[Marxism] KFC spreads its poison in China...

[davidquarter@xxxxxxxxxxxx]

http://news.yahoo.com/news?tmpl=story&u=/ap/20050116/ap_on_bi_ge/kfc_china

Demand for KFC Soaring in China

Sun Jan 16, 4:13 PM ET   Business - AP


By BRUCE SCHREINER, Associated Press Writer

LOUISVILLE, Ky. - China's relentless appetite for the colonel's chicken has KFC 
on
a building boom in the world's most populous country, with 1,200 locations, 
soaring
profits and a menu that mixes in bamboo shoots and lotus roots.



At a time when its sales in the United States are struggling, KFC is dominating 
even
rival McDonald's in China and turning the goateed visage of Kentucky Fried
Chicken founder Colonel Harland Sanders into a ubiquitous symbol of America.


"We are really positioned as a part of the fabric of life in China," said David 
Novak,
chairman and chief executive of Louisville-based Yum Brands Inc., parent company
of KFC.


Yum's operating profits in China exceeded $200 million in 2004 ? more than half
the company's burgeoning international profits. And the pace of 275 locations
opened in the country last year is expected to be matched in 2005.


Sam Su, president of Yum's China division, called China "the ultimate
marketplace." He predicted that as the Chinese economy grows, it will someday
surpass the number of KFC restaurants in the United States, where there are 
5,453
stand-alone locations and 1,277 multibrand outlets featuring other Yum brands.


"In many parts of China, the local municipal governments actually view the 
arrival
of a KFC as a sign of the city coming of age," Su said in a phone interview from
China.


A restaurant industry analyst said KFC's recipe for success in China includes a 
solid
business plan guided by a management team intact for years.


"For many companies, China is a hope and a dream ? maybe a very realistic hope
and a dream ? but for Yum it's reality today," said Joe Buckley with Bear 
Stearns &
Co. "It's an important piece of the company that still has plenty of growth 
potential
ahead of it."


Yum's China operations represented about 15 percent of the company's operating
profits in 2004, a figure expected to reach about 18 percent this year, Buckley 
said.


He said Chinese fast-food consumers' preference for chicken has contributed to
KFC's success: "It's an advantage to be the chicken brand, given that scenario."


KFC consumers in China can dig into buckets of original recipe chicken, but KFC
has tailored some dishes specifically to Chinese tastes. There's a twister 
sandwich
styled after the way Peking duck is served, but with fried chicken inside along 
with
cucumber shreds. Instead of cole slaw, which never caught on in China, customers
can order seasonal vegetables. In spring, it's bamboo shoots; in summer, lotus 
roots
are on the menu. And in colder months, there's rice porridge and winter soup.


Other Yum brands also are vying for Chinese customers. The company opened at
least 39 Pizza Hut restaurants in China last year, for a total of 146 outlets, 
and Su
predicts a bright future for the chain.


"With the rising income and economic growth, there's no reason to doubt that 
Pizza
Hut will be a huge brand," he said.


Taco Bell is testing a casual dining format in China, and Yum is even dabbling 
in
Chinese fast-food with one test restaurant in Shanghai.


"We are working on a model that hopefully can work across China," Su said of
Yum's Chinese fare. "If that happens, it's going to be a huge business 
opportunity."


But KFC is clearly at the forefront of Yum's expansion. More than 100 KFC
restaurants have sprung up in both Beijing and Shanghai. The chain has spread to
every Chinese province and region except Tibet. KFC restaurants have reached
280 Chinese cities, compared to just 20 cities in 2000. Yum's revenues in China
topped $1 billion last year, up from $261 million in 1998.


Elsewhere around the globe, KFC opened about 50 new restaurants last year in
Britain, another high-growth market for Yum, raising its total chicken outlets 
to 660.





Yum had operating profits of $116 million in Britain and $55 million in Asian 
markets
excluding China last year, with KFC representing 60 percent of the amount.

In the United States, KFC has struggled in a crowded fast-food sector, including
burger chains that have added chicken to their menus. KFC's domestic same-store
sales have trended mostly downward the past two years, though Novak predicts a 1
percent to 2 percent uptick in 2005.

In China, KFC has outpaced rival McDonald's Corp., which has its own expansion
plans. McDonald's has more than 600 restaurants in China and plans to open about
100 more this year, comparable to 2004. Its long-range plans call for 1,000
restaurants in China by 2008.

"We're very bullish on China," said spokesman Walt Riker. "We're aggressively
expanding the business."

McDonald's sells a "significant amount of chicken" in China, but also offers 
beef,
pork and fish, giving Chinese customers "unique choice and variety," Riker said.

Most KFC restaurants in China are either company-owned or joint ventures
involving the chain. The company is looking to recruit more franchisees, Su 
said,
but added, "we are expanding faster than we are able to find good franchisees."

Novak said Yum has a big head start over its competitors in China and intends to
build on that advantage. "We are truly walking the talk in terms of taking this
market," he said.

With its growth in China, the brand has come a long way since Sanders perfected
his original recipe, with a secret blend of 11 herbs and spices. The colonel's 
face
now is displayed on signs and KFC packages across China, though hungry
customers might be fuzzy about exactly who he is.

"I think most people would recognize he's an old gentleman who developed some
great recipe of food and was the founder of KFC," Su said.

___

On the Net:

www.yum.com





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