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Yum! Brands: KFC in China

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nadine jang

on 23 January 2013

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Transcript of Yum! Brands: KFC in China

Carla Romero Nadine Jang Yum! Brands Founded 1997 in Louisville, Ky.
World's largest restaurant company with 38,000 restaurants in over 120 countries
1 million associates.
Yum! is ranked #213 on the Fortune 500 List
$12 billion in revenue in 2011. Current Chairman and Chief Executive JOB TITLE: Executive Chairman, Chief Executive Officer, and President and Chairman of the Executive & Finance Committee at YUM! Brands Inc.
-Served as Chief Operating Officer of Pepsi-Cola North America, and Executive Vice President of Marketing and National Sales for the Pepsi-Cola Company.
-Was an Independent Director of JPMorgan Chase & Co. since 2001.
-Served as a Director of Bank One Corporation.
-Novak holds a B.A. degree from the University of Missouri.
-Novak was named 2012 Chief Executive of the Year by Chief Executive magazine Yum! Brands Inc. Mr. Su joined KFC in May 1989 as
its Regional Marketing Director for
North Pacific and doubled up as
Acting General Manager for China
in December 1989, when China
KFC had only four units. President of the China Division for Yum! Brands, Inc. Presented by: Strength Weakness Opportunities Threats Yum! Brands
SWOT Analysis Strong brand portfolio
Geographical landscape
Market leading position in China
Overall, strong market position Limited financial leverage
Legal issues Increase in consumer spending in the US
Business expansion in China
Coffee and breakfast growth
YRI acquisition SWOT Analysis: KFC China Strengths Weakness Opportunities Threats Highly competitive nature
Government regulations
Rising manpower costs
Changing consumer preferences Case Study: The Recession... Promoting Healthier Eating Reducing Waste Value Meals Brand Equity
2nd only to McDonalds in Foreign Sales $550M
Strong Cash Flows
Generate $1 B each year
Strong International markets
Strong Franchise and License Fee Revenues for cash flow
Strong trademark recipes
Ranks highest for convenience and menu variety
Largest multibranded restaurant in the world Recent drop in sales for KFC
Failed to rank in top 20 in growth in 2000.
Different regions in China
Healthy life style Growth of 18-24 age demographic
Increase in Chinese median income
New leadership and employee creativity
Increase in delivery service
Balanced menu
Updating restaurants interior Other competitors in China including McDonalds. Other western chains like Subway, Dairy Queen, Burger King, Papa John's, and Starbucks and local Chinese chains like Kung fu and Little Sheep
E Coli disease
Health trend away from fried food
Increasing wage rates directly affect menu prices85% annual employee turnover for fast –food marketInternational Exchange RatesChanging customer demands David C. Novak J. Samuel (Sam) Su Recommendations... Update “I’m pleased to report we remain on track to deliver at least 13% EPS growth this year. Our 2012 EPS growth is driven by double-digit operating profit growth, prior to foreign currency translation, in all three of our major operating divisions: China, Yum! Restaurants International and the U.S. Solid same-store sales growth at each of our divisions and record international new-unit development highlight the quality of our growth.
For the fourth quarter, stronger than expected operating performance from Yum! Restaurants International and our U.S. division is offsetting softer sales in China, where we now expect same-store sales to be negative as we overlap 21% same-store sales growth from last year. Full-year same-store sales growth in China is expected to be 6%. Next year will be another strong year for our China division, given this year’s record development of at least 800 new units and significant innovation in the pipeline, underpinned by world class operations. We are extremely confident Yum! China remains the best growth story in the restaurant industry.
Our leading, global brands are well positioned in the fastest growing emerging markets. We remain focused on the three keys to driving shareholder value: new-unit development, same-store sales growth and high returns on invested capital.” Quote from Mr. Novak himself...
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