The Week in China: KFC’s Toilet Water Ice Cubes, Apple Genius Bar Scalpers and more


Above: Domino’s isn’t the only one in the world delivering delicious pies with drones.

China is the second largest economy in the world and every significant brand’s future is impacted by its growth (or collapse)—but who’s got the time?! Here’s the week’s reads that will make you look like a keen China observer in case you find yourself immersed in a cultural conversation.

This week: KFC’s toilet ice cubes… “China’s Foursquare” Jiepang launches 5.0… Taobao kills its sellers… Fan Bingbing for cheap scooters… Time Out’s Shanghai stunt… QQ trademarks… “Virtual” cola sales… China loves vans… IKEA… GM… HP’s silk road… Huawei tells the US to “shut up”… and more.[more]

The Paradox of KFC China’s “Toilet Water” Ice Cubes

“Daddy, I want some too!” says the child to his father who is slurping toilet water through a straw. It’s just one of numerous editorial cartoons from China’s news service Xinhua in the wake of a report that ice cubes used by numerous fast food outlets in the country are dirtier than toilet water. 

When KFC’s history is written, 2012 through 2013 will go down as the darkest period of the chain’s China operations. Or at least parent company Yum! Brands should hope so. After a scandal involving antibiotic-injecting chicken suppliers and a sales-killing H7N9 bird flu panic, KFC now faces “toilet water ice cubes” accusations. The charges come from a China Central Television (CCTV) segment in which the news service sampled ice cubes from three fast food locations—KFC, McDonald’s and the Bruce Lee-inspired Kongfu—and found them all sanitary failures. KFC was fingered as the worst of the worst though with McDonald’s better than toilet water, but still beneath guidelines. (The report reminded many of the May scandal in which a Starbucks outlet in Hong Kong was found to be brewing coffee with water from the toilet sink.)

As a Reuters columnist noted, CCTV’s “toilet water” (马桶水) actually means “tap water,” (自来水) as the source of the water is the same. The former was used to give the report an extra element of brand damage. And damaging these foreign brands was more or less the point. Case in point: a Friday People’s Daily slam of Apple’s iPhone: “iPhones are becoming so common in China these days that many people lost their once strong desire to own one. Also, the devices are considered too expensive, and many consumers are opting for cheaper phones with similar capabilities.” (Note to Starbucks China: Check your ice ASAP!) Anyways, the good (and bad) news is that according to a new survey, KFC is China’s most loved/hated foreign brand. 

That drinking the nation’s tap water is taking health into your own hands is not a news flash in China. The country’s water is so polluted that some of it is even unusable for industrial purposes, while scandals over drinking water are basically a monthly event. In April and May, bottled spring water brand Nongfu suspended Beijing operations after charges of substandard production. The brand sued and the case is pending.

Ironically, CCTV’s KFC report reveals an odd bit of unintended PR consequences. While China’s sensationalized criticism on KFC and McDonald’s aims to mute the foreign brands’ popularity in China, it promotes an extraordinary anti-China message overseas. The “KFC toilet water ice cubes in China” story was picked up and breathlessly re-reported in America’s press, retrenching foreign opinions of China as an underdeveloped, dirty, corner-cutting country.

China’s E-Commerce is Killing Brick and Mortar Sales, People

If you don’t already know, China is taking to e-commerce like fish to water. In part, this is because of cost but also because of the emerging dynamics of how the nation’s mobile tech boom breaks down traditional consumer behaviors. (For more on the topic, see the much-lauded new documentary on China’s mobile tech, High Tech, Low Life.) Now, some information shows how the growing e-commerce sector is viciously competitive, and also, in some cases, literally deadly.

A recent Economic Observer survey of massive e-commerce platform Taobao found 60 percent of sellers had operated for two years or less and 30 percent for less than a year. Part of the greenness of the Taobao landscape can be chalked up to e-commerce itself being relatively new in China. But it also demonstrates how vicious price competition drives the market. So vicious in fact that a very successful cosmetics e-commerce outlet manager just died from “overwork” after only six months online. It was the second such reported death. To frame just how competitive Taobao is becoming, take a look at the Sichuan residential community of 1,000 where “more than 400 of those households are running Taobao stores.”

There may be more to come as Taobao merchants are facing new competition from the very products they are selling. Gap, Uniqlo, Forever 21, and soon Zara and Topshop are all opening their own Taobao outlets to sell direct to consumers at a discount.

Jiepang: You Can Stop Calling Us “China’s Foursquare” Now

brandchannel recently spoke with Jiepang’s CEO about branded photos and what the “China’s Foursquare” launch of Jiepang 5.0 means for its 5 million users. 

Jiepang‘s update aims to take the app from its roots as a location based service “to a holistic check-in social network.” One meaning of “holistic” is that Jiepang is synching with many of China’s other most popular social networks like WeChat. The update also re-imagines the user interface and adds categories and friend tagging. The service hopes these expanded services move it behind its “Foursquare of China” reputation.

As WeChat also looks to expand outside of its root services, Jiepang’s expansion pushes the boundaries out further on the increasingly full set of options for China’s social network users where everyone is slowly starting to offer many overlapping services. Just remember: monetization, monetization, monetization.

More China News:

– A “virtual” soft drink sold online has raised close to $200,000 to pay for a sick young Liaoning girl’s medical treatments. The popular, fictional, virtual soda is named Baixue (白雪) Cola. Do-gooders should lookout though, as there are over 500 results for “白雪” in a trademark search of China’s database and you can bet sooner or later one of them is going to come looking for a cut.

– Are you eating terrible instant noodles? According to a new study there’s a 50 percent chance you’re in China.

– If sales are a rocking, don’t come knocking. China auto buyers love vans.

Apple’s war on Genius Bar appointment scalpers causing havoc in Hong Kong Apple stores.

China Daily: “Huawei Tells US to Shut Up

– “I’m the leader,” says China mega-star actress Fan Bingbing in an ad for… cheap electric Aima scooters.

– Since 2008, China’s rising labor costs have driven 30 percent of its shoe production to other Southeast Asian factories.

– How is Caterpillar like top shelf baijiu? China launches a five-year ban on contraction of new government buildings as part of ongoing state frugality campaign (which is why Caterpillar’s economic outlook is so bad).

– Austerity flattening Rolls Royce China sales, while ongoing austerity drive leads to luxury shopping “hotlines.” 

– Hong Kong ad spending at four year low.

– What does Hewlett-Packard have to do with China’s “new silk road?”

GlaxoSmithKline weathers the post-bribery scandal storm.

– Belgian phama brand UCB gets a visit from China’s authorities. The State Administration for Industry and Commerce (SAIC) hauled off and questioned AstraZeneca as well.

WeChat goes down! WeChat goes down!

IKEA finds China solutions for its China problems.

– Will China microbrew? An interview with Great Leap Brewery.

– Fewer Chinese are power shopping Paris’ luxury stores.

QQ social network parent Tencent in battle over “QQ” trademark.

– Why are lawyers in Asia so cheap?

Groupon may be suffering in the US, but its peers in China are expanding into lower tier cities.

– Is Alibaba’s Smart TV a dumb move?

GM: China will not get the Chevy Cruze this year.

– To encourage recycling, Hangzhou city is giving away the iPhones 5.

– China talks of snapping up depressed real estate in Detroit.

– Dutch designers find success in China.

Finally, Time Out Shanghai gets a standing ovation for its “Stolen iPhone” promotion that so wonderfully highlights the city it is all about.