Two news items from the retail space are showing how China remains a challenging and competitive market despite its huge potential, with KFC operator Yum Brands (NYSE: YUM) and German retailer Metro (Frankfurt: MEO) both suffering setbacks for different reasons. In Yum’s case, the company is quickly discovering the meaning of the word “saturation”, as its rapid expansion in China has forced it to open restaurants in less profitable locations that are ultimately hurting its performance. Adding to its woes, KFC recently found itself at the center of China’s latest food safety scandal, which I’ll discuss shortly. In Metro’s case, the company simply discovered that the Chinese retail market is quite competitive, especially in the electronics space where Metro was trying to find a niche in a partnership with the consumer products unit of Taiwanese manufacturing giant Hon Hai (Taipei: 2317).
Tag Archives: Yum Brands
News Digest: January 9 报摘：2013年1月9日
The following press releases and media reports about Chinese companies were carried on January 9. To view a full article or story, click on the link next to the headline.
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- Yum Brands (NYSE: YUM) Warns China Sales Fell More Than Expected (English article)
- Apple (Nasdaq: AAPL) CEO Tim Cook In China For Another Visit (Chinese article)
- MIIT Issues Draft For MVNO Service Trials (English article)
- China’s CDB Wavers On Funding HSBC’s Ping An (HKEx: 2318) Stake Sale: Sources (English article)
- Dangdang (NYSE: DANG) To Reduce Focus On 3C, Apparel (English article)
News Digest: December 22-24 报摘： 2012年12月22-24日
The following press releases and media reports about Chinese companies were carried on December 22-24. To view a full article or story, click on the link next to the headline.
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- Alibaba Outbids Tencent, Baidu to Invest in Sina (Nasdaq: SINA) Microblog – Source (English article)
- China Probes Safety of Yum Brands’ (NYSE: YUM) KFC Chicken Products (English article)
- Amazon (Nasdaq: AMZN) Web Services (AWS) China Site Goes Live (Chinese article)
- Phoenix New Media (NYSE: FENG) Vice President Wang Yulin Resigns (Chinese article)
- Online Wine Seller Jiumei Launches Financial Product With Rothschild (Chinese article)
Yum’s China Salad Days In the Past? 百胜集团在中国的高速扩张终结？
KFC and Pizza Hut owner Yum Brands (NYSE: YUM) has banked on the China story for much of its growth over the last decade, building itself into one of the world’s biggest China plays by deriving more than half of its revenue from the fast-growing market. So it was almost inevitable that the company would take a big hit when the China market started to stall, which is exactly what has happened in Yum’s latest earnings report. That report saw Yum make the somewhat shocking announcement that its China same-store sales to fall around 4 percent in the fourth quarter from year-ago levels. (English article)
Mid-Sized Players Join China Fast Food Feast 国外中小快餐企业抢滩中国市场
The big boys like KFC, McDonalds (NYSE: MCD) and Starbucks (Nasdaq: SBUX) aren’t the only ones hoping to feast on China’s growing appetite for fast food, with 2 mid-sized players, ice cream specialist Dairy Queen and Pizza Hut also announcing big new expansion plans to cash in on the trend. For investors, these expansions by smaller players spotlight that China offers interesting potential for not only the big names, but could also make mid-sized players an interesting bet. Then again, these more mid-sized companies come with a bit more risk, as they often lack the resources of the bigger names to execute their expansions, and are more likely to withdraw from the market at any signs of trouble, creating potentially big losses. Let’s look first at Dairy Queen, a well-known US brand that has been quietly expanding in China over the last few years. The company, owned by billionaire investor Warren Buffett, recently opened its 500th store in China, and says it plans to add another 100 stores by the end of this year, after opening 131 new stores in 2011. (company announcement) Meantime, Pizza Hut, owned by Yum Brands (NYSE: YUM) has announced it will open at least 150 new stores this year as it expands into third- and fourth-tier cities, part of a trend that is seeing restaurant operators move into smaller, less affluent Chinese cities in pursuit of growth. Both Pizza Hut and Dairy Queen represent a group of lower-profile foreign restaurant operators that have found varying degrees of success in China, joining other similar sized players like Japan’s Yoshinoya, Hong Kong-listed Ajisen (HKEx: 538) and US pizza chain Papa Johns (Nasdaq: PZZA). A key component to the success for both the larger and smaller players is finding a strong Asia partner to help navigate the often tricky China market, where foreign companies are often subject to much more scrutiny than local companies. Ajisen got a good lesson in the potential perils of the market last year, when many Chinese consumers boycotted the chain after it falsely claimed that its soups were made with fresh ingredients, dealing a huge blow to the company’s revenue. Negative campaigns like that could easily force some of these smaller companies to incur big losses and even withdraw from the market, spotlighting one of their biggest vulnerabilities. But if they have the right partner and backing, some of these companies could also look like strong bets to profit from China’s growing appetite for western fast food.
Bottom line: New expansion plans by Dairy Queen and Pizza Hut in China spotlight the market’s big potential for mid-sized fast food companies.
Related postings 相关文章:
◙ Yum, Starbucks Forge Ahead in Face of Slowdown 百胜和星巴克逆势强劲增长
China Flexes Anti-Monopoly Muscle in Hard Disks
New comments from China’s anti-monopoly regulator show it is preparing to play an increasingly active role on the global M&A stage, reflecting the nation’s growing importance as not only a major global manufacturer but increasingly also a consumer of many products. The comments from a top Commerce Ministry official, in this case regarding the pending acquisition of Hitachi’s (Tokyo: 6501) memory storage business by Western Digital (NYSE: WDC), look quite intelligent to me, showing that China is taking its new role quite seriously and that it could soon become a major gatekeeper for big global M&A deals, a job now mostly performed by the US and European Union. (English article; Chinese article) In this particular case, the head of the ministry’s anti-monopoly bureau, Shang Ming, made suitably cautious comments at a year end event in Beijing by saying his department is concerned the deal could harm competition in the global market for hard disc drives “to a certain extent”. With this kind of comment, Shang is indicating his department is likely to approve the deal, but only after Western Digital and Hitachi take steps to ensure the global market for disc drives remains competitive, most likely by selling off some assets to another rival. Such conditions are relatively common in global M&A, and are frequently imposed by the US and European regulators before they approve many major global deals. In fact, China has previously imposed such conditions on other major global M&A in its brief history of regulating such deals, though in the few such cases to date conditions have been relatively mild. These latest comments indicate that could change in the future as China looks to play a bigger role in global markets. All this looks good if the Commerce Ministry continues to develop itself as a fair judge dedicated to free trade. It showed movement in that direction last month, when it approved the purchase of leading hot pot chain Little Sheep by Yum Brands (NYSE: YUM), operator of the KFC chain, casting aside concerns by some that the deal might be vetoed for more nationalistic reasons. Global companies will undoubtedly be watching carefully for the final decision in this Western Digital deal; but final conditions that are reasonable and fair will give more credibility to China as it seeks to establish itself as a serious player in regulating the flow of major global M&A.
Bottom line: China’s careful approach to Western Digital’s pending purchase of Hitachi’s hard disc drive business reflects its growing maturity as an arbiter of major global M&A.
Related postings 相关文章:
◙ Little Sheep Gets Swallowed: Good for Yum, Good for China M&A 小肥羊被收购对百胜和中国是双赢
◙ China OKs Nestle Buy, Opens Door for Big Brand M&A
◙ Troublesome Timing As China Approves NSN-Motorola 中国监管部门批准诺基亚西门子购买摩托罗拉网络业务时机不佳
Wal-Mart Pork Brouhaha Spotlights Food Risk 沃尔玛“标签门”表明中国严打决心
A new flurry of reports about mislabeled products at some of Wal-Mart’s (NYSE: WMT) China stores would be almost comical if they weren’t true, spotlighting just how sensitive the issue of food safety and false advertising has become in the country. The latest media reports say some Wal-Mart store managers have been detained and more than a dozen stores temporarily closed in this new crisis. And the reason for all the brouhaha? Believe it or not, it’s all because someone discovered that some pork products were falsely labeled as “organic” when in fact they weren’t. (English article) Don’t misunderstand me, I’m quite against the mislabeling of products, especially when such practices could result in health hazards to consumers. But in this case, there doesn’t appear to be any immediate health hazard, and the detention of employees over this kind of minor misdeed seems like a bit of an overreaction. All of this is no doubt part of Beijing’s desire to show it is taking false advertising and food safety very seriously, following a steady stream of much bigger scandals in the last 3 years that have sickened and even killed victims who ate unsafe and tainted food products. This kind of high-profile campaign carries big risk for companies like Wal-Mart, which will now face backlash from Chinese consumers. Hong Kong-listed Japanese noodle chain Ajisen (HKEx: 538) has experienced first-hand this kind of backlash, as its business has dropped dramatically since Chinese media recently exposed that its soups were made using packaged powder rather than fresh ingredients as the company had advertised. Its shares have lost about half their value since the scandal erupted in July. Wal-Mart, which is China’s second biggest supermarket operator, now faces similar fall-out, and other major chains like recently listed Sunart (HKEx: 6808) and Carrefour (Paris: CARR), China’s largest and third-largest supermarket operators, will also be exposed to similar risk. Restaurant operators like KFC parent Yum Brands (NYSE: YUM) and McDonalds (NYSE: MCD) will also be vulnerable, as Beijing looks for more high-profile targets to chase to ease broader public concerns over food safety and false advertising.
Bottom line: Major food-related firms will be highly vulnerable to negative publicity campaigns in the next 2-3 years, as China tries to ease public concerns over food safety and false advertising.
Related postings 相关文章:
◙ Coke’s China Formula: A Pulpy and a Smile 可口可乐入乡随俗显成效
Yum China: Little Sheep Getting Tangled in Trade Friction? 百盛收购小肥羊案卷入中美贸易摩擦？
The latest quarterly results from Yum Brands (NYSE: YUM) are once again all about China, with strong performance from that market salvaging an otherwise dismal period for the operator of the KFC and Pizza Hut chains. But for followers of this company, what’s equally interesting in Yum’s quarterly results announcement is what’s NOT included, namely any mention of its pending purchase of leading Chinese hot pot chain Little Sheep (HKEx: 968), which is still awaiting regulatory approval nearly 6 months after the deal was first announced. First a look at the third quarter numbers, which showed that Yum’s China business boomed in just about every way, even as operating profit in its home US market slipped 16 percent. (company announcement) Yum’s China revenue leaped 35 percent, while its China same-store sales and operating profit rose 19 percent and 7 percent, respectively. The only negative China figure in the results was store margins, which slipped to 21.3 percent this year from 25.2 percent in 2010 as inflation in China took a toll. But amid all those rosy figures, there was no mention at all of Yum’s pending $500 million acquisition of Little Sheep, a relatively straightforward deal which the company first announced in April but still hasn’t received regulatory approval. (previous post) Yum provided a brief update of sorts on the deal in its last quarterly results by mentioning it had set aside funds for the purchase, seeming to indicate it still believed the deal would get regulatory approval. (previous post) It’s hard to read too much into the failure to mention the deal in its latest results announcement, as perhaps there’s just nothing new to add. The most recent US-China trade frictions that have seen the US Senate approve a bill to punish China for currency manipulation could add an interesting twist to this deal. Beijing’s approval of the Little Sheep deal now would send a strong message that it’s committed to fair trade, and could help dispel some of the anti-China rhetoric on Capitol Hill. Still, one never knows with China, and the regulator could also choose to veto the deal in an angry response to the US Senate’s move, which would only heighten tensions. I honestly think the latter is less likely to happen as China has traditionally tried to defuse this kind of friction. Accordingly, I wouldn’t be surprised to see the Little Sheep deal finally approved in the next month as a goodwill gesture aimed at mollifying tensions.
Bottom line: China is likely to finally approve Yum Brands’ pending purchase of the Little Sheep hot pot chain in the next month to try to diffuse trade tensions with the US.
Related postings 相关文章:
◙ Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊
◙ China’s Heavy Hand Leaves Investors Wary on YUM’s Little Sheep Buy 百胜难吞小肥羊
◙ YUM and Little Sheep – A Sweet Match If China Approves 美国百胜购小肥羊：甜蜜姻缘还靠中国政府成全
Starbucks Wide Open for China Business with New JV 星巴克在云南建合资厂
Less than a year after announcing its first major initiative to nurture China’s domestic coffee-growing sector, Starbucks (Nasdaq: SBUX) has come back with announcement of a more substative joint venture to buy coffee beans from the country for use both at home and abroad. (company announcement) This move is clearly as much about public relations as it is about coffee from southwest China’s Yunnan province, which undoubtedly has potential to compete with some of the world’s other top growing regions but is more significant because it carries the “made in China” label. Let’s take a look at the numbers: even with its current aggressive expansion plans, Starbucks, a relative latecomer to China, will have a relatively modest 1,500 stores in the country by 2015, less than a tenth of its current global store count. By comparison, Yum Brands (NYSE: YUM), parent of the KFC and Pizza Hut chains, now derives a full one-third of its global revenue from China and counts the country as its second largest market after the US. (previous post) Anyone who does the math will see that obviously Starbucks sees lots of room for growth in China, especially if it can take a cue from Yum and McDonald’s (NYSE: MCD) and localize its products to better suit China’s tea-drinking culture and develop more products at a middle price range to meet demand from less affluent smaller cities. Having a coffee-buying base in Yunnan could help to lower prices by buying a more local product, and would also be a strong selling point to Chinese eager to see their higher-end products like home-grown coffee compete on the global stage. On the whole, this joint venture looks like a good, cost effective way for Starbucks to tell China it’s committed to the country for the long run, as it seeks to replicate the success of Yum and McDonald’s in this fast growing market.
Bottom line: Starbucks’ new China joint venture underscores its commitment to the country, which could easily become its second largest global market over the next decade.
星巴克<SBUX.O>最近宣布，将成立合资厂，从中国购买咖啡豆，供应国内外。毫无疑问，云南有与其他咖啡豆种植区竞争的潜力，这一举动不仅仅是公关需要，更重要的是，在云南购买咖啡豆意味着“中国制造”。让我们看看这组数字：虽然星巴克的扩张计划野心勃勃，但在2015年前，星巴克在中国的店铺也将总共只有约1,500家，这还不及其在全球店铺数量的十分之一。相比之下，肯德基和必胜客的母公司百胜<YUM.N>收入的三分之一来自中国，并将中国视为其仅次于美国的第二大市场。任何明眼人都能看出来，星巴克在中国看到了很大的增长潜力，尤其是如果借鉴百胜和麦当劳的经验，将其产品本土化，以适应中国的饮茶文化，并开发更多中端价位的产品，满足不那麽富裕的较小城市的需求，发展潜力更是很大。在云南成立合资公司，购买当地产品，有助於降低其产品价格，对於那些希望看到本土咖啡进军全球市场的中国人来说，这也是一个有力的卖点。总的来说，对於想复制百胜和麦当劳在中国市场成功的星巴克来说，这个合资公司看似是星巴克向中国承诺致力於长期开辟该国市场的经济又有效的途径。
一句话：星巴克在中国成立新合资公司，意味着星巴克承诺要长期开辟中国市场，这可能让中国在未来十年成为其在全球的第二大市场。
Related postings 相关文章:
◙ Starbucks, Maxim’s Divorce: Bitter Ending or Sweet Times Ahead? 星巴克与美心闹“离婚”
◙ Yum Feasts on China, Still Eying Little Sheep 百胜依然觊觎小肥羊
◙ Starbucks China Expansion: New Brew Needed to Serve Up Success
