Just wondering. Inflation.
Front and center. We saw how U.S.
CPI rose half a percent, still elevated at six point four percent.
How are you looking at inflation? Do you expect CPI to continue to rise?
Well, good morning, Linda. And great to be on with you and great to
be here in Singapore with our franchise partners celebrating all the success
we've had the last few years and planning for more growth in the future.
You're right, we did have a great fourth quarter.
We just put up some amazing numbers. But our growth is really just getting
started, as we'd like to say. We've got fifty five thousand
restaurants and another hundred thousand yet to be built.
As far as the environment that we're operating in, as we mentioned on our
earnings call, you know, we're pleased with how the consumer is behaving
generally around the world. And we're seeing good, strong demand in
most of the markets that we operate. And obviously, markets like China are
just coming out of lock. And so we're very optimistic about the
future growth in that market this year. But David, inflation remains elevated.
You see the need perhaps to raise the prices of the food on your menu across
your brands. You see the need to perhaps raise wages
for your workers. Well, certainly over the last few years,
we have seen an increase in the product costs and we've seen an increase in the
wages that we're paying our workers, and that's great because we've adjusted our
model and passed some of those costs along to consumers and then found other
ways that we can save on input costs so that we can continue to be an amazing
value for our consumers. And that's really the environment that
we operate in when you're the largest player in the world as we are.
Most restaurants of any other company. We have some scale advantages that allow
us to navigate some of these trickier challenges better than most.
But we as we mentioned on our earnings call, you know, we think that we're past
the peak of inflation in most of the markets that we operate in.
And we're seeing a little bit more of a return to normal in the consumer
environment. Let's talk about the Chinese market.
You played a crucial role in a spin off back into the 2015 or 2016 thereabouts.
I'm wondering, David Yum Brands has said before that it doesn't expect Chinese
consumer demand to recover anytime soon. Why is that?
What is the base case scenario for you? The base case scenario for us in China
avoids defer to our China team there. As you know, we've spun off our China
business as a separate public company and were licensee of Yum on their
earnings call. They were optimistic about the future
growth in China this year. But for us, the benefits of our business
model is we're in a hundred fifty seven countries.
We have four brands, three massive brands around the world.
So that diversification really allows us to get through any challenge anywhere in
the world. We saw that in full display over the
last few years as we navigated the challenges of coded.
You talked about diversification. We know that you started selling coffee
at KFC in China. Give us a sense of how that is doing.
Is it taking market share from the likes of Starbucks, which is offering pretty
much a higher price point products? As far as the specifics on coffee in
China, obviously that's been a big part of the KFC brand in China for quite some
time and the China team does an amazing job with their coffee program.
I couldn't speak to market share, but I will say that's the beauty of our
brands, is our flight, the flexibility of our formats and different markets.
We lean in on different products and make sense in the local communities.
So, you know, we do have a flexible model and dominate in certain parts of
the, you know, category depending on the markets that we operate in.
And our franchisees take full advantage of that.
We've got over thirteen hundred franchisees represented here in
Singapore that have finally got a chance to get together with us after we've had
this meeting delayed for quite some time during Covid.
And it's fantastic to be able to get together and give him a hug and
celebrate the way they've used all these different programs in their markets to
navigate this environment. How are you assessing expansion
opportunities in this part of the world in Asia as Europe
is expecting a slowdown? The same thing with the US might Asia
provide those opportunities for expansion and growth for you?
Absolutely. Asia is a big part of the growth story
at Yum! It always has been and it always will be
given the population here. In fact, last year alone we opened forty
five hundred gross new units around the world.
Thirty one hundred net new units and all of those net new units, more than half
of them came from Asia. In fact, more than half of them came
from just India and China. So this is a big part of our growth
equation. With the returns that our franchise
partners are getting from building in these markets are quite impressive.
Young China, for example, reported two to three year cash paybacks on their
investments. And even during the challenging times
that they've had during the last few years, they continued to build.
So our footprint in China, for example, has gone from nine thousand units prior
to the pandemic to over 12000 today, just as one data point.
So lots of growth, as you said, all around Asia.
And of course, one of the reasons why we've chosen to meet here with our
franchise partners.