Yum China unit anticipates solid growth after new spinoff
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