KFC Conference Call
October 17th, 2007
Today in my international business class I played an excerpt from the Yum Brands (YUM) conference call for the third quarter, held just last week. (Yum’s corporate website; Google Finance info; Yahoo Finance info).
The first part of the call is dominated by discussion of China, the brightest spot in Yum’s operations. Yum’s CEO said he imagines having 20,000 restaurants in China one day, which he asserted seems entirely reasonable given that McDonald’s Corp. has 14,000 outlets serving a US population of only 300 million (compared with China’s 1.3 billion).
Yum grew by more than 20% in China for the quarter, compared to essentially flat growth in the U.S.
After listening to this CEO in Louisville, Kentucky brag about how his company was buoyed by its China results, the class compared the US and Chinese websites for KFC. We noted how the Chinese website has a much more youthful and sports-focused theme.
The class didn’t have any students who read Chinese, so I gave them a little guided tour of the website, pointing out how the name of the featured 3-on-3 basketball tournament creates a nice English-Chinese rhyme (between 3-on-3 and Ken-de-ji or Kentucky in Mandarin). I also pointed out how the website featured a booklet celebrating KFC’s 20 years in China.
The US website, though carrying a nice banner about a corporate effort to fight global hunger, looked much flatter than the Chinese site and emphasized, if anything, cheap prices more than youthful vigor.
On the call the CEO noted that besides KFC and Pizza Hut, Yum is developing some chains in China that don’t yet exist in the US, including a sit-down restaurant called Tea Time which they say might be able to challenge Starbucks in China. They are also testing a different quick-service chain in Shanghai now.
I think hearing about how Yum’s China operations are the company’s best current and future growth story and noting some contrasts in the marketing messages between the two websites helped drive home some lessons about the challenges (and opportunities!) of striking the right balance between global standardization and localization. The website contrasts also helped underscore the difference between corporate strategies of competing on price vs. other kinds of distinctiveness.
Bloomberg’s coverage of Yum’s earnings report is available here.