Earnings report

After China, India could be KFC’s next big market

July 10, 2013
July 10, 2013

On July 10, Yum Brands, the parent company of KFC, Pizza Hut and Taco Bell reported yet another quarter of falling sales in China—down 20% at comparable stores, which translated into a 16% drop in earnings for the second quarter.

As we’ve said before, it’s time for Yum—which made 42% of its total profits in China last year—to move beyond China, where food-safety scandals and saturation in the fast-food market are taking a bite out of its business. That’s why it is good news today that Yum opened its 500th store in India, a Taco Bell in a shopping mall in Bangalore. Yum aims to double its stores in the country by 2015.

Fast-food retailers have been eyeing India, which like China, is home to an expanding middle class and growing cities. (The country’s urban population is slated to double over the next decade.) Yum started its expansion in India last year, announcing plans to spend $100 million over the next four to five years and breaking out its India business as separate division, similar to its China operation. Indeed, Yum has said it is using its China strategy as a model in India. Its Indian stores sell fare adjusted to local tastes like Tandoori paneer pizza, or veggie sandwiches. KFC in China has sold local fare like egg tarts, chicken in Sichuan sauce, and egg soup.

So far, so good. KFC competes closely with McDonald’s, which has long been the Western fast-food market leader there. Growth has been relatively strong with total sales, including those at Yum franchises, up 24% in the second quarter. As long as Yum doesn’t mistranslate “finger-lickin good” like it did in China, India could be a promising new market.

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