Yum! Brands (YUM) will continue its bold push to bring Colonel Sanders into new territories despite a year of problems in China, the company’s single-largest market in terms of revenue. This week executives reaffirmed their commitment to opening more KFC restaurants in both China and India as well as Russia, Indonesia, Pakistan, Nigeria, Vietnam, Egypt, Thailand, South Africa, and Malaysia.
Growing in emerging markets is not without its problems, and Yum dwells on the risks from such factors as disease outbreaks in its annual report. About 60 percent of the world’s nations—spanning from Mongolia to Argentina—now have a KFC. Over the next seven years, Yum plans to invest $10 billion in emerging markets; in 2014 alone, Yum will open 600 new fried chicken outlets on top of the 18,000 KFCs already spread across 120 countries. (Other fast-food chains like McDonald’s(MCD) and Subway also intend to grow quickly in these regions.)
Yet KFC’s year-long China debacle highlights how developing countries combine tremendous opportunity with potentially damaging problems. The chain is just starting to show signs of stabilizing after food safety issues tanked sales in China, with same-store sales flat last month—through help from a limited-time promotion—after falling every month in 2013 except February. Yum expects “a strong bounce back” in 2014.
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Some of the markets mentioned at its investor conference this week—Vietnam, India, Pakistan, Indonesia, and Nigeria—rank lower than China for their food safety environment, according to the Economist Intelligence Unit’s Global Food Security Index. The ranking, one of many indicators factored into the larger index, “measures the enabling environment for food safety. Sub-indicators include: existence of agency to ensure health/safety of food; access to potable water; presence of formal grocery sector,” according to the methodology. This is how the countries fared:
Yum doesn’t seem deterred. Asked about concerns about food safety in emerging markets, Yum spokesman Jonathan Blum responded in an e-mail: “We have high food safety standards and requirements everywhere we operate. We take food safety very seriously.”
KFC is betting consumers’ hunger for well-known American brands in these areas will keep restaurants busy. “These countries are coming out, and for them, KFC is a big deal,” Micky Pant, KFC’s new chief executive officer, explained at the investor event in New York. “It’s a sign of arrival. You were part of the community of nations. You get food that you’ve been denied all along.” So get ready, developing world: The fried chicken’s on its way.
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