October 29, 2013

 

Yum! to establish foothold in Indian market amid strong competition in China

 

 

Fast food company, Yum! Brands, is planning to secure a strong customer base in India through an outreach to a younger demographic of the country's population.

 

The development came as Yum! faces increasing competition from local food chains in China.

 

The parent organisation of KFC, Pizza Hut and Taco Bell has released its strategy for the South Asian nation while announcing the opening of a restaurant in Goa.

 

According to David Novak, chairman and CEO of Yums!, the Indian market could contribute to the company's overall sales by 2015 when it reaches a thousand stores and helps generate a a billion dollars in revenue.

 

As the sixth largest poultry consumer market in the world, India is seeing a rapidly growing middle class and has a potential marketplace of 1.2 billion people. About 65% is under the age of 35, a demographic which Yum! is focusing its brand loyalty on.

 

Under Yum!, chicken-based fast food chain, KFC, is presently the fastest growing quick-service restaurant brand in India, having tripled in growth over the last five years to 296 outlets. In addition, Yum! is expected to make US$1 billion in system sales in two years.

 

Still, Novak believes there are potential for Taco Bell's expansion in the country. "KFC is currently our lead opportunity , but we think Taco Bell could have a bigger potential here over the long term seeing the huge population of vegetarian consumers," he said. "We are localising a lot of the menu for Taco Bell as we build the brand. Taco Bell is a big, scalable brand of the future for India."

 

Meanwhile, in China, KFC, previously a dominant brand there alongside McDonald's Corporation, is losing its foothold to homegrown fast-food chains. McDonald's has recently slowed down expansion while Yum! warns of a hindered recovery this month due to the country's economic weakness.

Food scares during December 2012 and a bird flu outbreak have also affected sales as the company posted a 68% drop in quarterly profits. Yum! made a net profit of US$152 million in the three months towards September 7, 2013, with sales in China falling 11% from a year ago.

About three quarter of the company's revenue came from operations in China. At a combined total of 5,600 KFC and Pizza Hut outlets, Yum! holds a 6.5% share in the country's US$174 billion fast-food market.

 

Domestic chains like Dicos, Country Style Cooking and Kung Fu Catering have seen steadier growth and are eroding the dominance of American brands. In comparison to KFC and other Western brands, such chains are reported to offer healthier and cheaper meals which have more variety and incline closely to local tastes.

 

Yum! currently has more than a thousand KFC, Pizza Hut and Taco Bell outlets across 100 cities.