KFC rivals Starbucks in China

People walk past a fastfood restaurant of KFC in Huaian city, East China's Jiangsu province, Feb 14, 2015. [Photo / IC]

Coffee is going to be big part of KFC's future－and the ambition goes far beyond the stunt of testing an edible coffee cup. Thousands of KFC restaurants in China, where the fried chicken purveyor is already the single largest fastfood chain, will start selling freshly ground coffee this year in a bid to become a lower-cost "premium" alternative to Starbucks.

Trying to beat Starbucks on higher-quality coffee in China makes more sense than it might seem for KFC, which has a long-established breakfast menu featuring such local fare as congee－a rice porridge with pickles and preserved egg. Starbucks, meanwhile, has spent the past 16 years spreading the concept of "coffee culture" and cultivating demand for high-price brews throughout China.

KFC started rolling out its new premium coffee in its most developed Chinese markets in December. "And we were very pleased with the results," said Pat Grismer, chief financial officer at Yum Brands, KFC's parent.

So far the new coffee has helped boost KFC's breakfast and afternoon business. The company will offer premium coffee in 2,500 KFCs in China by year's end－a footprint that already surpasses all the 1,500 Starbucks locations in the country.

China has about 4,500 KFC outlets, leaving yet more room for the chain to expand. McDonald's, with more than 2,000 locations in China, also sells coffee and McCafe products.

KFC's premium coffee will cost about 10 yuan ($1.61), according to Youngchinabiz.com. Yum's Grismer didn't confirm the price, but KFC's coffee would be sold for half the price of a comparable cup at Starbucks. Both KFC and McDonald's already offer lower-end coffee for about 6 yuan, and the McCafe menu in China also includes some more expensive items.