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Playing The India Growth Story Via The Fast Food Chains

|Includes: DNKN, DPZ, MCD, Yum! Brands, Inc. (YUM)

India and China have a strong growth story both in terms of GDP and Population. YUM Brands and McDonald's have had significant success in China. In 2011 YUM had 4500 restaurants in China that generated half of YUM's operating profits. China will have 2000 restaurants in China by 2013.

India is a far different landscape. The per capita incomes are still low but are fast gaining momentum. There is a large vegetarian population and red meat is still not an option. Infrastructure is poor in terms of cold storage and transport systems. There is also the "value conscious" customer who has a lot of alternate cheap options.

As the growth story unfolds, we see families work long hours and also embrace eating out as an option. MCD and YUM have been in the subcontinent for a decade or more and finally getting their act (or second act) right. Food Hygiene is finally a factor with the younger population. There is also the whole "Mall" centric lifestyle that has taken over the Tier I and Tier II cities in India.The Indian population is one of the youngest in the world and 60 percent of India's 1.2 billion residents are under the age of 30, and this is the sweet spot for fast food players. In India YUM now has 215 Pizza Huts, 156 KFC's and 3 Taco Bells. It is forecasting 2000 units with a total investment of $1 Billion by 2020, an investment similar to China in their early days.DPZ has been one of the more successful Pizza delivery chains with over 440 stores by end 2011. Their forecast calls for building 80 new stores in 2012. DPZ operates via its master franchisee Jubilant Food Works. They also have the rights for Dunkin Donuts and have plans to expand this chain. Their stock has been on a tear in the past year and is one of the hottest stocks to list in BSE since 2010.All these companies have localized their products, price, and formats. As this young nation embraces the western lifestyle I believe they should produce phenomenal returns.

Disclosure: I am long DPZ, DNKN, YUM.