Alibaba chief sees tasty op­por­tu­ni­ties in fast food

China Daily (USA) - - BUSINESS - ByWANG ZHUOQIONG wangzhuo­qiong@ chi­

It is an in­spir­ing story for many ne­ti­zens in China. Many years ago, JackMa, head of the Alibaba Group, was re­jected by KFC when he ap­plied for a job with the fast food chain.

Now the in­ter­net ty­coon’s pay­ment unit is in­vest­ing in the fast food chains’ China busi­ness to help more cus­tomers use the mo­bile pay­ment sys­tem at Yum! Brands Inc’s 7,200 restau­rants across the coun­try, which also in­clude Piz­za­Hut and Taco Bell.

“The in­vest­ment is of a strate­gic na­ture,” said Ja­son Yu, gen­eral man­ager of Kan­tar World­panel China. Af­ter all, the two Chi­nese in­vestors’ com­bined shares are less than 5 per­cent of the to­tal hold­ings of YumChina.

Yu said the in­vest­ment will not bring ma­te­rial change to the day-to-day run­ning of the op­er­a­tion of the fast food chains.

Last Fri­day, Yum! Brands Inc agreed to sell a com­bined $460 mil­lion stake in its Chi­nese op­er­a­tions to Pri­mav­era Cap­i­tal Group and Ant Fi­nan­cial Ser­vices Group, a deal that sets the stage for a spinoff of the busi­ness into a sep­a­rate com­pany next month.

Pri­mav­era, a Chi­nese pri­vate eq­uity firm, will in­vest $410 mil­lion in the spinoff. Ant Fi­nan­cial, an af­fil­i­ate of e-com­merce gi­ant Alibaba Group Hold­ing Ltd, will put $50 mil­lion into the busi­ness. Pri­mav­era founder Fred Hu, the for­mer Gold­man Sachs Group Inc chair­man in charge of its busi­ness in China, will be­come chair­man of the new com­pany, which will be called YumChina.

Yum, the sprawl­ing fast­food em­pire that in­cludes KFC, Pizza Hut and Taco Bell and op­er­ates more than 7,200 restau­rants in China, said the spinoff re­mains on track to be com­pleted on Oct 31. The new com­pany will then start trad­ing on the New York Stock Ex­change un­der the ticker YUMC on Nov 1.

Ant Fi­nan­cial, the Alibaba af­fil­i­ate, op­er­ates the widely used Ali­pay mo­bile-pay­ments plat­form. The firm will as­sist with an elec­tronic pay­ment sys­tem that works across the restau­rant brands.

“We ex­pect Ant Fi­nan­cial can pro­vide fur­ther unique in­sights to help us bet­ter con­nect with con­sumers through mo­bile technology,” said Micky Pant, Yum China’s chief ex­ec­u­tive of­fi­cer.

De­spite the food safety scan­dals that se­verely hurt its busi­ness in the coun­try last year, Yum’s busi­ness has im­proved in re­cent quar­ters, and Yum’s per­for­mance in Asia has shown signs of pick­ing up.

The com­pany’s sec­ondquar­ter profit beat es­ti­mates, helped by the KFC chain’s bet­ter-than-ex­pected per­for­mance in China. Still, rev­enue dropped 3 per­cent to $1.6 bil­lion in its China busi­ness, which ac­counted for 53 per­cent of the group’s to­tal. Yum shares have ad­vanced 24 per­cent this year.

Still, the win­ner in the deal is un­doubt­edly Alibaba. “The deal will cer­tainly ac­cel­er­ate the adop­tion of the Ali­pay mo­bile pay­ment as well as dig­i­tal mar­ket­ing in­te­gra­tion with Alibaba ecosys­tem,” Yu said..

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