Specifically with regard to Western fast food, the McKinsey survey showed a drop of 7% in popularity from the 2012 survey. That means Yum China will be swimming against a strong tide in trying to grow its business.
Already, Yum China’s growth is no longer based on existing store sales. Its growth now comes solely from new store openings.
From an investment standpoint, I’m still a great believer in China – and especially the Chinese consumer growth story. They are still buying lots of things. But the Chinese are no longer eating in great numbers at KFC and Pizza Hut, and likely will not in the future.
Perhaps the Chinese will develop a fondness for Taco Bell, which Yum is bringing to China by the end of 2016. But with their growing aversion to Western fast food, I doubt it.
To me, there will be many other better Chinese consumer plays than Yum China.
This article is brought to you courtesy of Tony Daltorio from Wyatt Investment Research.