Yum Favours Taco Bell to Pizza Hut

The Economic Times - - Companies & Economy - Ratna.Bhushan @times­group.com

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.

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