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If you’re a dad, I hope you enjoyed Father’s Day as much as I did.
My children and I went on a hike in the Jewel Basin, a part of the Flathead National Forest. With 15,349 acres, 27 lakes, and 35 miles of trails, it’s one of my favorite parts of Montana. The Jewel Basin area, in my view, is every bit as beautiful as Glacier and Yellowstone National Park.
Just about every country celebrates Father’s Day, but the dates vary. The U.S., France, and Japan all celebrate it on the third Sunday of June every year. But China does so on August 8.
Eight is pronounced Ba, and the 8th Day of the 8th month is … Ba Ba Day! August 8, by the way, also happens to mark the start of the Beijing Olympic Games this year.
As in the U.S., Father’s Day in China often includes a family celebration at a restaurant. And today I want to tell you where many Chinese fathers will be eating their meals on August 8 …
Pizza Hut and KFC: Two of the Most Popular
Restaurants in China Are American Icons:
Yum Brands, the parent company of Pizza Hut, KFC, Taco Bell, Long John Silver’s, and others, is the largest restaurant chain in the world. It has over 34,000 stores, but more than 14,000 of them are outside the U.S. and concentrated in Asia.
In China alone, Yum operates more than 2,000 KFCs and 300 Pizza Huts. In fact, more than 50% of Yum Brands’ revenues come from outside the U.S.
According to A.C. Nielsen, KFC is the top consumer brand in China, even ahead of Coca-Cola and Nike. You see, very few Chinese will ever have the chance to set foot in the U.S. so dining out at KFC or Pizza Hut is as close as they will get to visiting America.
Plain and simple, the Chinese love KFC and Pizza Hut!
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| Yum plans to expand its hugely successful home delivery services to target the huge nocturnal populations of crowded Chinese cities. |
Get this: The swarm of customers waiting to get into the grand opening of a new KFC in the city of Qiandaohu was so thick that eight security guards had to be brought in to help manage the crowds. “This happens every time KFC opens a new store,” says Wang Weiming, manager of the Qiandaohu KFC.
The reason is that Yum has been able to take advantage of the Chinese’s love affair with American products. And they have succeeded in tailoring their menus to local tastes across China.
The menu is different from the United States, with smaller portions and new entrees featuring popular local ingredients. For example, at Chinese KFCs, you can get a Beijing Duck Wrap served with scallops and hoisin sauce, chicken skewers that come with the cartilage, shredded pork soup, and congee (rice porridge).
Pizza Hut takes that localization strategy even further:
In Taipei, they serve sashimi pizza …
In Kualu Lumpur the locals love chicken satay pizza …
In Shanghai, sea eel is #1 …
And as unbelievable as it sounds, the Thai people love to dollop a can of tuna fish on top of their pizza!
The packaging is American, but the tastes are definitely Asian.
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Plus, the Chinese consider KFC and Pizza Hut to be upscale restaurants, not ‘fast food’ like we do. The restaurants are bright, lavishly decorated, and have impeccably clean bathrooms.
This is why young Chinese men often take their dates to KFC or Pizza Hut and why families swarm to the restaurants on big holidays (like Father’s Day).
I know because I’ve checked out KFCs and Pizza Huts all over China myself. During my last trip two weeks ago, I ventured into three Pizza Huts and four KFCs and I can tell you that there wasn’t an empty seat to be found in any of those stores and each had a waiting list of hungry Chinese customers.
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| After opening its first store in China in 1990, Yum’s Pizza Hut brand now operates over 360 casual-dining restaurants in more than 80 different cities. |
I even walked into a Hong Kong Pizza Hut and tried to make a reservation for Father’s Day. The term ‘reservation’ got lost in the language barrier, but the young woman made it very clear that she expected Father’s Day to be “VERY VERY BUSY!”
The Chinese, of course, don’t need much of an excuse to eat out at a restaurant. Last week, I told you that China has four million full-service restaurants, seven times as many as the U.S.
And China’s 1.4 billion people spent more than $126 billion dining out last year.
But I want to make something clear …
Not All American Restaurants
Are Raking in Profits in China!
McDonald’s, for example, had a big head start over Yum Brands in China but its U.S. menu has struggled to gain popularity with Asians.
The main reason is that Asians prefer chicken and seafood over beef. Plus, a hamburger is still a hamburger even if you throw a pineapple ring and teriyaki sauce on it.
I’ve walked by dozens of McDonald’s restaurants in Asia and seldom do I see more than a small handful of customers there. McDonald’s is throwing a lot of money in China and I suspect they’ll do okay, but it will never be the smashing success story that Yum Brands is enjoying.
The bottom line: There are several ways to participate in the Chinese economic miracle and Yum Brands is a stealth way to put some Chinese spice into your portfolio.
My Asia Stock Alert subscribers already own it and are sitting on a nice open gain. However, I’m not suggesting that you rush out and buy the stock today … you may want to wait for a pullback before jumping in.
Best wishes,
Tony
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