Bottom line: Retailers like Yum and Mondelez are increasingly suffering from weak China sales due to a local slowing economy, and are unlikely to return to rapid growth of previous years over the short- to medium-term.
Mondelez in China shuffle
Two separate stories involving major western food retailers paint a gloomy picture for the China market, which is losing momentum in tandem with the country’s slowing economy. One headline has Yum Brands (NYSE: YUM), operator of the KFC fast food chain, announcing results that continued to be weak in this year’s second quarter, despite a major overhaul for its China operation and the fading impact of a major food safety scandal a year ago. The other news has Mondelez International (Nasdaq: MDLZ), maker of Oreos cookies, reportedly making major adjustments to its China operations, in a move that one insider says is the equivalent of lay-offs. Read Full Post…
Bottom line: A potential future spin-off of Yum’s China operations looks like a good move that would give the new company more focus, while McDonald’s China franchising drive also looks good if it can find the right partners.
Investors eye spin-off for Yum’s China unit
China was once the hot story for fast food companies like KFC and McDonald’s (NYSE: MCD), as Chinese consumers flocked to the concept of reasonably priced food that was served quickly in attractive restaurants with friendly workers. But that story has become quite stale in recent years, leading this pair of global heavyweights to look for new China stories to pump up their local business and excite investors.
KFC has been trying to achieve that goal through a major overhaul of its China restaurants over the past year, and now is back in the headlines as some investors call for its parent, Yum Brands (NYSE: YUM), to split off its China operations into a separate company. Meantime, McDonald’s is trying to bring some excitement back to its China story by rapidly accelerating the expansion of its traditional franchised store model in the market. Read Full Post…
The following press releases and media reports about Chinese companies were carried on May 7. To view a full article or story, click on the link next to the headline.
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Third Point’s Loeb Not Pushing For Yum (NYSE: YUM) To Split Off China Business (English article)
Qihoo (NYSE: QIHU), Coolpad Unveil QiKU As Brand For Smartphone JV (Chinese article)
Mobile Ridesharing App Dida Pinche Wins $100 Mln Series C Funding (English article)
Trina (NYSE: TSL) Building $160 Mln Manufacturing Facility In Thailand (English article)
Bottom line: Yum’s new upscale Italian restaurant looks like a smart concept for the China market, but a broader campaign to move its Chinese KFC stores upmarket looks like too little too late.
A year after announcing plans for a major overhaul of its aging Chinese KFC stores, Yum Brands (NYSE: YUM) is adding another prong to its China reboot with the launch of an upscale Italian eatery as it tries to to regain relevance in its most profitable market. Yum’s newest China restaurant brand, Atto Primo, is situated in the heart of the Shanghai Bund, home to some of the city’s oldest and most famous buildings and most expensive restaurants. Yum is calling the restaurant a “lab” for now, but I suspect it could quickly expand the concept with new outlets if it proves popular. Read Full Post…
The following press releases and media reports about Chinese companies were carried on February 5. To view a full article or story, click on the link next to the headline.
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Yum’s (NYSE: YUM) China Sales Fall Less Than Expected, Shares Rise (English article)
Baidu (Nasdaq: BIDU) to Invest $100 Mln In Lenovo Unit Fancy Maker – Source (English article)
The following press releases and media reports about Chinese companies were carried on July 24. To view a full article or story, click on the link next to the headline.
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McDonald’s (NYSE: MCD) Sticks By Meat Supplier OSI After Yum Severs Ties (English article)
SAIC (Shanghai: 600104), Alibaba Partner In Internet Car Initiative (Chinese article)
First Foreign-Invested Hospital Approved, Obstacles Remain (Chinese article)
Phoenix Satellite TV (HKEx: 2008) Announces Profit Warning (HKEx announcement)
Lenovo (HKEx: 992) To Launch, Air Purifiers, Other Smart Devices (Chinese article)
It’s been more than a year since a major food safety scare hit western fast-food operators in China, so we were probably overdue for the latest scandal that is now consuming leading chains KFC (NYSE: YUM) and McDonald’s (NYSE: MCD). Frankly speaking, Chinese consumers are probably so jaded about food safety scandals by now that I don’t know if these latest 2 will really have much long-term impact on either company.
The most disgraceful element this time is the fact that the supplier at the heart of the latest scandal is a foreign-owned firm. Up until now, most of the suppliers who provided tainted food to big foreign supermarkets and restaurant chains were domestic Chinese firms, which usually have lower quality control standards. Thus this latest scandal could really do some damage to the broader image of foreign-owned companies, which are generally seen as more trustworthy than their Chinese peers. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 22. To view a full article or story, click on the link next to the headline.
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Yum (NYSE: YUM), McDonald’s Apologize As New China Food Scandal Hits (English article)
Mobile Internet Users Pass Desktop Users For First Time – CNNIC (Chinese article)
Huawei’s H1 revenue Up 19 Percent Year-On-Year At $22 Bln (English article)
The following press releases and media reports about Chinese companies were carried on July 17. To view a full article or story, click on the link next to the headline.
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WTO Rules Against US Import Tariffs On China Steel, Solar Panels (English article)
GAPPRFT to Regulate Internet TV Platform License Holders (English article)
Sohu (Nasdaq: SOHU) Online Game Unit Changyou To Invest $91 Mln In MoboTap (PRNewswire)
Yum’s (NYSE: YUM) China Rebound Dimmed By India, Pizza Hut Weakness (English article)
Wanda Group Seeks Partners To Form E-Commerce Unit (Chinese article)
Nearly 3 months after announcing its first major overhaul since entering China in the 1980s, fast-food giant KFC (NYSE: YUM) is saying it plans to move upscale as part of a drive to reignite its sputtering growth in the market. This kind of repositioning looks quite shrewd, and plays to a more upscale image that overseas brands naturally receive due to their foreign status. KFC actually enjoyed such upscale status when it first came to China in 1987, when its clean restaurants, friendly service and and quality food were considered superior to the fare at many local eateries at that time. But as China’s economy has boomed and income levels have risen, KFC’s image has moved considerably downscale, and the chain is now considered quite average. Read Full Post…
In a move that was long overdue, Yum Brands (NYSE: YUM) is taking the bold step of relaunching its KFC brand in China in a bid to reverse sinking sales as bird flu season heats up. Yum might like to blame its recent woes for KFC in China on a bird flu scare last year, or on a minor food safety scandal that briefly tarnished its image. But the reality is that the brand is showing signs of age, and really is in need of this kind of a major overhaul. Read Full Post…
