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Yum! bets on China growth - and wins.
Maggie returned with her husband to his family home in Chuzhou on the eve of the Chinese New Year, just in time for the grand opening of the city's first KFC restaurant. She took her husband's nephews to the big event – and waited a half-hour just to get inside.
Having a KFC in their own back yard meant a lot to the folks in Chuzhou, a relatively out-of-the-way Chinese city of 500,000 urban residents. But such enthusiasm for the taste of fried chicken and other fare is typical outside China's major urban centers whenever the U.S.-based fast-food chain opens a new outlet.
A report by KFC's parent Yum! Brands Inc., which also owns the Pizza Hut and Taco Bell chains, said more than 500 new KFC outlets opened in China in 2009, including 140 in central and western regions. More than half the openings were in relatively small, so-called fourth- to sixth-tier cities. Even a few rural villages got new KFCs .
This small-city strategy contributed to a reported 23 percent increase for operating profits in Yum!'s China region, which includes Thailand and Taiwan, making it the most profitable and fastest-growing section of the chain's global empire. The company said 2009 revenues in the Chinese market jumped 18 percent year-on-year, to US$ 3.68 billion.
Meanwhile, the company's 2009 operating profit rose a mere 1 percent in its home base, the United States.
Yum! assets in China include several brands including KFC, Pizza Hut and Taco Bell. But the KFC chain is a unique soldier on the company's front-lines in a bitter battle with fast-food rival McDonald's. Its latest strategy calls for lightening up in Europe and America, while focusing on a showdown with the Golden Arches in China.
In terms of financials and store presence, Yum! is far behind McDonald's back home in the United States. But it's comfortably ahead as China's leading restaurant group. At the end of 2009, Yum! operated almost 2,900 KFCs in China, compared with McDonald's 1,137 locations.
China is home to nearly 35 percent of the 1,470 new restaurants opened by Yum worldwide last year. And in a fourth quarter blitz, 205 opened in China.
Yum! Deputy Director Tim Jerzyk said the company is banking on the rise of China's hungry urban middle class. By 2020, he said, China expects to have more than 500 million middle class city dwellers – Yum!'s consumer base.