1 / 42

Yum! Brands Symbol: YUM Jiawei Chen & Tianran Chen Revised by: Ryan Comisky March 31 2009

Yum! Brands Symbol: YUM Jiawei Chen & Tianran Chen Revised by: Ryan Comisky March 31 2009. Agenda. Industry overview Company overview Competitors Thesis points 1. Global 2. Management 3. Cash flow advantage Financial Data Risk factors. Industry overview.

greg
Download Presentation

Yum! Brands Symbol: YUM Jiawei Chen & Tianran Chen Revised by: Ryan Comisky March 31 2009

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Yum! BrandsSymbol: YUMJiawei Chen & Tianran ChenRevised by: Ryan ComiskyMarch 31 2009

  2. Agenda • Industry overview • Company overview • Competitors • Thesis points 1. Global 2. Management 3. Cash flow advantage • Financial Data • Risk factors

  3. Industry overview • U.S: 945,000 restaurants $552 billion in annual sales.  • Quick Service Restaurants (QSR) consist of 72.8 % of the whole industry revenues. • Advantage of economies of scalelow priced value meals • Fierce competition

  4. Company Overview • World’s largest quick service restaurant (“QSR”) company based on number of system units • 1997 spin-off of PepsiCo forms Tricon • 2002 changed its name from TRICON Global Restaurants, Inc. to YUM! Brands, Inc.

  5. Five concepts KFC: chicken. Pizza Hut : quick-service pizza Taco Bell: Mexican-style food LJS: seafood categories A&W • Business structure * Company-operating units * Independent franchisees or licensees

  6. Units Distribution • 3 segments: 1. United States - 20,000 units 2. YUM Restaurants International (YRI) – 13,000 units 3. China – 3,600 units • More than 36,300 units in more than 110 countries and territories

  7. Competitor • McDonald’s • Domino’s Pizza • Burger King

  8. Thesis points 1) Global distribution systemwhich has great potential 2) Strong management team and energetic company culture 3) Strong cash flow

  9. Thesis I: Strong overseas growth potential world-wide revenue distribution(unit: million)

  10. The China Division and YRI have been experiencing dramatic growth and now represent nearly 60% of the Company’s operating profits

  11. Global Development---Rapid Growth in China • Mainland China -rapidly growing economy -population of 1.3 billion • KFC -Leading QSR 2500 units in 500 cities -Yum! opens nearly one new KFC every day in mainland China (Q4 2008) • Pizza Hut -Western-style casual dining restaurants -400in 100 cities -the first restaurant chain to introduce pizza

  12. Long Term GOAL at least20,000units in mainland China.

  13. SO, why is Yum! successful? Competitive advantages: • 1. Food Quality and Flavor! • 2. Product Strategy: localization -Foreign brand with Chinese Character -Promote new product every months -Combine Chinese dining tradition

  14. 3. Marketing the Brand - Make restaurant a social communication place - Modern lifestyle behind the food

  15. Not a Coincidence!! Survey Q: Why do you go to KFC or Pizza Hut? A: Food Flavor and Quality: 85% Eating Environment: 43.6% Convenience: 38.2% Price: 25.5% Follow trend or advertisement: 0%

  16. Manager telephone interview Q: In your opinion, what is the main reason that Yum! Brands can be successful in China? A: 1. Quality 2. Food Flavor 3. Service: targeted to different age populations - Birthday party - Student discount

  17. Can the success continue in the future?-Yes! • 1. Low individual visiting frequency for existing customers consistent and stable consumption pattern Survey Q: How often do you eat in these restaurants? KFC Occasionally: 57.4% Pizza Hut Occasionally: 83.3%

  18. 2. Large Potential Market for Lower Income Population Survey Q: How much do you spend on average every time you go to KFC? A: 15-25 RMB—2.2-3.6 Dollar 56% 25-50 RMB—3.6-7.1 Dollar 36.4% Pizza Hut? 30-50 RMB—4.3-7.1 Dollar 34.5% 50-80 RMB—7.2-11.4 Dollar 34.5% Survey Q: If there is an economic crisis, how will it influence your consumption in these restaurant? No Change: 55.6% Both decrease: 27.8% Decrease in Pizza Hut, no change in KFC: 13%

  19. What’s more…….New Brand, New Product • Pizza Hut Home Service (pizza delivery) East Dawning (Chinese food) • 20% shares of Little Sheep Company, a Chinese Hotpot system restaurant

  20. Joining Hotpot

  21. II. Overseas--International • YRI Revenues: $3.0 billion Operating Profit: $528 million (2008) • 9 straight years of opening over 700 new restaurants.   • Company expects to continue to experience strong growth in new markets, including India, France, and Russia.  

  22. Increase of Percentage In Franchise Fees Around The Globe (in 2008) • Asia (excluding China) 19% • Latin America 12% • Middle East Northern America 32% • South Africa 32%

  23. India • Interview Indian students at UVa - Develop in recent years - Localization of food, offer vegetarian options - Welcomed by young people - Large growing potential

  24. USA • Highly competitive marketplace • Slower profit growth • But continues to produce strong cash flows.

  25. Furthermore . . . • Multibranding, should strengthen volume sales • Refranchising company-owned restaurants. By the end of 2010, management hopes to own less than 10% of its U.S. restaurants (down from 20%)More cash flow

  26. Thesis II. Management • Core CHAMPS – Cleanliness, Hospitality, Accuracy, Maintenance, Product Quality and Speed of Service • Various senior operators visit the company’s restaurants from time to time to help ensure adherence to system standards and mentor restaurant team members.

  27. VAR about Management • “Challenging” • “Systematic” • “Like a family”

  28. Thesis III: Strong Cash Flows • In 2009, it is important to note that management does not need to access the credit markets to finance their company • Strong cash flow and balance sheet provide them with the flexibility to successfully navigate through these challenging financial times.

  29. 3 Year Cash Flow Breakdown

  30. Financial Data • Last Trade:27.65 • Market Cap(bil) 12.68B • P/E 14.5 • EPS (ttm):1.96 • P/S Ratio 1.09 • 5-Y Avg Ann Return 6.91% • Annual Dividend $0.76 • Dividend Yield 2.6% • Beta 1.09

  31. the cumulative total return

  32. 2008 Highlights · Worldwide system sales growth of 7% - same store sales growth of 3%+ international development of 1,495 new units · Worldwide operating profit growth of 8% • An industry leader with return on invested capital (ROIC) of 20%.

  33. Earnings per share (EPS) for the previous four quarters: $1.90 • Worldwide Operating Profit growth: 11% • PE ratio: 14 • Stock price declines compared to 2008 • 2006 has the same stock price

  34. Risk Factors • Operating results are closely tied to the success of the Concepts’ franchisees. • Nature and volatility of the foreign currency markets • Influence by commodity price

  35. Risk, but also OPPORTUNITY! • Foreign currency factor can be a great advantage for Yum! Brands • US Dollar depreciation relative to RMB  more of an opportunity than risk

  36. Questions?

More Related