China boosts Yum Brands

08 October 2009

BEIJING: Yum Brands, the US restaurant company which operates a number of major chains, including KFC and Pizza Hut, has enjoyed a substantial increase in its sales levels in China, helping offset slowdowns in some of its other key markets.

When reporting its latest quarterly results, the American firm said that its Chinese revenues rose by 11% over the last three months, compared with a contraction of 5% in its home country.

Similarly, operating profits in the fast-growing economy climbed by 32% on an annual basis, measured against an improvement of 15% worldwide.

Yum Brands opened a total of 267 new outlets between June and September this year, some 88 of which were located in mainland China.

It also launched more than 500 restaurants in the world's most populous nation during 2008, when it posted combined revenues of $469 million (€320m; £295m) in China, Thailand and Taiwan.

Overall, its sales levels in those three countries were up 20% last year, a figure that reached 24% in 2007, and 23% in 2006.

By contrast, its international unit, which houses its operations in areas including Australia, Canada, Japan and the UK, posted an average annual growth rate of 9% over this period.

David Novak, chairman/ceo of Yum Brands, said "China and Yum Restaurants International are on track to open over 1,400 international new units this year."

"We are especially pleased that our China team achieved margins near record levels with high average unit volumes."

The Chinese government's stimulus package was argued by analysts to be one key reason for the restaurant group's strong performance.

Matt Robinson, of, the analysis and forecasting company owned by Moody's, said the impact of this policy "gradually flows through to virtually everywhere in the Chinese economy."

Retail sales in China rose by 15% in August year-on-year, he added, indicating that consumer spending is continuing on a positive trajectory.

"That is extraordinary growth in a period that is representative of a global economic downturn," Robinson said.

"It reflects the urbanisation of China and the ongoing increase in living standards … It's probably one of the driving reasons why anyone increasing market presence in China is doing particularly well."

Alaistair Chan, an associate economist at, argued consumption levels had demonstrated a "stable, robust sort of growth", and that underlying demand should also continue in the long term.

Data sourced from Forbes; additional content by Warc staff