KFC and Pizza Hut owner Yum Brands (NYSE: YUM) has banked on the China story for much of its growth over the last decade, building itself into one of the world’s biggest China plays by deriving more than half of its revenue from the fast-growing market. So it was almost inevitable that the company would take a big hit when the China market started to stall, which is exactly what has happened in Yum’s latest earnings report. That report saw Yum make the somewhat shocking announcement that its China same-store sales to fall around 4 percent in the fourth quarter from year-ago levels. (English article)
Tag Archives: McDonalds
China Retail Slows As New Mega-Shops Open 中国零售业放缓 大型零售店继续开张
The China retail scene is buzzing with conflicting signals from these last few weeks, as established names like Tesco (London: TSCO) sound negative notes amid a rapid economic slowdown, even as newcomers like Apple (Nasdaq: AAPL) and Forever 21 open massive new stores. In fact, there really aren’t too many contradictions in this latest news, since these new mega-stores were probably in the planning stages before China’s economic slowdown began. Thus these newer stores are more indicators of investments for the future rather than bets on the present.
Denny’s Takes a Bite of China 丹尼餐厅进军中国市场
I was pleasantly surprised today to read that Denny’s (Nasdaq: DENN), one of my favorite US diner chains, is testing the Asia market with plans to open restaurants in China, part of a broader move that is seeing mid-sized restaurant chains pile into the market in a bid to copy the success of top names like KFC (NYSE: YUM) and McDonalds (NYSE: MCD). I also like the fact that Denny’s, known for its 24-hour breakfast menu, is taking a go-slow approach to China, with plans to open a modest 50 stores in the country over the next 15 years through a joint venture with local partner Great China International Group. (company announcement)
Burger King Build-Up: Strange Partner Choice 汉堡王在华组建合资公司：奇怪的合作方
China’s lucrative but increasingly crowded fast food market is about to heat up a notch, following a new announcement by Burger King that it will significantly ramp up its China business under a new joint venture. (company announcement) The size and rapidity of this build-up certainly caught my attention at first; but a closer look at the announcement reveals a strange choice of partners for this new initiative that raises doubts for me about whether this venture will really succeed, especially with the fierce competition in the market from much better run operations by sector leaders KFC (NYSE: YUM), McDonalds (NYSE: MCD) and a growing number of mid-tier players. (previous post)
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Yum’s New Tie-Up Smells of Slowdown 百胜在苏宁店内开餐厅
I was initially intrigued on reading that restaurant operator Yum (NYSE: YUM) was forging a new tie-up to open its KFC and Pizza Hut restaurants in appliance stores owned by Suning (Shenzhen: 002024), one of China’s top retailers, in what seems like a good expansion opportunity. (English article) But after some more consideration, this kind of a move almost looks to me more like a sign that Yum, after years of relentless expansion in China, may finally be running out of good growth opportunities in the huge market and is now having to look for newer, less obvious areas for expansion. If that’s the case, look for Yum’s phenomenal China growth to slow markedly in the next couple of years, putting a big damper on one of its few big growth stories that has made the company a popular investment choice even as many of its other major global markets remain sluggish. Let’s look at the actual news, which has Yum planning to open 150 new restaurants under its KFC, Pizza Hut and newly acquired Little Sheep hot pot brands in Suning stores over the next 5 years. This latest announcement comes as Yum now has 5,000 restaurants in China, with plans to open another 600 in the near future, further consolidating its spot as the country’s biggest operator ahead of the second largest player, McDonalds (NYSE: MCD), which has about 1,500 stores now and is aiming for 2,000 by the end of next year. Yum’s Suning tie-up looks similar in its less conventional nature to McDonalds plan announced last year to build up its drive-through business catering to a growing number of Chinese car owners. (previous post) That plan was followed by news in November that Yum itself was forging its own new partnership with oil major Sinopec (HKEx: 386; NYSE: SNP; Shanghai: 600028) to open restaurants in gas stations. (previous post) McDonalds is also exploring greatly expanding its franchising business, similar to what it already does in the US. While I applaud all these new moves for their innovation, they also seem to reflect the increasingly apparent reality that China’s first- and second-tier cities where Yum has found most of its success so far are quickly becoming saturated, with fewer and fewer attractive new opportunities for expansion. Gas stations and now Suning appliance stores certainly get lots of traffic, but it’s far from clear to me that either of these new initiatives will provide a big new growth area, as people who go to these places don’t usually come to eat a meal, though perhaps they might enjoy a snack during their visit. All that said, I would expect many of these new initiatives, including this new Suning tie-up, to produce very mixed results, contrasting sharply with the stellar performance of most of Yum’s existing China stores. If that’s the case, I wouldn’t be surprised to see Yum’s China growth slow quite a bit in the next 2 years, which seems almost inevitable, and for many of these new initiatives to ultimately end up as only modest successes or perhaps even as failures.
Bottom line: Yum’s latest tie-up with Suning appliance stores is the latest in a growing number of unusual new initiatives that show it may be reaching the saturation point in China.
Related postings 相关文章:
◙ Yum’s New China Strategy: Fill Up With Gas, Food
◙ Growth-Hungry McDonalds Explores Risky Franchising Route
◙ McDonald’s Revs Up for China Drive-Thru 麦当劳寄望“得来速”汽车餐厅拓宽中国市场
McDonalds, Carrefour Latest Targets in Consumer Assault 家乐福、麦当劳被中国政府“点名
I have to admit, I’m starting to strangely enjoy China’s latest campaign that has big state media — CCTV in particular — chasing big-name foreign companies in a bid to improve the country’s record for food safety. You may ask why I feel this way, as I also believe that these foreign companies being targeted are much more responsible in terms of food and product safety than many Chinese firms. The answer is because these foreign companies are so high-profile that they quickly capture national and global headlines, drawing attention to the issue and providing a warning for smaller Chinese companies that are engaged in much worse violations. At the same time, these big foreign companies have the resources to easily weather such negative publicity, which is usually quite short-lived as I suspect that all sides know these cases are designed more to draw attention to the issue than to actually punish the big foreign firms. The latest such high-profile attack has come this week against 2 industry titans, leading French supermarket and general merchandise seller Carrefour (Paris: CA) and fast food giant McDonalds (NYSE: MCD). (English article) According to Chinese media reports, CCTV has run a story attacking Carrefour for mislabeling ordinary chicken as a premium product at some of its stores, while McDonalds was guilty of selling chicken wings past their permitted sale period at a Beijing store. Both instances look quite trivial to me, as clearly no one’s safety was threatened by these practices. I suspect food safety officials will quickly investigate the matter and perhaps slap both Carrefour and McDonalds with small fines to show everyone that any kind of mislabeling or other misrepresentation is unacceptable. Meantime, business will quickly return to normal, as the public already considers these large multinationals much more reliable in terms of food safety than most domestic chains and local eateries. This latest attack follows a string of similar investigative reports from CCTV, including a “scandal” that erupted late last year when China’s leading TV operator revealed that Wal-Mart (NYSE: WMT) had committed the “grave offsense” of mislabeling regular pork as organic. (previous post) Likewise, KFC (NYSE: YUM) also came under attack last year for selling soy milk made from powder rather than fresh product, even though the company had never even claimed that its soy milk was fresh. In both instances, the news created a small storm for a few weeks before quickly blowing over as business returned to normal. I’m sure that investigative reporters from both CCTV and other major news outlets will continue to scour Beijing and other big cities in search of the latest minor violations by major western companies. Such attacks are likely to do little damage on such big corporations, and could even help them win points with the government and food regulators who conveniently use them as models to send a broader message to the market on the importance of food safety and intolerance for businesses that threaten public health.
Bottom line: New media attacks on McDonalds and Carrefour are part of a broader government food safety campaign, and will have little effect on these global corporate giants.
Related postings 相关文章:
◙ Wal-Mart Pork Brouhaha Spotlights Food Risk 沃尔玛“标签门”表明中国严打决心
◙ Pepsi’s New China Shot Ignores Bigger Issues 百事联手康师傅抢占中国市场
◙ Mid-Sized Players Join China Fast Food Feast 国外中小快餐企业抢滩中国市场
News Digest: March 16, 2012 报摘： 2012年3月16日
The following press releases and media reports about Chinese companies were carried on March 16. To view a full article or story, click on the link next to the headline.
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◙ China’s BoCom (HKEx: 3328) Raises $8.9 Billion in Private Placement (English article)
◙ China Mobile (HKEx: 941) Announces Annual Financial Results (HKEx announcement)
◙ McDonalds (NYSE: MCD), Carrefour (Paris: CA) Targets of China Consumer Campaign (English article)
◙ Perfect World (Nasdaq: PWRD) Announces Q4 and Fiscal Year 2011 Results (PRNewswire)
◙ Phoenix Satellite Television (HKEx: 2008) Announces Annual Financial Results (HKEx announcement)
◙ Latest calendar for Q4 earnings reports (Earnings calendar)
Mid-Sized Players Join China Fast Food Feast 国外中小快餐企业抢滩中国市场
The big boys like KFC, McDonalds (NYSE: MCD) and Starbucks (Nasdaq: SBUX) aren’t the only ones hoping to feast on China’s growing appetite for fast food, with 2 mid-sized players, ice cream specialist Dairy Queen and Pizza Hut also announcing big new expansion plans to cash in on the trend. For investors, these expansions by smaller players spotlight that China offers interesting potential for not only the big names, but could also make mid-sized players an interesting bet. Then again, these more mid-sized companies come with a bit more risk, as they often lack the resources of the bigger names to execute their expansions, and are more likely to withdraw from the market at any signs of trouble, creating potentially big losses. Let’s look first at Dairy Queen, a well-known US brand that has been quietly expanding in China over the last few years. The company, owned by billionaire investor Warren Buffett, recently opened its 500th store in China, and says it plans to add another 100 stores by the end of this year, after opening 131 new stores in 2011. (company announcement) Meantime, Pizza Hut, owned by Yum Brands (NYSE: YUM) has announced it will open at least 150 new stores this year as it expands into third- and fourth-tier cities, part of a trend that is seeing restaurant operators move into smaller, less affluent Chinese cities in pursuit of growth. Both Pizza Hut and Dairy Queen represent a group of lower-profile foreign restaurant operators that have found varying degrees of success in China, joining other similar sized players like Japan’s Yoshinoya, Hong Kong-listed Ajisen (HKEx: 538) and US pizza chain Papa Johns (Nasdaq: PZZA). A key component to the success for both the larger and smaller players is finding a strong Asia partner to help navigate the often tricky China market, where foreign companies are often subject to much more scrutiny than local companies. Ajisen got a good lesson in the potential perils of the market last year, when many Chinese consumers boycotted the chain after it falsely claimed that its soups were made with fresh ingredients, dealing a huge blow to the company’s revenue. Negative campaigns like that could easily force some of these smaller companies to incur big losses and even withdraw from the market, spotlighting one of their biggest vulnerabilities. But if they have the right partner and backing, some of these companies could also look like strong bets to profit from China’s growing appetite for western fast food.
Bottom line: New expansion plans by Dairy Queen and Pizza Hut in China spotlight the market’s big potential for mid-sized fast food companies.
Related postings 相关文章:
◙ Yum, Starbucks Forge Ahead in Face of Slowdown 百胜和星巴克逆势强劲增长
Yum’s New China Strategy: Fill Up With Gas, Food
Just weeks after getting regulatory approval for its purchase of leading hot pot chain Little Sheep (HKEx: 968), KFC parent Yum Brands (NYSE: YUM) is making headlines once again for yet another tie-up, this time with Sinopec (HKEx: 386; NYSE: SNP), China’s top oil refiner. (English article) But Yum is less interested Sinopec’s oil refining prowess, and has its eye instead of the company’s 30,000 gas stations located across China, many of which could host new outlets for Yum’s KFC and Pizza Hut stores. I have to say that this strategy looks quite intriguing, as Sinopec’s vast chain of gas stations in China would instantly complement Yum’s own 3,500 KFCs and 560 Pizza Huts throughout the country, providing real estate and other infrastructure that Yum could instantly use to quickly open lots of new stores to boost its already strong position as China’s leading fast-food operator. The strategy looks similar to rival McDonalds’ (NYSE: MCD) launch earlier this year of a major new initiative to open drive-through restaurants, catering to China’s new generation of young, affluent car owners. (previous post) I personally like Yum’s strategy a bit more, as opening outlets in Sinopec stations will give it lots of new locations to choose from, and allow it to quickly build outlets in the ones that it likes. The McDonalds strategy looks a bit more time-consuming, calling on the company to explore locations and then build new restaurants on its own. The big question, of course, is will Chinese consumers want to purchase fried chicken, pizzas and maybe even hot-pots-to-go at the same place that they fill up their car with gas? Honestly speaking I’m not sure what the answer is, as I’ve never seen this concept at gas stations outside China. In the US many gas stations house convenience stores, but it’s far less common to see actual restaurants inside them. That said, I don’t see why the concept won’t work, and would give this latest tie-up between Yum and Sinopec and strong chance of success.
Bottom line: Yum’s new tie-up with Sinopec will allow it to expand its KFC and Pizza Hut business to thousands of Chinese gas stations, tapping China’s new generation of car owners.
Related postings 相关文章:
◙ McDonald’s Revs Up for China Drive-Thru 麦当劳寄望“得来速”汽车餐厅拓宽中国市场
◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢
◙ Starbucks Wide Open for China Business with New JV 星巴克在云南建合资厂
Wal-Mart Pork Brouhaha Spotlights Food Risk 沃尔玛“标签门”表明中国严打决心
A new flurry of reports about mislabeled products at some of Wal-Mart’s (NYSE: WMT) China stores would be almost comical if they weren’t true, spotlighting just how sensitive the issue of food safety and false advertising has become in the country. The latest media reports say some Wal-Mart store managers have been detained and more than a dozen stores temporarily closed in this new crisis. And the reason for all the brouhaha? Believe it or not, it’s all because someone discovered that some pork products were falsely labeled as “organic” when in fact they weren’t. (English article) Don’t misunderstand me, I’m quite against the mislabeling of products, especially when such practices could result in health hazards to consumers. But in this case, there doesn’t appear to be any immediate health hazard, and the detention of employees over this kind of minor misdeed seems like a bit of an overreaction. All of this is no doubt part of Beijing’s desire to show it is taking false advertising and food safety very seriously, following a steady stream of much bigger scandals in the last 3 years that have sickened and even killed victims who ate unsafe and tainted food products. This kind of high-profile campaign carries big risk for companies like Wal-Mart, which will now face backlash from Chinese consumers. Hong Kong-listed Japanese noodle chain Ajisen (HKEx: 538) has experienced first-hand this kind of backlash, as its business has dropped dramatically since Chinese media recently exposed that its soups were made using packaged powder rather than fresh ingredients as the company had advertised. Its shares have lost about half their value since the scandal erupted in July. Wal-Mart, which is China’s second biggest supermarket operator, now faces similar fall-out, and other major chains like recently listed Sunart (HKEx: 6808) and Carrefour (Paris: CARR), China’s largest and third-largest supermarket operators, will also be exposed to similar risk. Restaurant operators like KFC parent Yum Brands (NYSE: YUM) and McDonalds (NYSE: MCD) will also be vulnerable, as Beijing looks for more high-profile targets to chase to ease broader public concerns over food safety and false advertising.
Bottom line: Major food-related firms will be highly vulnerable to negative publicity campaigns in the next 2-3 years, as China tries to ease public concerns over food safety and false advertising.
Related postings 相关文章:
◙ Coke’s China Formula: A Pulpy and a Smile 可口可乐入乡随俗显成效
Coke’s China Formula: A Pulpy and a Smile 可口可乐入乡随俗显成效
Coca Cola (NYSE: KO) has made global headlines with its announcement that it will invest $4 billion in China over the next 3 years, as it soaks up more business in the nation’s smaller cites with its popular and affordable drinks. (company announcement) The figure certainly accomplished its mission as an attention grabber, and it’s easy to see why. While sales in most major global markets sputter as the 
world economy struggles out of recession, Coke notched 21 percent growth in China in the first half of the year with unit sales surpassing 1 billion — equal to its annual sales for the market just 5 years ago. Clearly there’s plenty of room for growth, as Coke, despite its position as China’s largest software seller, still only has a relatively modest 17 percent of the market. What’s most interesting to me in this story is the fact that earlier this year Coke scored an unusual first in China with Minute Maid Pulpy, which claimed the honor of becoming the company’s first billion-dollar drink developed outside the US. (company announcement) I’ll admit to being a fan of Pulpy myself, frequently consuming this drink that at least superficially seems a bit healthier than Coke and no doubt is attractive to consumers in the country that gave the world mandarin oranges. Coke is clearly moving in step with other major consumer brands like fast food operators KFC (NYSE: YUM) and McDonalds (NYSE: MCD), which have developed a strong stable of products suited to local tastes, often providing stronger platforms for growth than their traditional offerings created in Western markets. Its latest mega investment testifies to Coke’s realization that such innovations are key to keeping its growth alive, and I wouldn’t be surprised to see it maintain the 20-plus percent growth rates in China into at least the next 2-3 years.
Bottom line: Coke’s $4 billion commitment to China underscores the huge success it has had in the market, and the enormous potential remaining for future growth.
可口可乐(KO.N)宣布未来三年将在中国增加投资40亿美元，因其在中小城市业务迅速扩张。这则消息使得可口可乐成为媒体焦点，它这麽做其实也很容易理解。全球经济迟滞之际，可口可乐在全球多数主要市场的销售业绩欠佳，但今年上半年在中国的销售则增长了21%，销量超过了10亿瓶，五年前这是在中国市场的全年销量。显然，可口可乐在中国还有很大的发展空间，虽然是在中国的软饮销售冠军，但市占率也才17%。而我最关注的是，可口可乐在中国推出的品牌“美汁源”，跻身其销售额过10亿美元的品牌行列，是可口可乐在美国以外地区开发的品牌首次销售达到10亿美元级别。我本人也常常喜欢喝“美汁源”，至少从表面上看，这比可乐要健康一些吧，这也无疑受到了中国消费者的欢迎。象肯德基(YUM.N)和麦当劳(MCD.N)这些全球知名品牌那样，可口可乐也试图迎合当地消费者口味、开发独特产品，开辟成长机遇，而非单调沿用在西方市场创立的产品系列。可口可乐此次在中国的大手笔投资，表明它已经意识到，创新是保持成长的关键。未来两三年，若可口可乐在中国能保持20%以上的增长率，我不会感到奇怪。
一句话：可口可乐在中国大手笔40亿美元投资计划，印证其在中国市场的成功，并预示其未来发展潜力。
Related postings 相关文章:
◙ Investors Feast on Sun Art 高鑫零售首日挂牌表现抢眼
◙ Philips Taps Electric Rice Bowl With Shanghai Deal 飞利浦收购奔腾 进军中国电饭煲市场
◙ Unilever Helps China See the Light Behind Free Markets 联合利华帮助中国向市场经济迈进
