Yum! Brands – parent of KFC, Taco Bell and Pizza Hut fast food businesses – says it plans to open nearly 5000 new fast food stores in China by 2020.
It plans to open a further 1700 in India in the same time frame as it follows a strategy of building leading brands in every significant category in the two fast-growing economies.
Chairman and CEO David Novak told an investors briefing this week that his company is on the “ground floor” of significant global growth rotating around China and other developing markets.
CFO Rick Carucci said Yum! currently has a global portfolio of more than 38,000 restaurants in more than 15 countries. It leads rivals in emerging markets with 11,000 stores. Overseas growth has taken the company from reaping 52 per cent of its profits in the US in 2006 to 75 per cent outside the US in 2011.
In China today, Yum! has 4190 stores serving a population of 1.3 billion and in India 305 units serving 1.2 billion. By 2020 it hopes to have 9000 stores in China, 2000 in India.
New stores will open in new transport infrastructure currently being built all over China – airports and train stations – as well as in the rapidly-growing roll of shopping centres and hypermarkets, where the company can cash in on demand for convenience.
Carucci told analysts that international expansion would drive at least 13 per cent earnings per share growth in 2011, at a time when the mature US market had “a disappointing year”.
Mark Chu, president and COO of Yum! China, spoke of his division’s vision “to become the best restaurant company not only in China but the world”.
The company was not focused purely on rolling out new stores, but enhancing the overall offer as well. For example, Pizza Hut in China had adopted a strategy of changing 25 per cent of its menu every six months, and had expanded the offer by developing premium lines and value lines.
Angela Loh, chief marketing officer of Yum! China, said the company was building multiple category leading brands, including a new chain East Dawning specially for the Chinese market. This dining concept would be positioned as “the best Chinese quick service restaurant option” and be run to KFC back end systems and standards.
Menus for all of its brands would be localised to maximise consumer appeal.
Meanwhile, over in India, says Niren Chaudhary, Yum! India president, the organised eating out market was projected to grow 25 per cent on a CAGR basis from US$600,000 in 2005 to $6 billion in 2015. Just two per cent of the nation’s eating out market is currently organised (corporate run as opposed to ‘ma and pa’ options) and Indians eat out just once in 40 days on average, suggesting a huge growth opportunity as disposable income levels rise.
Chaudray also shared some store operational data with investors: A new KFC costs about US$550,000 to build, turns over an average $1.1 million per week through 4300 transactions and has a cash margin of 17 per cent.
