How KFC Took on Starbucks With Freshly Ground Coffee in China

When you think of where to get a quality cup of coffee, a global fast-food chain probably isn’t your first choice. But in China, KFC—better known for fried chicken than caffeine—quietly set out to challenge established coffee giants like Starbucks by rolling out a full-scale freshly ground coffee program in hundreds of its outlets.

By the end of 2015, KFC aimed to serve freshly brewed coffee in at least 2,500 locations across China—more than double its initial target—offering espresso-based drinks priced between 10 and 20 RMB (about $1.30 to $2.60), significantly cheaper than Starbucks’ average drink price of 30 RMB.

KFC’s Strategic Coffee Push in China

KFC, owned by Yum Brands (later part of J.M. Smucker via KFC parent Yum China), had long relied on the Chinese market for growth. In March 2015, Pat Grismer, then CFO of Yum Brands, told investors the coffee initiative was performing “very satisfactorily,” boosting both breakfast and afternoon tea sales. With over 4,800 stores in China—far more than Starbucks’ 1,500+ and McDonald’s 2,000+ outlets selling coffee—KFC saw major potential.

The brand began testing freshly ground coffee in Shanghai as early as November 2014. By January 2015, it had expanded to Beijing, Guangzhou, and Shenzhen. Each participating location was equipped with a professional coffee machine, and signage marked the new offering with a simple “COFFEE” label. To drive trial, the chain bundled coffee with discounted snacks like egg tarts and burgers during afternoon tea hours.

From Experiments to a Full Coffee Lineup

KFC’s journey into coffee began much earlier. According to He Yong, Vice President of Brand Planning at KFC, the company had been experimenting with different coffee beans, equipment, and brewing methods in Shanghai and Beijing since 2009. Over the years, it developed four separate coffee product lines.

Internal consumer tests—including concept testing and blind taste evaluations—led to a pivotal decision in mid-2013. KFC conducted live, side-by-side trials of two coffee concepts (a latte-art focused drink and a richer, balanced freshly brewed espresso) in similar restaurants in Beijing and Shanghai. Consumer preference ultimately determined the current freshly ground espresso-based offering.

Store Design and Brand Positioning

KFC also recognized that selling coffee meant more than just brewing it—it required the right environment. Starting in 2014, the company rolled out a new store design concept called “Dining Room.” These locations featured custom artwork, pendant lighting, green plant dividers, and long counters to evoke a “coffeehouse feel within a restaurant.”

By the end of 2014, over 370 of these redesigned KFC outlets had opened. The plan was to make all new openings adhere to the new design and accelerate retrofits of older locations. This shift helped position KFC not just as a fast-food joint, but as a more inviting space for coffee and casual dining.

The Competitive Landscape

KFC’s coffee wasn’t trying to mimic Starbucks’ premium, third-place experience. While Starbucks positioned itself with an average drink price of around 30 RMB and a distinct café culture, KFC leaned into its fast-food roots—with approachable pricing starting at just 10 RMB. The chain didn’t create a standalone coffee sub-brand like McDonald’s did with McCafé, but it did invest in store upgrades to better accommodate coffee service.

Why Now? Market Pressures and Opportunity

The push into coffee came at a critical time for KFC in China. The brand faced declining sales in 2014 due to the fallout from the Shanghai Husi (OSI Group) meat safety scandal, which caused a 11% drop in fourth-quarter revenue and a 16% decline in same-store sales in China. Consumer habits were also shifting—fast-food chains were no longer seen as novel or aspirational.

In response, KFC had already begun offering more localized menu items, such as congee, soybean milk, fried dough sticks, and rice dishes. With those efforts underway, coffee emerged as another potential growth driver—one aligned with China’s rapidly growing coffee culture.

Frequently Asked Questions

When did KFC start selling freshly ground coffee in China?

KFC began testing freshly ground coffee in Shanghai in November 2014, and officially expanded the offering to Beijing, Guangzhou, and Shenzhen by January 2015. The chain aimed to have it in at least 2,500 locations across China by the end of 2015.

How much does KFC coffee cost compared to Starbucks?

KFC’s freshly ground coffee was priced between 10 and 20 RMB (approximately $1.30 to $2.60), while Starbucks’ average drink price in China was around 30 RMB, making KFC’s offering significantly more affordable.

What kind of coffee machines did KFC use?

Every KFC location offering freshly ground coffee was equipped with a professional coffee machine, though the specific brand or model was not disclosed in the report. The setup supported espresso-based drinks like lattes and cappuccinos.

Did KFC create a separate coffee brand like McCafé?

No, unlike McDonald’s, which launched McCafé as a dedicated coffee brand, KFC did not create a separate sub-brand for its coffee. However, it did redesign many locations to better accommodate coffee service under the “Dining Room” concept.

Why did KFC decide on a freshly ground coffee line over other options?

After testing four different coffee product lines since 2009, including a latte-art series and a balanced freshly brewed series, KFC conducted consumer tests and live trials in 2013. Based on these results, it chose the freshly ground espresso-based option as the final product for rollout.

How many KFC stores were there in China compared to Starbucks in 2015?

By 2015, KFC had over 4,800 stores in China, compared to Starbucks’ approximately 1,500 stores and McDonald’s 2,000+ locations that also sold coffee. This gave KFC a significant advantage in potential reach for its coffee initiative.

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