McDonald's prepped for sales growth in China http://today.reuters.com/news/newsArticle.aspx?type=reutersEdge&storyID=2006-06-06T124117Z_01_HKG247558_RTRUKOC_0_US-RETAIL-CHINA-MCDONALDS.xml
Tue Jun 6, 2006
By Sophie Taylor
HONG KONG (Reuters) - McDonald's Corp. (MCD.N: Quote, Profile, Research), the world's largest restaurant firm, is aiming for 10 percent annual sales growth in China over the next five years despite stiff competition from Yum Brands Inc.'s (YUM.N: Quote, Profile, Research) KFC.
Greater China President Guy Russo told Reuters on Tuesday he foresees same-store sales in the country of at least 5 percent annually in coming years, in line with the regional pace of growth.
Same-store sales -- or sales at outlets open 13 months or longer -- are a key measure of health for the retail industry. Globally, McDonald's chalked up same-store sales growth of 3.9 percent in 2005.
"We're going to continue what we're doing now by adding about 100 restaurants a year over the next five-year period, so that's about 10 percent growth" in sales, Russo said on the sidelines of a promotional event.
McDonald's, which saw flat sales in China in 2005, has opened drive-through outlets -- a concept first introduced in the United States in 1975 -- in an effort to return to a growth track.
The fast-food titan, which runs around 30,000 restaurants in over 119 countries, opened its first store in China in 1990 -- three years after Yum's KFC set up shop in Beijing.
McDonald's plans to boost its stores in China to over 1,000 by 2008 from 750 now, but that still lags rival KFC's over 1,900 as of 2005. Plus, KFC has racked up average growth of 20 percent over the past five years.
Still, China remains one of McDonald's 10 biggest markets, though McDonald's does not divulge specific figures for China.
The Asia Pacific, Middle East and Africa accounted for about 14 percent of global sales, or about $2.82 billion, in 2005. Of that total, Japan, China and Australia comprised about half.
China was unlikely to move up the ranks of top markets quickly, Russo said. "The next five years is steady as she goes. I can see five years down the track, and I'm not looking at 2,000 restaurants," he said. "I see us going through a very methodical execution of our strategy."
INDIAN GROWTH
McDonald's -- which operates 90 stores in India and plans to have 110 to 120 there by the end of this year -- also aims to add between 20 and 30 restaurants per annum there over the next three to five years.
"I would see India opening between 20 to 30 restaurants for the next three to five years," Tim Fenton, President of McDonald's Asia Pacific, Middle East and Africa, told Reuters.
McDonald's senior regional executives were speaking on the sidelines of the opening of the company's quality-control center in Hong Kong's crowded North Point district.
Its Chinese menu now relies more heavily on chicken than in other markets, reflecting the local preference for poultry over its more typical burger-heavy offerings.
The company has also introduced rice burgers to lure Asian consumers -- rice cakes sandwiching fried beef or shrimp. (US$1=HK$7.8)
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