Growth Opportunities in BRIC Countries

aiinsight

Growth opportunities in BRIC countries

The quickly emerging BRIC countries — Brazil, Russia, India and China — provide significant opportunities for restaurant chains looking to grow internationally, provided those companies tailor their menus to local tastes.

Chicago-based industry research firm Technomic Inc. said striking a balance between maintaining brand identity and building country-specific menu innovations can allow restaurant brands to gain a foothold in these growing markets. Menu items like chicken and coffee will be growth areas for BRIC countries.

“[U.S. restaurant chains] can take advantage of the worldwide recognition they’ve established, but in order to gain loyal customers in new markets, they need to innovate on the menu and introduce items specifically adapted for local consumer preferences,” Darren Tristano, Technomic executive vice president, said. “Chains are also leveraging their international experience and applying lessons learned to improve domestic operations and innovation.”

Some of the largest U.S. restaurant brands have already begun rolling out such products, sometimes by importing them from the United States or other foreign markets, Technomic said.

Brazil
McDonald’s recently launched a Chicken Bacon Onion sandwich in Brazil, which was originally developed for its European division. The sandwich combines a breaded chicken breast with bacon, bacon-spiked cheese and bacon-flavored sauce on a bun dotted with sesame seeds and bacon bits.

Restaurant securities analyst Mark Kalinowski of Janney Capital Markets noted this summer after meeting with McDonald’s chief financial officer Pete Bensen that market-to-market menu sharing would become more common for McDonald’s. Not only could popular items overseas show up in U.S. McDonald’s restaurants, but domestic sales drivers, like McCafé Real Fruit Smoothies, could soon appear on menus in Brazil and beyond.

Burger King has also announced growth plans in Brazil, Technomic said, with a master franchise agreement with an affiliate of private-equity firm Vinci Partners in a joint-venture deal. Burger King currently has 110 franchised locations in Brazil.

Additionally, Wendy’s said it’s renewing its international growth push, with Brazil and China as key targets. The quick-service chain currently has only a few hundred international units, but projects a potential 8,000 overseas restaurants.

China
Companies including Yum! Brands Inc. and McDonald’s Corp. see China, with a population of more than a billion people, as the top prize in international expansion.

In the first half of the fiscal year, Yum generated an operating profit of $397 million from its nearly 4,000 Chinese restaurant locations, or 48.4 percent of its total $820 million operating profit. While McDonald’s generates only 3 percent of its total operating profit from its 1,400 China restaurants, the brand increased its same-store sales there by 14 percent in the second quarter. McDonald’s plans to open 175 to 200 units in China this year.

Yum is also planning to expand in China with native concept Little Sheep, which specializes in “hot pots,” Technomic said. Yum already owned 27 percent of Little Sheep before making an $863.5 million offer for the rest of the brand this summer.

Russia
In Russia, Yum made a similar move by taking over its Rostik’s-KFC joint-venture in 2010 from Rostik Group, which controls Russia’s largest restaurant chain, Rosinter.

Chicken will be a huge market in Russia in the coming years, Technomic noted. One of the country’s largest poultry processors, Cherkizovo, has broken ground on a new production facility that can process 500,000 metric tons of live poultry per year, a significant upgrade from Russia’s total current capacity of 15,000 to 20,000 metric tons annually, Technomic research showed.

India
In India, coffee will have a large potential for foodservice brands, based on the growth of the country’s largest native coffee chain, Café Coffee Day. That brand, with more than 1,100 locations, is beginning to spin off brands, including Coffee Day Lounge, which it hopes to grow from 19 current units to 100 by the spring of 2013.

India has 1,200 restaurant franchisors, about 25 percent of which are from outside India, according to the U.S. Department of Commerce’s Commercial Service. The service valued India’s current restaurant franchise market at $3.3 billion across all sectors, and pegs its potential to reach $20 billion by 2020.

Baskin-Robbins, Pizza Hut, KFC, Papa John’s Pizza, Ruby Tuesday, Pizza Hut, Subway, McDonald’s and Domino’s Pizza all have a presence in India. Domino’s Indian master franchisee, Jubilant Foodworks, had 339 restaurants across 79 cities at the end of 2010 and planned to open 70 units there in 2011. Jubilant’s same-store sales growth has averaged 18 percent over the past five years.

View the full article on Nation’s Restaurant News

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: