KFC and Pizza Hut may not be standard economic indicators, but they’re flashing a warning sign about the state of the Chinese economy right now and, if China won’t eat at KFC, or at Pizza Hut, the world has a problem! [Let me explain.]
The commentary above & below consists of edited excerpts from an article by Mike Bird (businessinsider.com). See original article* HERE.
Yum Brands, the U.S. food giant that owns KFC, Taco Bell and Pizza Hut, made an enormous push into China in the last decade (KFC now has 4,889 outlets and Pizza Hut 1,705) and sales there account for more than half of its total sales worldwide. That being said, however,
- KFC sales rose there by only 3% year-on-year while
- Pizza Hut’s fell 1%.
By Chinese standards, those are pretty dreadful growth figures…
Here’s what Yum CEO Greg Creed had to say [about the situation]:
“The pace of recovery in our China Division is below our expectations… Given our lower full-year expectations in China, combined with additional foreign exchange impact, we now expect 2015 EPS growth to be well below our target of at least 10%…China comps for the quarter were 2% vs. our 8-10% and worse even than the most bearish projections of +5-7%.”
China is now making a difficult transition away from the investment binge of the post-2008 period, toward a services-led consumer economy, which is often called the “middle-income trap”…The way China’s growing middle class chooses to spend (or not) will make or break those rebalancing efforts, and that matters for the whole world given the way the country has propped up global growth since the 2008 financial crisis.
If China won’t eat KFC, the world has a problem!