KFC owner Yum says its future is in Asia
Yum!, the fast food chain operator, said yesterday that its future was firmly in Asia. The company which owns KFC, Pizza Hut and chinese brand East Dawning and mongolian brand Little Sheep, said that Asia and particularly China was by far its best performing market. It plans to move capital out of America and Europe into Asia over the next five years.
Last year China delivered about USD 1 billion in EBITDA, with the US and the rest of the world delivering around USD 700 million each. Yum is delighted that it is the clear number 1 quick service restaurant (QSR) operator in Asia, far ahead of McDonalds.
Yum believes it is only scratching the surface of China’s potential. The company says it now has 3.1 outlets per million people in China compared to a staggering 60 per million people in the US. Even with aggressive investment into the China market, Yum will still only have 7 outlets per million by 2015.
Yum’s expansion strategy over the next five years is focused on the 20 or so city clusters that are developing quickly across China, and within them it is focused on the emerging transport hubs and retail hypermarkets. The company used the example of the city of Changsha in Hunan province.
Changsha’s population will grow from 3.1 million to 5.7 million in the next ten years, the metro rail system will add 4 new lines and 100 or more stations by 2015. The city will also add 5 coach stations, a high speed rail station and an international airport. It said that its was looking at putting KFC, Pizza Hut or East Dawning in most of these locations.
But China is not the only focus for Yum, who believes that it can replicate China’s success in India.
Yum India is matching China’s growth in outlets and profitability year by year, but is some 14 years behind. Critically, Yum India reached its breakeven point in 2011 on USD 230 million of sales. By 2015 Yum predicts that India will be delivering USD 1 billion in sales and some very healthy profits.
Pizza Hut is also a key part of the company’s Asian investment. It has had good success in outlets where the menu has been modified to include not just pizza but also Asian style meals that are usually rice based.
The company said it will fund its Asian expansion by withdrawing capital from mature markets like the US and UK. In the UK for example, the entire Pizza Hut chain will be turned into a franchise network.
