At present it runs only 63 restaurants across the region, which is way behind its target of opening 250 to 300 outlets within 2012. Last year, the Miami-based quick- service restaurant giant entered into a joint venture with Cartesian Capital Group and the Kurdolu family to strengthen its China operations. One of the reasons for Burger King Worldwide Inc (NYSE:BKW)’s slow growth in China is its late entry compared to Yum! and McDonald’s.
Also, the fast-food giant has not made use of its traditional beef offering, which could give it an extra edge over its fellow rivals, particularly as Chinese consumers love beef over chicken and consider it to be quality meat that is better for health.
Not only is Burger King working to fight Yum! in the world’s most populous economy, but McDonald’s Corporation (NYSE:MCD) is also looking for top-line growth through its expansion program in China. The company currently runs more than 1,700 stores in China and plans to add another 300 by the end of this year. As per Euromonitor, Yum! occupied 39% of China’s fast-food market share in 2011, followed by McDonald’s, which is way behind occupying 15.6%.
But the recent series of setbacks have made both of the Westerners lose market share to local players. Yum!’s chicken scandal was so powerful that it not only negatively impacted its own revenue, but it also generated a sense of doubt for fellow player McDonald’s.
However, McDonald’s is in a better position that Yum! Brands, Inc. (NYSE:YUM)’s KFC. Firstly, it’s because of McDonald’s Corporation (NYSE:MCD) lower scale of operation compared to KFC. Secondly, KFC’s name itself emphasizes on chicken, which is keeping people away from it after the avian flu scare. In addition, the Big-Mac maker is trying to overcome the challenges by cutting the prices of chicken nuggets and promoting fish-based dishes, which could help compensate its lost sales for chicken.
Looking ahead
Under the current circumstances, Yum! estimates a ‘mid-single-digit’ decline for 2013. The food chain, which commands a substantial portion of China’s $14.1 billion fast-food industry, is facing difficulties in managing the chicken issue and avian flu concern. China is an extremely crucial market for Yum! Brands, Inc. (NYSE:YUM)’s future growth potential. It would be interesting to watch how the fast-food giant works out its strategy to win back its customers and fight the growing competition from both big and small players.
The article What, Other Than Chicken, Is Scaring Yum!’s Growth In China? originally appeared on Fool.com and is written by Rajesh Marwah.
Rajesh M. has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald’s. The Motley Fool owns shares of McDonald’s. Rajesh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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