Yum Brands (YUM) found riches bringing KFC to China, but cashing in on bringing ersatz Mexican food to the rest of the word is going to be a longer slog to success.
Yum Brands, better known as the owner of KFC, Pizza Hut and Taco Bell, has had remarkable decade-long run, with YUM stock tripling in no small part thanks to the huge popularity of KFC in China. In fact, there was a time in the early 2000s when YUM stock was spoken of as an under-the-radar China play.
And, indeed, YUM stock turned out to be a heck of a China play. YUM stock has posted a total return of 265% over the last 10 years vs. 105% for the S&P 500. Heck, when things were really cooking, Yum stock tripled in the five years before the last market crash.
Needless to say, YUM stock hasn’t been under the radar in a long time, but then China isn’t the growth machine it used to be, either. That fact has Yum Brands looking for the next big grand slam in international markets, and it thinks it can hit one with Taco Bell.
Yum Brands Expansion No Slam Dunk
The idea is to make Taco Bell’s take on Mexican food a global superstar. Yum Brands plans to add 1,3000 international Taco Bell locations by the end of 2023. The roll out is targeted for the U.K., Korea, Chile, India, Poland, Japan, Thailand and Peru. Taco Bell says it selected those markets because they have at least some familiarity with Mexican food. (No, Taco Bell isn’t really Mexican food, but that’s how it’s marketed anyway.)
Past attempts by Taco Bell and others to bring Mexican-inspired fast food to nations outside the U.S. have largely failed. Yum Brands itself had abortive attempts to get Britons and the Japanese to make a run for the border in the 1980s and ’90s.
Whether that’s because the vast majority of Mexicans living abroad live in the U.S. or there’s no shortage of competition from other fast-food chains — both international and domestic in those markets — is a question Yum Brands is going to have to sort out for itself.
As for what these means for anyone who holds YUM stock? Not much for now. It’s not like Yum Brands is dumping a thousand new restaurants around the globe overnight. It’s simply a plan — one that will be pursued with prudence and a sharp eye on costs — and we won’t get a sense of whether it’s working or failing for some time.
But hey, kudos to Yum Brands for its global ambition with the Taco Bell brand. Even if it works in only, say, half the target markets, it could still make a huge contribution to results.
Sadly, that’s not going to move the needle on YUM stock anytime soon.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
