Yum! Brands in China: No Wonder Why Childhood Obesity is China's New Problem
Sun Bin has reported about Yum Brand's KFC & Pizza Hut operating profit totaled $58 million in its China division. After reading this watch my video of the new KFC that opened on Gongrentiyuchangbeilu 工人体育场北路 in Beijing on Dec. 25, 2005. This is how full the restaurant is everyday, every hour!
- China GDP: $2tn; USA GDP:13tn. So Yum! China profit is 2.5 times that of USA in terms relative to market size
- per capita profit: China $50/1300 vs USA 130/300. i.e. $0.0385 vs $0.433. Let's factor in the fact that price level in China is lower than US, say 30-50% lower, that still gives at least a 5-7 fold growth potential for China. Scrap 2/3 of rural China, still 2-3 times that of USA.
- Note the cost in China is also lower, and most importantly, the sales/store is a lot higher in China due to higher urban population density ($1.2M/store China vs $0.9M/store USA, see below -- this explains why McDonald's in HK is among the cheapest while also the most profitable franchise in the world
- If you think they got lucky on KFC, let me remind you that it was bird flu year and that Chinese are not very fond of pizza
- Another reason China has a lot of room for growth is that the $50M is mostly from KFC today, i.e. the profitable Pizza Hut has a lot of room to grow (1,378 KFC and 201 Pizza Huts at mid-2005)
(graph from USA Today)
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