Tag Archives: Pizza Hut

Yum’s Little Sheep: Tasty Food Or Indigestion?

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Little Sheep growth stalls during Yum review

An interesting new Chinese media report is questioning whether US fast food giant Yum (NYSE: YUM) is spoiling the Little Sheep chain of hot pot restaurants it acquired just a year ago. The numbers released by Yum certainly don’t look very so-so, and comments by an unnamed restaurant official don’t paint a very rosy picture either for Little Sheep under Yum’s management. But it’s probably still too early to say whether this acquisition will be a success, and I would still be willing to bet we’ll see Little Sheep start making some new and exciting moves later this year. Read Full Post…

Bird Flu Eases As KFC Reels

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KFC gets break with end of bird flu emergency

Embattled hoteliers and restaurant operators whose business has been hit by China’s H7N9 bird flu outbreak are finally getting some relief with Shanghai’s formal cancellation of its bird flu emergency after the city went 3 weeks without any new cases. (English article) But companies could continue to feel the fallout from the scare for at least the next few months, with by Yum’s (NYSE: YUM) KFC perhaps the most vulnerable to longer term damage. Read Full Post…

Bird Flu Takes Bite Out Of Yum

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Yum results: Nothing to crow about

The latest stomach-churning results from fast food giant Yum (NYSE: YUM) are a good opportunity for an updated look at the impact that bird flu is having on companies that rely on the restaurant and travel industries in China. Somewhat ironically, these latest dismal results from the operator of KFC and Pizza Hut restaurants actually sparked a rally in Yum shares, since many were expecting the figures to be even worse than they were. Read Full Post…

Yum’s New Tie-Up Smells of Slowdown 百胜在苏宁店内开餐厅

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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

 

Mid-Sized Players Join China Fast Food Feast 国外中小快餐企业抢滩中国市场

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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

◙ Starbucks Raises Prices, But Who Cares? 没人会在意星巴克提价

◙ Growth-Hungry McDonalds Explores Risky Franchising Route

Yum’s New China Strategy: Fill Up With Gas, Food

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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

Little Sheep Left Waiting at Regulator’s Door 小肥羊仍在监管机构大门外苦等

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More than half a year after announcing its plan to purchase top Chinese hot pot chain Little Sheep (HKEx: 968), Yum Brands (NYSE: YUM), owner of the KFC and Pizza Hut chains, has learned it will have to wait just a bit longer for the anti-monopoly regulator’s decision on the deal — an potentially ominous sign for a regulator that has shown a past tendency to consider nationalistic elements alongside commercial ones in such deals. But at the end of the day, the fact that the regulator hasn’t vetoed this deal yet indicates some debate is probably taking place in the organization, and I still think the chances of an approval are greater than 50 percent, especially as China tries to show its commitment to fair trade in light of US Congress legislation that would punish Beijing for manipulating its currency. According to a new statement filed by Little Sheep to the Hong Kong Stock Exchange, the initial 30 day period for China’s Commerce Ministry to consider Yum’s purchase, worth some $500 million, ended on July 27. (company announcement) The ministry elected to extend that period by another 60 days, which again ended on September 27. Still lacking a final determination, the regulator again exercised its final option for another 60 day extension, meaning a final decision should come by late November. So what does all of this mean? Shareholders clearly don’t think it bodes well, bidding down Little Sheep stock by 12 percent to HK$5.39, or 17 percent below Yum’s offer price of HK$6.50 after the announcement. From a monopolistic standpoint, Yum is clearly China’s largest restaurant operator and would add to that position, but only slightly, by buying Little Sheep. But based on past behavior, I suspect nationalistic concerns are more at play here, as Little Sheep is China’s biggest hot pot chain and a promising home grown brand. Still, I think that at the end of the day fair trade advocates at the Commerce Ministry will win out to their nationalistic peers in this decision, as China seeks to show the world it is willing to play by global rules, and we should see an approval of this deal just before the late November deadline.

Bottom line: Delays in government clearance for Yum’s pending purchase of Little Sheep indicate internal debate at the anti-monopoly regulator, but the deal should finally get a green light next month as China tries to show its commitment to fair trade.

Related postings 相关文章:

◙ Yum China: Little Sheep Getting Tangled in Trade Friction? 百盛收购小肥羊案卷入中美贸易摩擦？

◙ Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊

◙ China’s Heavy Hand Leaves Investors Wary on YUM’s Little Sheep Buy 百胜难吞小肥羊

Starbucks Wide Open for China Business with New JV 星巴克在云南建合资厂

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Less than a year after announcing its first major initiative to nurture China’s domestic coffee-growing sector, Starbucks (Nasdaq: SBUX) has come back with announcement of a more substative joint venture to buy coffee beans from the country for use both at home and abroad. (company announcement) This move is clearly as much about public relations as it is about coffee from southwest China’s Yunnan province, which undoubtedly has potential to compete with some of the world’s other top growing regions but is more significant because it carries the “made in China” label. Let’s take a look at the numbers: even with its current aggressive expansion plans, Starbucks, a relative latecomer to China, will  have a relatively modest 1,500 stores in the country by 2015, less than a tenth of its current global store count. By comparison, Yum Brands (NYSE: YUM), parent of the KFC and Pizza Hut chains, now derives a full one-third of its global revenue from China and counts the country as its second largest market after the US. (previous post) Anyone who does the math will see that obviously Starbucks sees lots of room for growth in China, especially if it can take a cue from Yum and McDonald’s (NYSE: MCD) and localize its products to better suit China’s tea-drinking culture and develop more products at a middle price range to meet demand from less affluent smaller cities. Having a coffee-buying base in Yunnan could help to lower prices by buying a more local product, and would also be a strong selling point to Chinese eager to see their higher-end products like home-grown coffee compete on the global stage. On the whole, this joint venture looks like a good, cost effective way for Starbucks to tell China it’s committed to the country for the long run, as it seeks to replicate the success of Yum and McDonald’s in this fast growing market.

Bottom line: Starbucks’ new China joint venture underscores its commitment to the country, which could easily become its second largest global market over the next decade.

星巴克<SBUX.O>最近宣布，将成立合资厂，从中国购买咖啡豆，供应国内外。毫无疑问，云南有与其他咖啡豆种植区竞争的潜力，这一举动不仅仅是公关需要，更重要的是，在云南购买咖啡豆意味着“中国制造”。让我们看看这组数字：虽然星巴克的扩张计划野心勃勃，但在2015年前，星巴克在中国的店铺也将总共只有约1,500家，这还不及其在全球店铺数量的十分之一。相比之下，肯德基和必胜客的母公司百胜<YUM.N>收入的三分之一来自中国，并将中国视为其仅次于美国的第二大市场。任何明眼人都能看出来，星巴克在中国看到了很大的增长潜力，尤其是如果借鉴百胜和麦当劳的经验，将其产品本土化，以适应中国的饮茶文化，并开发更多中端价位的产品，满足不那麽富裕的较小城市的需求，发展潜力更是很大。在云南成立合资公司，购买当地产品，有助於降低其产品价格，对於那些希望看到本土咖啡进军全球市场的中国人来说，这也是一个有力的卖点。总的来说，对於想复制百胜和麦当劳在中国市场成功的星巴克来说，这个合资公司看似是星巴克向中国承诺致力於长期开辟该国市场的经济又有效的途径。

一句话：星巴克在中国成立新合资公司，意味着星巴克承诺要长期开辟中国市场，这可能让中国在未来十年成为其在全球的第二大市场。

Related postings 相关文章:

◙ Starbucks, Maxim’s Divorce: Bitter Ending or Sweet Times Ahead? 星巴克与美心闹“离婚”

◙ Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊

◙ Starbucks China Expansion: New Brew Needed to Serve Up Success