Yum! posts strong revenue growth

Yum! Brands Inc, the parent of KFC and Pizza Hut restaurant chains, achieved revenue of $2.72 billion in the first quarter, an increase of 7.5 percent year-on-year, according to its earnings report released on its website Wednesday (Beijing time).

Net profit grew 18 percent year-on-year to $399 million, helped by a rebound in the China market, according to the report.

Revenue for Yum!'s China division, which accounts for half of its sales, jumped 20 percent to $1.38 billion, and its operating profit surged to $285 million, up 85 percent year-on-year.

The China division also saw a 9 percent year-on-year same-store sales growth, fueled by increases of 11 percent at KFC and of 8 percent at Pizza Hut. Yum!'s biggest rival, McDonald's Corp, reported Tuesday (US time) that its same-store sales in China increased 6.6 percent year-on-year in the first quarter.

The global fast-food industry is going through a slowdown, as consumers switch to healthier diets which involve less fried food and soda. That has forced global restaurant chains to invest more generously into the booming China market, experts said.

Yum! has about 6,300 restaurants in China and around 4,500 of them are KFCs, which had suffered a 24 percent year-on-year same-store sales drop in the first quarter of 2013.

KFC's sales and profits in China were significantly impacted by the fear of the avian flu last year, and reports of a small portion of KFC chickens containing chemical residues in late 2012.

But the negative effects have been fading, leading to a recovery in sales, Yan Qiang, a partner of Beijing-based Hejun Consulting, told the Global Times Wednesday.

"Yum! is clearly on its way to a strong bounce-back year," David Novak, chairman and CEO of the firm, was quoted as saying in the earnings report, "Looking ahead, we have significant building blocks in place in China and each of our divisions to drive sales and profit growth this year and beyond."

Jonathan Blum, Yum!'s spokesman, attributed KFC's sales boost to a crispy chicken promotion advertised with Chinese celebrities, Reuters reported Wednesday.

KFC is also building up the sales momentum in China by launching a menu revamp including 15 new products since the beginning of April.

Zhou Yi, a 24-year-old Beijing resident who is a loyal consumer of KFC, told the Global Times Wednesday that the frequently updated menu is the main attraction to her.

KFC has been making great efforts in localization by continuously launching Chinese style fast food, which has helped its sales growth, according to Yan.

Other than new products, KFC has tried different methods to win back customers, including more advertisement and cheap lunch meals, Yan said.

McDonald's is also trying to attract Chinese customers by introducing local elements. The company unveiled a new flagship restaurant "EATERY" in Guangzhou, South China's Guangdong Province, over the weekend.

The flagship restaurant mingled McDonald's familiar color blocks with traditional Chinese elements in interior design.

The new design is aimed at attracting young consumers aged below 25 as well as children after McDonald's business in China began to show slowdown since 2012, partly due to a diversion of consumers to the Chinese fast-food chains such as Zkungfu and Shunkouliu.

Although there are many local fast-food chains entering the competition, the growing Chinese fast-food market is still large enough for the players, partly because young people are less interested in cooking for themselves, according to Yan.

Yum! opened 123 new units in the first quarter and plans to open at least 700 new restaurants in China this year in a bid to further capitalize its leading position in the largest retail market in the world, according to its earnings report.