360° Coverage : YUM China Swings to Recovery

2 Updates
YUM China Swings to Recovery
Photo Credit: Forbes Business

YUM China Swings to Recovery

Jan 7 2014, 4:28am CST | by

Research is contributed by Yifeng Mao, the Head of Research at Goldpebble Research based in Singapore.  Opinions expressed are our own. Disclaimer: We currently do not have a position in YUM.  KFC...

Filed under: news

 
 
 

41 weeks ago

YUM China Swings to Recovery

Jan 7 2014, 4:28am CST | by

Research is contributed by Yifeng Mao, the Head of Research at Goldpebble Research based in Singapore.  Opinions expressed are our own.

Disclaimer: We currently do not have a position in YUM

KFC China

According to the Goldpebble Consumer Product Monitor, YUM has quietly increased prices by 0.5 to 2 RMB, depending on the item on the menu recently.  We followed up with store visits in Beijing, Shanghai, Shandong, Chongqing and our findings have confirmed price hike of around 5% year-on-year.  The price increase has been unannounced and rarely noticed.  We suspect it is to avoid further friction with the government and local media.

We are also seeing new product offerings, including golden extra-crispy chicken, larger buckets of chicken wings and new openings of dessert corners to cross-sell to existing traffic within stores.   KFC China has started to swap out its main product of ‘finger licking good’ fried chicken to golden extra-crispy chicken, to lower the cost.  Golden crispy chicken is easier to make and spices are locally sourced.

As such, we now expect  approximately 5% year-on-year SSSG (Same Store Sales Growth) for KFC China in December and into 2014, higher than the street consensus.

The long waited recovery follows a catastrophic year of endemic food hygiene and safety concerns, starting from the 45-day chicken scare in Oct 2012 and a CCTV expose on the issue in Dec 2012. That was quickly followed by the bird flu outbreak and scandals over bacteria-ridden ice cubes, tissue paper with fluorescent agents, and barrels contaminated with whitening chemicals in the spring of 2013.  I have provided detailed analysis of the events throughout 2012 in my latest book Tiger Woman On Wall Street.

As a result, SSSG (same store sales growth) for KFC China slumped to -20% in Q1 and Q2 2013 and -10% in Q3 2013. It further narrowed to 0% growth in November.  YUM China management appears to be under increasing amount of pressure to re-deliver growth before Q2, a seasonally weak quarter.

Pizza Hut

Both Pizza Hut brands (Pizza Hut Casual Dining, Pizza Hut Home Service, Pizza Hut Express) continue to grow at approximately 10%. Pizza Hut brands combined represents just under 10% of YUM China’s total revenue. However, they are an important growth driver in China.  In 2013, among approximately 400 new stores openings, half are Pizza Hut stores.

In China, Pizza Hut offers a premium dining experience, with localized flavors and alcohol offerings, and the chain is popular among young Chinese as a venue for dates and parties.

Long-Term Trends Still Cautionary

Nevertheless, we continue to believe that the KFC brand has passed the peak cycle of growth in China especially in the populated big cities. In addition, the strengthening of food safety practices by the local and central governments implies that supermarkets and established chain restaurants will be frequent targets of rigorous inspections if problems are found. Relative to the local businesses, multinational operators are more likely to be targeted of the heightened crackdown.

According to Goldpebble’s broad Consumer Pricing Monitor, the food price inflation in China is likely to be higher than the reported CPI (Consumer Price Index) of 2.5%, led by food, wages and commercial rent.  YUM China’s profit margins are unlikely to rebound back to the 20% level in 2012.

Source: Forbes Business

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and M ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

How stress ups depression risk
New York, Oct 21 (IANS) The immune system is crucial to fend off diseases, but if it is hypersensitive to stress, the risk of depression may go up, says new research.
 
 
Male IBS patients report more social stress
Washington, Oct 21 (IANS) Male patients with irritable bowel syndrome (IBS) experience more interpersonal difficulties than their female counterparts, a study found.
 
 
Why people accept inequality
London, Oct 21 (IANS) Inequality can be fair too and the brain knows it, a new research has found.
 
 
Pentagon announces rapid response team for Ebola
Washington, Oct 21 (IANS/EFE) The Pentagon during the weekend announced the formation of a specialized 30-person military rapid response team to combat Ebola in the US.
 
 
 

Latest from the Network

1,074 new dengue cases in Chinese province
Beijing, Oct 18 (IANS) China's Guangdong province has reported 1,047 new cases of dengue fever, health authorities said Saturday. Six people have already died in Guangdong -- five in Guangzhou and one in adjacent...
Read more on Business Balla
 
Blake Lively 'always' wanted to be mum
Blake Lively has ''always'' wanted to be a mother. The 27-year-old actress is expecting her first child with husband Ryan Reynolds and she admits she's been dreaming of this moment since she was a youngster. Speaking...
Read more on Celebrity Balla
 
Kris Jenner 'torn apart' by Bruce's new relationship
Kris Jenner feels ''torn apart and angry'' that Bruce Jenner is dating her former assistant. The 58-year-old matriarch split from the 64-year-old Olympic gold medalist last October following 22-years of marriage but is...
Read more on Celebrity Balla
 
Cheryl Fernandez-Versini won't move to France
Cheryl Fernandez-Versini doesn't want to move to her husband's home country of France. The 'X Factor' judge, 31, who comes from Newcastle, is adamant she won't be relocating any time soon to suit her new spouse Jean-...
Read more on Celebrity Balla
 
Lance Bass sets wedding date
Lance Bass has set a date for his wedding. The former *NSYNC singer and his partner Michael Turchin, who have been dating for two-and-a-half years, are to tie the knot on December 20, 2014, a representative for the...
Read more on Celebrity Balla
 
Nepal avalanche toll reaches 39
Kathmandu, Oct 18 (IANS) At least 39 climbers died while hiking on a key Nepali route after it was hit by a major snowstorm and avalanches earlier this week, BBC reported Saturday citing officials. Over 350 stranded...
Read more on Politics Balla
 
Jake Gyllenhaal says society is complicit in 'nightcrawling'
Jake Gyllenhaal says almost everybody in society ought to relate to his new movie 'Nightcrawlers'. The eagerly-awaited film concerns those people who monitor police scanners and then race to crime scenes to film eye-...
Read more on Movie Balla
 
India eves look for first win in AFC U-16 qualifiers
Dhaka, Oct 18 (IANS) India will hope to register their first win of the 2015 Asian Football Confederation (AFC) Under-16 Women's Championship qualifiers when they take on hosts Bangladesh in a crucial encounter at the...
Read more on Sport Balla
 
Moyes mulling return to management
London, Oct 18 (IANS) Former Manchester United manager David Moyes said that he is ready to revive his managerial career six months after being sacked by the 'Red Devils'. "I am ready to return. I have enjoyed the...
Read more on Sport Balla
 
Ebola fears loom over Ghana hosting AFCON
Accra (Ghana), Oct 18 (IANS) The Ghana Medical Association (GMA) cautioned the government Saturday against hosting the 2015 African Cup of Nations (AFCON), despite a request by the Confederation of African Football (...
Read more on Sport Balla