How “YUM Foods is reaching for a bigger slice of the Fast Food Pie”
Jul 18, 2015
What YUM Brands have to say about India
YUM Brands is investing big time in “KFC & TACO Bell” to ensure it becomes the No.1
restaurant company in India
India is the opportunity of a
Lifetime .By 2030,India will b the
largest consumer market, ahead of US,
China
YUM Brands-A Brief Profile
oOrigin-Louisville, Kentucky
oNo of Restaurants-40,000
oPresence-Over 125 countries
oAwards
-Ranked #216 (FORTUNE 500)
-was named the ‘100 Best Corporate
Citizens’ by Corporate Responsibility
Magazine
oYum Brands Restaurants
(a)KFC
(b)Pizza Hut
(c)Taco Bell
The Power of YUM
4,800,000,000 Transactions
1,900,000,000 dollars in
franchise fees
1,500,000 associates
1,952 new international
restaurants
KFC Issue before 20 years which affected YUM Brands
When KFC Made its entry in India there were protests over Globalisation,small farmers
rights,environment & foreign investors were already at fever pitch when the entry of a brand
owned by PepsiCo
The outlet was picketed & ransacked repeatedly & charges of unacceptable levels of
monosodium glutamate made consumers hesitate even as they turned up their noses at the
bland recipes & lack of add-ons in the menu
After 20 Years
Today YUM Brands is currently the world
largest fast-food company as well as fastest
growing restaurant in India
• YUM Brands too had been relying on franchises for expansion over the years but now has changed trajectory investing heavily in opening company owned outlets in an all-out bid to get the reach & growth it is seeking
Expansion
• YUM has an impressive war-chest to ensure its success-$100 million(Rs.600 Crores) to be invested over the next 3-4 years
Investment
YUM Brands Strategies
Separation of Indian entityThe parent company ‘YUM Brands’ had carved out the Indian division as a separate entity in
2011(China is the only other standalone international market-a telling indicator of how important success
in the Indian market is for the Parent company. In 2011 India had around 466 YUM restaurants compared
with 4493 in China)
The company now has direct reporting relationship with the CEO of the company & direct sponsorship
from the company on investment & resources required to bring the opportunity(From 2007-2009,YUM
Brands has opened around 276 restaurants in India even as the China division added 1,750 to its portfolio)
KFC & Pizza Hut which launched in
1996 didn’t exactly set the Indian market
on fire. In 2005,there were just 5 KFC
outlets in India against 240 outlets of
McDonalds
Even Pizza Hut lost its fist place to rival
Dominos because it failed to adopt home
delivery strategy in timeKFC V/s Pizza Hut V/s McDonalds V/s Dominos
YUM Brands Franchise
YUM Major Franchisees in India
(1)Devyani International
(2)Dodsal Group
(3)Hansa Zone
Concept of Equity Leadership
-This means company began investing its own money to open stores in emerging markets(The first company
owned Pizza Hut restaurant opened in Mumbai in 2012
-The average investment in a KFC/Pizza Hut store is Rs.2-3 Crores & it takes 3-4 years to get a positive return
-There are around 172 company owned outlets (mostly KFC’s) & 517 Franchisee owned stores as of today
Devyani Operations in India
-Devyani currently operates 203 Pizza Hut stores & 57 KFC restaurants
-A news report in April 2014 states that Devyani International is in the fray to
buy Pizza Hut franchise rights in South & West India(Currently ‘DodsalGroup’ is holding these rights is
seeking a buyer).But there is no clarity whether YUM Brands would continue to offer these markets to franchisees or
open its own outlets
Why YUM Brands has opted Equity Leadership Model?
(1)Equity Investments by the company helps in;
-Brand Building
-Marketing
-People Capabilities
-Back-up Infrastructure building etc
-YUM Brands Vice President(Finance) said “Our equity investment in India was the catalyst for exponential growth in our KFC Brand”
YUM Brands expansion
-Yum Brands India will open 1000 outlets of Pizza Hut,KFC & Taco Bell by 2015(Of
this roughly Half will be KFC’s & other half Pizza Hut Restaurants)
-By 2020 the company will open around 2000 outlets(100 Taco Bell & 900 equally
divided between KFC & Pizza Hut)
-Half of the KFC ‘s & Pizza Huts will be developed by Franchisee based system
-The company targets 60% of its stores in tier 2 cities because costs are lower &
there’s pent-up demand to ensure high returns
Devyani International office is
covered with trophies & plaques
from YUM over the past 18 years
-Transformers Award Action
Hero(This was presented by YUM
Brands Global Head Mickey pant
in 2012
- Another award Kangaroo-The
Great Leap
The Taco Bell Profile
Pizza Hut Delivery(PHD) was hived off as a
separate division in 2010 & there are currently
171(out of 373) outlets that focus exclusively on
delivery
The company also plans to do similar strategy to
Taco Bell as well
KFC is YUM Brands lead opportunity but Taco
Bell could have a bigger potential in the long term
based on the ‘huge population of vegetarian
consumers’.
Taco Bell is localizing a lot of menu in order
to build its brand
Out of 2000 outlets planned by the
company to launch worldwide by
2020,atleat 100 will be in India
Taco Bell India Stores(5 Stores)
-Bengaluru(4 stores)
-Mumbai(1 Store)
Why Taco Bell has slow expansion in
India
-The company had to understand how the
Taco Bell model works in India & has
taken 3-4 years to fix the shortcomings
-The company is learning “store-by-store”
- The company is developing their vendor
base with a lot of handholding
Taco Bell strategy for menu offeringsoTaco Bell called a TEAM from US which
diagnosed that the wheat quality was to blame
when Taco Bell’s offerings were not turning out
the way they had been planned in India .After
much experimentation, the TEAM identified a
variety from Madhya Pradesh that was suitable
Three factors that make YUM Brands optimistic about its
prospects in India
(1)40% of the population is vegetarian while the rest also eat
vegetarian food most of the time(Taco Bell’s 75-item menu has a
variety of vegetarian items)
(2)The Taco Bell Chain serves spicy food with familiar
ingridi3nts such as beans,rice & flatbreads that will appeal to
Indian palates
(3)Taco Bell Indian menu starts at a loss making @Rs.25.This
strategy has proved a success for the Taco Bell. The fast food
chain doubled their sales from the time of the launch. The
company states “The higher you want to go, the lower should
be the price”
Four Stages of Building Brands (According to YUM Brands)
At the ‘concept
stage', one must
not think of
making money.
That happens in
stage four
YUM Brands do not
want to expand in a big
way in the concept stage
of Taco Bell stores. The
company is planning to
open around 35-40
stores in five to six
cities over the next 2-3
years. There are already
enquiries from small
centers such as ‘Navsari
& Bharuch’
Multiple Brands
Jubilant Food Works has 2
brands under its portfolio
(1)Dominos license in India(726
stores)
(2)Dunkin Donuts(29 stores)
YUM Brands in India has 3
brands under its portfolio
(1)Pizza Hut(373 stores)
(2)KFC(341 stores)
(3)Taco bell(5 stores)
The acceptability of Burger & Chicken as well as
Pizzas has been tested across the country. The
combination can give YUM Brands a good
advantage
The Pizza Hut is a higher ticket item than KFC &
the consumer class is also different, so there is no
cannibalization between the two
Having ‘multiple brands’ also ensures savings on
the backend in terms of rentals & economies of
scale because the same chgicken,cheese & flour is
used in both formats
YUM Brands Menu Offerings
Over the past several years the menu at Pizza Hut & KFC has
adapted to Indian tastes & preferences.YUM Brands wants Pizza
Hut,KFC & Taco bell to be youthful & inspirational
YUM Strategy in Menu Offerings
(1)First strategy is to be seen as inclusive brands
(2)To make sure that brand is relevant to India
-The company needs to get inspired by local eating out habits but
do it in unique way that YUM can own at prize points that are very
penetrable
Ex 1:Over the past 12 months Pizza Hut conducted an infromal
study called “India-to-Bharath” to understand what & how
consumers are eating so that Pizza Hut can adapt that into their
menu
Ex 2:Indians love carbohydrates more than protein,so more rice &
wheat options in YUM Brands menu
Ex 3:Indians want more “sauces”,so YUM Brands increased the
gravy in the food
At KFC,the focus is on Vegetarian options
•KFC’s-’So Veg,So Good’ ad campaign
emphasizes its Veg & Paneer offerings to
reach a wider customer base.KFC has also
intoduced dishes such as Veg Rice Bowl &
Veg Zinger Burger
•YUM Brands decision to stay affordable
-YUM Brands see their competition as street
food & not branded food & therefore the
company wants to make their food affordable
at street food prices. Why should a customer
stand & eat in the heat when YUM Brands
offer a world-class restaurant, air
condtioned,hygenic,aspirational place with
safe food
Prices starts at Rs.30 at KFC,
Rs.50 at Pizza Hut & Rs.300 for
the PAN Pizza
Competition
McDonalds
-McDonalds is grappling with internal problems in the North & East. “The company is adding 15-20 stores a year hardly”
-McDonalds are looking at reaching consumers in Tier 2 & 3 markets because of huge shift in lifestyle & purchasing power of people(Currently over 60% of McDonalds restaurants are in top six cities
-McDonalds plans to invest Rs.800-1000 Crores to add another 200-300 restaurants & 75-150 McCafe’s in India in the next five years
Dominos Pizza
-Dominos Pizza wants to pursue growth through restaurants addition in new & existing cities backed by an upgraded & expanded commissary network with a target to launch 150 new Dominos Pizza restaurants by FY15
YUM India posted sales of $ 57 million
in Q1 of 2014 compared with $58
million in the previous year. The
operating losses stood at $3 million in
Q1 FY15 compared with $4 million in
FY14.So,YUM India is yet to send back
profits from India to its parent company
Dominos Pizza is in a more mature
stage which made losses for a long time
& YUM is still in the investment stage
By 2020,YUM India will start
contributing to YUM Global
YUM Restaurants China
Yum! Brands is focused on
building leading brands in China in
every significant category
China is the best restaurant opportunity of the 21st Century with a consuming class that is expected to double from 300
million to more than 600 million people by 2020
YUM Restaurants China-A Brief Profile
Total Restaurants-6400 in 950 cities
Expansion Plans-To open 700 restaurants in 2014
KFC entry into China-1987 (KFC was the first quick-service
restaurant chain to enter China)
No of KFC Restaurants-4600(out of 6400)
KFC Menu@China Market-Beef, seafood, rice dishes, fresh
vegetables, soups, breakfast, desserts, and many other delicious
products. We’re also leveraging our restaurants throughout the day
with breakfast, delivery and 24-hour operations
Pizza Hut entry into China-Pizza Hut was the first restaurant
chain to introduce pizza and Western-style casual dining to China
in 1990
No of Resturants-1200 in 305 cities
Pizza Hut Menu@China-pizzas, entrees, pasta, rice dishes,
appetizers, beverages and desserts.
YUM Brands China investment
(1) Pizza Hut Home Service- Yum! Brands introduced pizza delivery to China in 2001 and there are
over 200 Pizza Hut Home Service units in 26 cities
(2)East Dawning- Yum! China created and is testing East Dawning, a quick-service restaurant concept
with nearly 30 stores serving Chinese food to Chinese consumers
(3)Little Sheep- Yum Brands acquired Little Sheep in 2012, the leading hot-pot brand in Chinese casual
dining with over 350 restaurants.
YUM Brands CSR activities
YUM Contribution to World Hunger Relief
Yum! brands had a longstanding commitment to hunger
relief in the U.S. through a initiative called “Harvest
program”, contributing on average $50 million worth of
prepared meals to 3,000 hunger relief agencies across the
country each year and now with nearly one billion people in
the world facing hunger and malnutrition
In October 2007, YUM associates, franchisees and
suppliers in more than 100 countries joined forces to bring
awareness and action to this global crisis as they launched
World Hunger Relief (WHR)–an annual initiative leveraging
the power of our global restaurant system to address hunger
through awareness, volunteerism and fundraisings
This global movement is now the world's largest private sector hunger relief effort in history benefiting the United Nations World Food Programme (WFP).
WFP is the world's largest humanitarian agency fighting hunger worldwide, feeding on average more than 90 million people in over 70 countries each year
Harvest Program(world’s largest
prepared food donation program)
•KFC, Pizza Hut and Taco Bell restaurants donate more than 10
million pounds of food annually to partner agencies nationwide
•Since 1992, the Yum! system has contributed more than 169 million pounds of product to over 3,000
nonprofit organizations—a fair market value of $763.5 million
•Partner agencies include a diverse mix of nonprofits committed to hunger
relief including women’s shelters, food banks, soup kitchens and religious and
community organizations
• Each year, these organizations serve more than 10 million meals of brand
donated food to those in need in cities all across the country
• In its 30th year, the Pizza Hut BOOK IT!® program is the longest-lasting and largest children’s literacy program in the United States
• Each year, the BOOK IT!® program makes reading fun for more than 14 million children in more than 630,000 classrooms
• The ‘REACH Educational Grant Program’ helps KFC restaurant hourly Team Members and Shift Supervisors pursue their educational dreams
• These $2,000 grants help Team Member recipients attend accredited four-year and two-year educational institutions, as well as trade/vocational schools
• KFC Foundation provides hundreds of thousands of dollars in scholarships and grants to hundreds of deserving students across the country –($11.5 million since 2006)
• Since 2012, nearly $1.5 million of that was awarded to 808 KFC Team Members via the “REACH Educational Grant Program”
• Taco Bell Foundation for teens has provided education & job training support to more than 2 million people though Public-Private-Partnership in association with organization like Get Schooled & Boys & Girls Clubs of America Taco Bell
Foundation for teens
KFC Foundation
Pizza Hut-”Book It
Program”
“REACH Educational
Grant Program”
Since 1985, Pizza Hut has invested
nearly $500 million in the program and
has awarded nearly 200 million
Personal Pan Pizzas to students who
have met their monthly “BOOK IT”
reading goals.