The fast food chains, KFC, Taco Bell, and Pizza Hut, while not prospering in our economy, are showing investors that they need to turn their attention outside of the US. YUM Brand, the restaurant chains' parent, third-quarter earnings are likely to demonstrate that the business is increasingly international, and specifically Chinese. The China locations are expected to gross 5% in sales, where as the US branches are only expected to rise 1% or 2%. This data points to the fact that YUM Brand will soon find most of its revenue coming from China, rather than the US.
Yum's profits point to a shift in consumer spending from the Western economies to Asia and Latin America. As Kelly Evans, the author of this post says, "the transition of those nations from export-led growth toward consumer-driven economies bodes well for retail and restaurant demand". But there are very few publicly traded US companies that are set to take advantage of this trend. For example McDonalds, an international competitor of YUM brands, only earns 20% of their sales from Asia where as YUM generates 36%. Also Burger King is private and Starbucks and Domino's Pizza both have smaller overseas operations. Although Yum's stock may be expensive, its "long-term, global growth prospects look tasty indeed".
This article makes perfect sense to me. Asian countries have increasingly growing populations which demand more and more sources of food and YUM brands has capitalized on this fact. I think this shows a movement towards other companies opening more branches overseas that will increase their revenue and increase their stock prices. I believe that more companies should take advantage of our global economy in order to keep their sales up and broaden their audience.
http://online.wsj.com/article/SB10001424052748704847104575532414070566570.html?mod=WSJ_FoodAndTobacco_leftHeadlines#articleTabs%3Darticle
I was actually considering this article for this week's blog. It is fascinating to think that Taco Bell, Pizza Hut, and KFC are joined together to corrupt the nation and the globe- since they are going to China, and now effecting their health. I remember the year that Big Brown won the Kenutcky derby (2008) and learning about Yum Brands. I personally have never heard of this giant merger. Only recently have I seen KFC and Taco Bell under the same roof.
ReplyDeleteThis article shows a company taking advantage of a growing population. However, for a company to grow 30 percent in one of the worst financial years ever recorded is beyond impressive. Hopefully they continue to increase, and we could definitely use this article to convince the "big spenders" with deep pockets for the term paper.
I also think this article shows how a company can stay strong through difficult times, because how many companies can look back at a financial year, being in the Hotels, Restaurant, and Leisure industry, and notice that they have drastically changed their ways for the better of the company.
I think this is a great article, it is eye-opening. As I've been looking for articles over the past weeks for these blogs, I've noticed a lot of news about YUM Brands. The company is constantly in the news as "one of the biggest competitor of "this" company or of "that" company." I also agree that YUM Brands has played the business game very well over the past couple of years. I think KFC, Taco Bell, and Pizza Hut are finally getting the slap in the face they need to expand their companies overseas. The Asian market is prospering quickly (as learned in economics) and it would be idiotic for these fast food companies not to take advantage of that.
ReplyDeleteGlobalization is a good idea for companies like YUM because it increases their revenues, and lowers prices for consumers by increasing competition. In order for other companies to increase their revenues, they must join the market in other areas of the world.
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