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Yum Brands taking KFC to China's smaller cities

Published on NewsOK Modified: December 6, 2012 at 3:21 pm •  Published: December 6, 2012

In 2013, Yum plans to build 700 restaurants in China. This year, the company had predicted it would build 650 but ended up building more than 800.

To cultivate loyalty amid intensifying competition, Yum is working to cater to local tastes. For example, the company introduced rice as a side dish in KFC. Next year, it plans to extend the line with premium rice offerings.

Although KFC accounts for the bulk of its business in China, Pizza Hut is expected to play a bigger role in the coming year with the number of openings to double to 220. That's about the same number of restaurants McDonald's is expected to build in the country, Chen noted.

Part of the pizza chain's growth will be fueled by its expanding delivery service. The company noted that its name for the service translates to "Must Win Homes Fast Delivery" in Chinese— and does not include the word "pizza," which is not as widely eaten in the country as in the U.S. Food other than pizza — fried shrimp, soups, steak — accounts for about half of sales at Pizza Huts in China.

In addition to its flagship U.S. brands, Yum has two smaller Chinese food chains — East Dawning and Little Sheep. Chen noted those chains are important to the company because "the Chinese consumer will always eat more Chinese food than Western food."

Overall, Yum, based in Louisville, Ky., expects sales at restaurants open at least a year to grow in the mid-single digits in China for 2013. Growth is expected to be softer in the first half of the year, and pick up in the second half.

"We feel good about it," said Novak, noting the worries Yum's forecast raised last week.

Beyond China, Yum sees India as its next big region for growth. It also noted that it also has a bigger presence than McDonald's in other developing nations, such as South Africa. And about half its operating profits now come from emerging markets, compared with 40 percent in 2009.

Yum's stock added $1.02 to close at $66.92.