One U.S. Chain's Unlikely Goal: Pitching Chinese Food in China [Wall Street Journal]
Summary: Yum! Brands is promoting a new type of fast food restaurant in China, diverting from its KFC and Pizza Hut-brands. Instead, with its East Dawning restaurant, it is attempting to localize by offering specialized Chinese dishes and decorating with a Chinese theme, while offering typical Yum! service such as speed and cleanliness. The president of Yum! China comments, "I think we are as close as can be at being local." Yum! already operates about 2,000 KFC and Pizza Hut restaurants in close to 400 Chinese cities, which is nearly 3x McDonald's presence, and says it aims for East Dawning to become the nation's largest Chinese fast food chain. China is becoming an increasingly important driver of Yum!'s earnings, accounting for about 16% of profits last year. The outlook for overall fast food restaurant sales growth in China is robust according to a Chicago-based consulting firm, with growth projected in the double-digits through at least 2010. Some challenges East Dawning faces include: difficulty in finding new shop locations, pricing, its menu restricts some popular dishes due to emphasis on speed, and growing competition.
Related links: Conference call transcripts: Yum! Brands F3Q06 and McDonald's Q3 2006 • Are Yum!'s China Margins Sustainable? • Yum!'s Quarterly Call Focuses on KFC, Pizza Hut & New Businesses in China • Yum! to Follow SBUX, No More Monthly Same-Store Sales Reports • McDonald's on its China Drive-Thru Strategy • McDonald's China Shows the Sexy Side of Beef (Article discusses McDonald's different approach to China and its attempt to differentiate from Yum! Brands.)
Potentially impacted stocks and ETFs: Yum! Brands (YUM), McDonald's (MCD), PowerShares Dynamic Food & Beverage ETF (PBJ), PowerShares Dynamic Leisure & Entertainment ETF (PEJ)
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