After being spun out ofPepsico two decades ago because Pepsico wanted to separate the beverage company from the restaurant business, YUM Brands has been one of the highest grossing fast food chains in China with a commanding market share. Activist-investor calls and pressure compelled YUM Brands Inc to separate its China business from the parent company.
There have been some issues related to the Yumssuppliers in 
Chinaand the company did not bounce back from the shock despite taking the time they thought they required. This move however, is said to boost the value of Yum by $7 billion in the Asian market with a more narrow focus on the market, according to Keith Meister. Keith Meister who owns 5% of the company is said to have won the battle of Yums separation of divisions and was added to the board by the food giant.
Scandals and Competition Hit Hard
Scandals regarding safety measures have hit the sales of Yum brands and have been detrimental to the business altogether. Last July was pretty rough for Yum Brands! Inc when a local supplier was accused of having used rotten meat. The vendor had been supplying many other food chains and Yum severed its ties with it as wellquickly followed by an apology to its customers. To regain consumer loyalty and brand image, KFC has added healthy breakfast items to its menu. Micky Pant who was appointed Chief Executive Officer of the China business will now be leading the newly separated entity.
Also the risks and opportunities associated with business operations in China are vastly different than thoseemployed in the US and so separate strategies make sense as well.
Pizza Hut has also experienced severe competition from Papa John’s and Domino’s and has lost market share in the Chinese market over time. KFC however is the largest fast food chain in China and has lost a great deal of share to the competition. Yum’s market share has been falling in the past two to three years and has fallen to 31.4% from 39.9% back in 2011.
Where other restaurant chains have been gaining business in China, Yum Brands leads but at a very low and deteriorating level and there seems to be little chance of growth with the current strategies. Taco Bell has been doing well but that alone wouldn’t compensate for the fall of the other divisions. Competition from local Chinese food groups has been a major threat because of their focus on the local market’s tastes and native food. Yum, on the other hand has struggled to combat this crisis while keeping the signature brands intact and adding local flavor to the menu.
On the Path to Recovery
The separation of the China business would help Yum focus on its country-specific strategies and tailor their corporate structures to cater to the local taste and target market’s expectations. The deal won’t be closing till 2016 but if this separation plan works well, Yum can come back stronger than ever against the new competitors and force them to go for a company specific strategy as well. Investors, be ready to enjoy a pop in the stock!
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