The Week Ahead: Yum! Brands

Tom Hudsonby Tom Hudson
Co-Anchor & Managing Editor

If you want to know how the Chinese economy is doing, look no further than KFC.  Chinese diners are crazy for Kentucky Fried Chicken. That appetite has been a big driver of profits at KFC’s parent company Yum! Brands.  Forty-nine cents of every dollar in earnings for it comes from China.

On Monday, Yum! Brands reports fourth quarter earnings.  It’s expected to show a double-digit increase thanks to its growth overseas, especially China.  Through its more than 3,000 restaurants in China, Yum! has become a model of how Western companies can succeed in a notoriously difficult but incredibly lucrative market.

Worries are building about China’s economic engine running out of gas.  For 30 years, it’s economy has grown by at least 10 percent each year.  It’s been fueled by exports.  All those socks, toys and iPhones made in China and destined for the U.S. and Europe have pulled millions of Chinese out of poverty (and allowed them to go to dinner at KFC).  However, export focused industries are slowing as global demand drops, threatening a hard stop to the Chinese economy.

This is why KFC’s business may be a good barometer. China has out-sourced its economic growth for almost a generation by relying on being the world’s supplier.  Now it begins turning it’s attention inward, feeding the appetites of its own developing consumer class.  And KFC wants to be on the menu.

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