Demand for KFC is booming in China

LOUISVILLE, Ky. — China's relentless appetite for the colonel's chicken has KFC on a building boom in the world's most populous country, with 1,200 locations, soaring profits and a menu that mixes in bamboo shoots and lotus roots.

At a time when its sales in the United States are struggling, KFC is dominating even rival McDonald's in China and turning the goateed visage of Kentucky Fried Chicken founder Colonel Harland Sanders into a ubiquitous symbol of America.

"We are really positioned as a part of the fabric of life in China," said David Novak, chairman and chief executive of Louisville-based Yum Brands Inc., parent company of KFC.

Yum's operating profits in China exceeded $200 million in 2004 — more than half the company's burgeoning international profits. And the pace of 275 locations opened in the country last year is expected to be matched in 2005.

Sam Su, president of Yum's China division, called China "the ultimate marketplace." He predicted that as the Chinese economy grows, it will someday surpass the number of KFC restaurants in the United States, where there are 5,453 stand-alone locations and 1,277 multibrand outlets featuring other Yum brands.

"In many parts of China, the local municipal governments actually view the arrival of a KFC as a sign of the city coming of age," Su said in a phone interview from China.

A restaurant industry analyst said KFC's recipe for success in China includes a solid business plan guided by a management team intact for years.

"For many companies, China is a hope and a dream — maybe a very realistic hope and a dream — but for Yum it's reality today," said Joe Buckley with Bear Stearns & Co. "It's an important piece of the company that still has plenty of growth potential ahead of it."

Yum's China operations represented about 15 percent of the company's operating profits in 2004, a figure expected to reach about 18 percent this year, Buckley said.

He said Chinese fast-food consumers' preference for chicken has contributed to KFC's success: "It's an advantage to be the chicken brand, given that scenario."