KFC Hungry For EM Growth


US- based fast- food company Yum! Brands has outlined plans to target rising demand in Africa as part of its ambitious emerging market (EM) growth strategy. Set to expand operations primarily with its KFC chain, the company is keen to capture a slice of the continent's increasingly dynamic consumer growth story, spurred by large, youthful populations, rising incomes and demand for Western - style fast - food products.

For the company , which also owns the iconic Pizza Hut and Taco Bell chains, EMs have played an increasingly central role in the pursuit of growth b eyond maturing Western markets. Yum built 380 new international outlets last year, with 88% of this development located in high - growth EMs , a clear indication of the company's commitment to securing long-te rm international growth opportunities .

Reporting a difficult start to 2013 in its key China market , first-quarter same - stores sales at KFC drop ped 24 % year-on-year (y-o-y) and operating profit sliding 41% in the midst of an outbreak of a vian flu. Operating separately from Yum's international division, losses here are crucial, with the China division accounting for 50.6% of group revenue in FY2012. While the company remains confident that th ese difficulties will pass , as they did following a similar scandal in 2005, efforts to expand in Africa come at an opportune time for the fast - food leader .

Up And Down Recently
Yum! Brands Daily Share Price (US$)

With more than 750 KFC outlets in South Africa (and plans to open another 45 this year), the company is well positioned to target further growth opportunities across the continent. Yum recently entered some of the region's largest markets, namely Kenya, Nigeria and Zambia, and the consumer outlook here continues to excite fast - food firms looking for international growth. With large, youthful populations, increasing urbanisation and rising incomes, these countries continue to provide fertile ground for companies looking to push convenient, affordable food options. And with Yum's Africa operations registering an 18% y-o-y rise in sales in Q113, growth here is a trend we expect to continue over the medium term .

China, US Continue To Dominate
Yum! Brands Group Revenue By Region (% of total)- FY2012

In BMI 's view, Yum! Brands' intensifying focus on EMs via its KFC chain is likely to offer promising growth potential moving forward, with Africa will play an increasingly vital role. Given the company's significant exposure in China and the US, diversifying further into high - growth markets such as India and the Middle East will mean the company is better positioned to weather slowdowns in the US (KFC has struggled to capture same - store sales growth in recent years) and a continuingly fragile food safety landscape in China. Although Africa in particular will provide some challenges owing to the varying needs of the vast continent ' s individual markets, the long-term growth opportunities here continue to excite.

Impressive International Reach
Breakdown Of Yum! Brands' International Division (% of total sales) FY2012
This article is tagged to:
Sector: Food & Drink
Geography: Africa