Yum! Brands Set To Dominate the Global Fast Food Market Over the last few years, Yum! Brands has opened up an average of 4 new brand stores per day around the globe. “The largest share of this growth is coming from its expansion in mainland China” (Burchett). According to Burchett, in 2010 alone, only counting the franchise Kentucky Fried Chicken stores of the Yum! brand empire, the number of stores open for business increased by 13% to 3,000 restaurants. When compared to global giant McDonald’s “mere” 1,500 stores in China, Yum! is in almost unheard of territory. Yum! rands as a whole have 3 times as many outlets as McDonald’s. With a superior distribution network, Yum! has a presence in over 700 cities in China, giving consumers in the 1. 3 billion people population the opportunity to access its 24-hour delivery service from all corners of the country, not just its well-developed eastern coast. The company has stated that its ultimate goal is to have 20,000 Kentucky Fried Chicken stores up and running in China alone. Numbers like this show why Yum! is one of the most successful foreign brands to enter the Chinese market and why a enthusiastic outlook on stock growth is sensible.
CEO David Novak’s recently famous statement, “I wouldn’t trade our long-term position with any consumer company in the world,” doesn’t seem like an overstatement as this brand has developed a robust global business strategy and plan that appears to be working. I believe that the YUM! brands global business strategy is a recipe for success. The company is customizing their food offering dependent on the location and culture. Clearly they have done a significant amount of research to find out what customers want in varying countries and successfully has implemented new stores based off the consumer research findings.
Yum! brands have taken the term localization and turned it into a blueprint for success. Burchett shares that KFC has a breakfast menu featuring Chinese staples such as youtiao (a donut stick) and bowls of Chinese congee, accomplishing a “Chinafied” selection for patrons. In 2010, the stores introduced rice to the menu for the first time and even have french fries and hamburgers to compete in food markets they haven’t ventured into in the United States. China alone accounted for a massive 54% of Yum! ’s overall $264 million profit in Q1 2011. In addition, Pizza Hut has taken a “fine-dining” pproach in the large markets of India and China, setting the ambience and environment inside the restaurants as more of a mid-to-upper scale place to take a date, rather than the fast-food feel it maintains here locally. Menu items cater to Chinese tastes in China, with seafood and shrimp topped pizzas. In both India and China, customers can order imported wine to go along with their meals. “Chinese customers are clearly responding positively to Yum! ’s menu selection, as revenue at Chinese outlets rose 13% in Q1 2011” (Burchett). By setting itself up as a higher end brand and tapping into local tastes, Yum!
Brands expands globally by thinking locally. There are many other companies that practice similar strategies. For example, if you walk into a Walmart in other countries you will see the same approach. Meaning, the mass retailer conglomerate has taken its consumer based research and modified its product offerings tailoring to the country in which it is located. If you were to walk into local Walmart store in Mexico, you will find a wide variety of salsas, homemade tortillas and local cheeses. Another strong strategic move for companies to become globally successful is to look into leaning more into innovation and acquisitions.
Yum! has launched its own unique Chinese food restaurant, East Dawning, to further dominate the food industry in China, serving only traditional Chinese food cooked in Chinese style pots and dishes. “Chairman and CEO of Yum! China Division, Sam Su, expects East Dawning’s brand association with KFC to have a strong, positive effect on Chinese consumers” (Burchett). Yum! also recently issued a preliminary proposal to take full control of China’s largest hot pot chain, Little Sheep. Already owning a 27. 2% ownership stake in the company, Yum! s seeking to capitalize on the average sales growth of 14% seen in all Chinese restaurants in the first half of 2011 by acquiring one of the most prominent Chinese brands in the food industry. Overall, investors who value diversification within large corporations are praising company’s strategies similar to Yum! ’s moves into new markets. These global business strategies are likely helping these companies avoiding another big hit like the one it took during the recent economic crisis. Many companies need growth in stock that will steadily increase the dividends it pays out to its investors. Yum!
Brands among many other companies is successfully reinvesting what it earns to achieve additional earnings which demonstrates further highlighting the strength of its expansion internationally in emerging markets is critical to its success. Yum! Brands is riding high on the globalization wave and is leveraging its presence around the world into large financial returns, resiliently weathering a setback in its home markets in the United States. Works Cited Burchett, Andrew. “Yum! Brands Set To Dominate The Global Fast Food Market. ” Elite Inside Trader. Elite Investment Group, 10 May 2011. Web. 06 June 2011.