong Kong and Macau. The move contrasts sharply with the prevailing trend of multinational corporations reeling back investments in China or even exiting altogether because of geopolitical and economic challenges.
One advantage for McDonald’s (NYSE:MCD): its majority partner in the China business, CITIC, provides top-level political cover, said Jason Yu, greater China managing director of market research firm Kantar Worldpanel. «Having a very powerful Chinese state-owned conglomerate as a partner means they are not going to be at the forefront of the geopolitical situation; that is quite important,» Yu said.
McDonald's China, Carlyle Group and CITIC declined to comment.
Other consumer-facing U.S. firms, including Starbucks (NASDAQ:SBUX), Apple (NASDAQ:AAPL), Coach owner Tapestry (NYSE:TPR) and sportswear giant Nike (NYSE:NKE), have remained similarly dedicated to the China market.
Starbucks and Nike, which face increased competition from lower-priced domestic competitors, show the need to stay agile in order to protect and grow market share, analysts say.
The coffee giant is sticking with expansion plans and launched a smaller cup size; Nike, by contrast, has offered localised, higher-end sneakers such as its «Year of the Rabbit» Dunk Lows.
McDonald’s has used
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