Yum Favours Taco Bell to Pizza Hut
New Delhi: Mexican is yummy: That seems to be the message to Indian diners from Yum! Brands, with its preference for the Taco Bell to Pizza Hut. So, thin-crust pizzas or chicken wings at Yum-owned KFC would be perfect appetizers for the main course in nacho cheese, as the Kentucky-based company re-draws its expansion plans in the country.
“Internationally, we continue to accelerate our presence of Taco Bell. In India, the team has unlocked opportunities for accelerated expansion in this huge potential market,” Yum! Brands Inc global CEO Greg Creed told investors and analysts at a post-earnings call Thursday night.
During the quarter, Taco Bell opened 15 international units in seven countries, including the four growth markets of Brazil, India, China and Canada.
Yum! Brands is making significant changes at each of its three brands, including downsizing Pizza Hut and stepping up presence of Taco Bell. While KFC and Pizza Hut are scale businesses in India, Taco Bell is the smallest brand here, with just about a dozen stores.
Beginning last year, Yum! Brands had changed its disclosure levels and stopped reporting on its India division as a combined entity. It has verticalised operations and integrated all three India brands with their global divisions. For the second quarter, Yum! Brands reported worldwide system sales growth of 6%, with KFC and Taco Bell at 7% and Pizza Hut at 2%. The business delivered a core operating profit growth of 19%.
Creed described KFC a ‘global powerhouse’, saying the brand was Yum’s most consistent, largest and fastest-growing concept, providing scale and diversification and representing close to 50% of Yum’s operating profit. In India, a core emerging market, KFC India reported 9% systems sales growth for the quarter. Two years ago, Yum had consolidated its businesses largely between private equity fund Samara Capital and Ravi Jaipuria’s Devyani International.
Yum Brands said during the call that new store development would be its top priority, adding that franchising would increase from 94% currently, to 96% in 2018. While KFC opened 202 units in emerging markets, Pizza Hut set up103 stores in emerging markets.
Creed said Yum Brands is investing $130 million in Pizza Hut, with the brand reporting same-store sales decline in the second quarter.