Yum China unit an­tic­i­pates solid growth af­ter new spinoff

China Daily (USA) - - FRONT PAGE - By PAUL WELITZKIN in New York paulwelitzkin@chi­nadai­lyusa.com

The CEO of Yum China, which af­ter its spinoff will be­gin trad­ing on the New York Stock Ex­change on Nov 1, is con­fi­dent his com­pany can triple its restau­rants on the main­land.

“There is risk ev­ery­where in the world,” Micky Pant said Tues­day in New York. “We think China has many more op­por­tu­ni­ties than risk.”

Yum China Hold­ings Inc will trade on the NYSE un­der the sym­bol YUMC. It will be­come the largest in­de­pen­dent restau­rant com­pany in China with more than 7,000 out­lets that will in­clude the Lit­tle Sheep and East Dawn­ing Chi­nese brands in ad­di­tion to KFC, Pizza Hut and even­tu­ally Taco Bell.

Yum Brands — the sprawl­ing fast-food em­pire that owns Ken­tucky Fried Chicken, or KFC, Pizza Hut and Taco Bell — an­nounced in Septem­ber plans to sell part of its China op­er­a­tions val­ued at $460 mil­lion to Pri­mav­era Cap­i­tal and the fi­nan­cial af­fil­i­ate of Chi­nese e-com­merce com­pany Alibaba Group Hold­ing Ltd.

Pri­mav­era, a Chi­nese pri­vate-eq­uity firm, will in­vest $410 mil­lion in the spinoff. Ant Fi­nan­cial Ser­vices Group, the Alibaba af­fil­i­ate, will put $50 mil­lion into the busi­ness.

Pant be­lieves the spinoff will en­able the China op­er­a­tions to ex­pand rapidly. “All of the profit we make in China will now be avail­able for China. I re­ally don’t see any rea­son why we can­not have 20,000 restau­rants in China,” he added.

Pant said his com­pany will be­gin open­ing Taco Bell out­lets in China soon — “at least in time for (the Chi­nese) New Year’s”, he said. Pant is con­vinced that the brand can be at­trac­tive in China.

Pant said Yum China’s best growth ar­eas in­clude the an­tic­i­pated 1,250 new malls that will open in the coun­try over the next few years along with rapidly ex­pand­ing trans­porta­tion hubs and mega-cities.

One area that Pant said is a top pri­or­ity for Yum China is food safety. Ear­lier this month, reg­u­la­tors im­posed 24 mil­lion yuan ($3.6 mil­lion) in fines against US meat sup­plier OSI Group LLC and its Chi­nese sub­sidiary in con­nec­tion with a 2014 scan­dal in which OSI’s Chi­nese units were ac­cused by a lo­cal tele­vi­sion sta­tion of sell­ing ex­pired meat to sev­eral fast-food out­lets, in­clud­ing Yum and McDon­ald’s Corp.

“Our num­ber one pri­or­ity is food safety and in­gre­di­ent qual­ity,” said Pant. “I have told our team that we will spare no ex­pense to en­sure a safe sup­ply chain.”

Pant said the com­pany has re­duced the num­ber of firms that sup­ply its restau­rants so that it will “deal with only top-qual­ity sup­pli­ers”.

One of Yum China’s hold­ings on the main­land is the hot pot chain of restau­rants called Lit­tle Sheep.

“We ex­pect to open 40 new Lit­tle Sheep units in the next year,” said Pant. “We cur­rently op­er­ate 40 Lit­tle Sheep out­lets in the US and Canada. I think it’s a Chi­nese brand that has great po­ten­tial to grow glob­ally.”

Mean­while, Louisville, Ken­tucky-based par­ent Yum Brands un­veiled a plan to drive growth once the sep­a­ra­tion of its China busi­ness is com­plete, by in­creas­ing fran­chise restau­rant own­er­ship.

Our num­ber one pri­or­ity is food safety and in­gre­di­ent qual­ity.” Micky Pant, CEO of Yum China

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