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Yum! Brands Is Desperate for a Turnaround

March 31, 2014 | About:
Live Investor

Live Investor

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Yum! Brands (YUM) is planning a major overhaul for its menu in China. The company is very eager to break the prolonged distress in which it’s entangled since December 2012. It undertook several promotional activities and control measures to recover from the backlash, and regain the lost glory of its KFC outlets in the economy. But nothing really helped the company to return to the mind-boggling numbers that it registered before being hit by the food safety scare issue a couple of years back.

What's on the Menu?

The U.S. based company is working hard to change the face of its menu drastically. Some of the items included in the mainland menu are three new rice dishes, two chicken sandwiches, some drinks and desserts as well.

This isn’t all. Vice Chairman of Yum Sam Su said that the fast food giant plans to redesign its stores completely, change employee uniforms, and offer new packaging. In addition, KFC is also trying to boost sales and recover its customers by leveraging the popularity of Chinese celebrities who would assist the company to promote its new products. This would aid the company rebuild its image entirely so that when customers enter an outlet, the interior, food and packaging would make them feel as if they have come to a new restaurant.

The ill effect of the excess antibiotic level in chicken has had such a massive impact on Yum’s revenue and image, that nothing could actually improve the situation for the Westerner. In the latest quarter ended December 2013, the company posted bottom line of $321 million, down from $337 million reported a year ago. Comparable store sales slashed 4% over last year. And while the company is struggling to regain market confidence, both local and international rivals are making hay. All this possibly triggered Yum to ultimately take such a bold step.

Big Market

China happens to be the most important market for Yum as sizable portion of its revenue and operating income comes from this emerging nation. The company altogether has more than 6,200 chains and boasted of a staggering market share of 41.2% in 2012, according to the findings of a research firm Euromonitor. In contrast, fellow players McDonald’s (MCD) managed a market share of 14.7% in the same year.

Yum targets to open 700 more stores across the nation in the current year. But if the company continues to face such challenges and bear the adverse effect of its negative publicity, it would have to prepare for decelerated growth in the future.

But Yum Demands a Turnaround

Yum is determined to reverse the situation for the better. It’s therefore undertaken such a major step – something that it’s never done in its 27 years of history in China. Going forward, the company proposes to revise or update the menu every year in this market. I believe the current revamp program would help the company move away from the shadow of the mishap. Yum’s working to alter things right from the root, and this should bear fruit.


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