Local firms vie for Yum's slice of China market

Sun Feb 5, 2012 5:29pm EST
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By Terril Yue Jones

BEIJING (Reuters) - Four floors up overlooking the bustle of the cavernous Joy City Mall in Beijing, diners take a break from shopping to slurp noodles and nibble on dumplings at an Ajisen restaurant.

It's an increasingly common sight: Chinese consumers turning to local fast-food alternatives to the long-dominant pair in China -- Yum Brands Inc's (YUM.N: Quote) KFC and McDonalds Corp (MCD.N: Quote).

Twenty-five years after Yum introduced China to American-style fast food with its first fried chicken store, the two U.S. giants are facing a plethora of Chinese and Asian eatery chains that are steadily munching away at their market share.

As Yum prepares to announce fourth-quarter earnings on Monday, some investors are eyeing its China operations warily. Last week saw a flurry of put options on Yum after McDonalds reported earnings and said foreign exchange fluctuations and other factors could eat into profits in 2012.

But Yum's China business seems robust. The company said on December 5 that it expects a benefit of $40 million this year from yuan-dollar exchange rates, while operating profit in China is expected to grow 15 percent. It plans to open 600 more locations in China in 2012 at a pace of more than one every day.


Yum worldwide: link.reuters.com/wef36s

China's quick-service mrkt link.reuters.com/tem46s   Continued...

<p>People stand in front of a poster of KFC and Pizza Hut in Guangzhou, capital of south China's Guangdong province in this April 2, 2007 file photo. REUTERS/Joe Tan/Files</p>