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PUBLISHER'S VIEWPOINT
June 2007
Why We Went Back To China
We went to China again in April. We went to attend Hotelex, the growing CMP/Sinexpo annual foodservice equipment show, which attracts manufacturers from around the globe. We went to see our friends. Chris Karssiens, group managing director of Enodis Asia Pacific, and his wife Paula, put us up again. We went to see the Chinese factories of American equipment manufacturers. More on that below.
But the real reason we went for the second year in a row is because China is driving American foodservice and hospitality big-time. Just look at these April and first quarter 2007 numbers from McDonald's and Yum! Brands.
In the first quarter, McDonald's global revenues rose 11%, with worldwide same-store (comparable) sales up 6.3%. Earnings per share jumped 27%. What drove the gains: growth in Europe and Asia/Pacific. In April, comparable sales were up 3.5% in the United States, 3.5% in Europe, and a whopping 10.3% in Asia/Pacific, the Middle East and Africa. The strong overall worldwide gains were "primarily due to strong performance in Japan and China."
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"China is driving American foodservice and hospitality big-time."
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But even the impressive McDonald's results pale besides those from Yum! The world's largest restaurant company, in terms of units, has been working hard and betting big on mainland China. The results speak for themselves. In the first quarter '07, Yum! saw earnings per share grow 19%, and worldwide operating profit rose 12%. This despite a few problems in the United States (you know what I'm talking about). In mainland China, a separate division for Yum!, sales rose 28% (that's right), and operating profit jumped 31%. Unit counts rose 19%, and same-store sales exploded up 9%. Sales at Yum! Restaurants Int'l, the rest of the huge company's offshore operations, also rose 25%.
And while Yum! and McDonald's are leading the American restaurant charge in China, American hotel brands have been moving just as aggressively, especially with the Beijing Olympics and Shanghai world's fair coming in '08 and '10. These folks are just the vanguard: A friend gave me the contact information on Applebee's new Shanghai office while I was at Hotelex, and lots of other chains are checking things out, too.
So I go to China with some regularity to check out KFC and McDonald's (I was impressed with both, especially the way they have tailored the menus to local tastes) and to visit the Chinese factories of their major American suppliers, staying in Hyatt Regency and Marriott Renaisssance hotels.
This year we visited Henny Penny (our thanks to Suzhou G.M. Geoffrey Lee and H.P. Exec. V.P. Morris Whitlock for hosting us) and Control Products in Suzhou. Last year, it was Enodis and Manitowoc and Hoshizaki (whose new operation in Suzhou will be open soon.)
Given what's going on with all their customers in China, they will all be expanding soon, and I'll be taking the long ride again.
Cheers,
Robin Ashton
Publisher
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