The Fast Food Race Picks Up In India

Posted:10/03/12
By:Freda Ding

Comments(0) | Add a comment

Research these Stocks on Kapitall’s Playground Now

At the end of the day Americans can only eat so much, despite global perceptions to the contrary. This fact helps to explain the collective moments of fast food industries expanding their presence abroad. Not just to China, but to India.

McDonald’s (MCD) made headlines last month when it revealed its plans to open a site in Amritsar to serve all-vegetarian fare including the popular McAloo Tikki burger. The announcement is a reminder that India is a relatively untapped market in terms of food. McDonald’s has only 271 locations in India out of its almost 33,000 global restaurants.

Yum! Brands, Inc. (YUM) has also shortlisted India as the next opportunity after China. Over half of it’s operating profit is coming from KFCs and Pizza Huts in emerging countries. The chain plans to open 500 outlets in India by 2015 (101 were opened in 2011). Although profit contributions from these outlets will be minimal at first, India is now its own reporting segment.

As Indian consumers welcome (or oppose) some of these new chains, they may be looking to guzzle a cumin-flavored Coke to go with that McSpicy Paneer. PepsiCo (PEP) already has a presence in India that includes snacks experiencing double-digit growth. Coca Cola (KO) has lofty ambitions to boost its own revenues in the next decade by focusing abroad. It wants to push more beverages into India especially as domestic consumers increasingly give soda the evil eye.

If, instead, you’re looking for a hot drink in Mumbai, Starbucks (SBUX) will be opening its first store by the end of the month, a big delay from plans released earlier in the year. The Mumbai branch will be serving locally source coffee. Don’t count on finding those chai lattes in a country of traditional tea drinkers. In fact, the biggest obstacle for Starbucks is convincing trendy consumers to ditch the masala chai and grab a cup of joe.

US companies are finally stepping up their efforts in India. Whether these products are going to be as affordable, welcomed (so far not so much), and attuned to local tastes remains to be seen.

1. Yum! Brands, Inc. (YUM, Earnings, Analysts, Financials): Operates as a quick service restaurant company in the United States and internationally. Market cap at $30.73B, most recent closing price at $67.42. Average quarterly operating expense over the last five quarters at $0.3M, vs. most recent cash and short term investments at $6.57M, implies a Cash / Avg. Operating Expense ratio at 21.9.

2. McDonald’s Corp. (MCD, Earnings, Analysts, Financials): Operates as a foodservice retailer worldwide. Market cap at $92.77B, most recent closing price at $91.99. Average quarterly operating expense over the last five quarters at $16.69M, vs. most recent cash and short term investments at $364.8M, implies a Cash / Avg. Operating Expense ratio at 21.85.

3. Pepsico, Inc. (PEP, Earnings, Analysts, Financials): Engages in the manufacture, marketing, and sale of foods, snacks, and carbonated and non-carbonated beverages worldwide. Market cap at $109.95B, most recent closing price at $70.65. Average quarterly operating expense over the last five quarters at $0.29M, vs. most recent cash and short term investments at $6.17M, implies a Cash / Avg. Operating Expense ratio at 21.28.

4. The Coca-Cola Company (KO, Earnings, Analysts, Financials): Distributes, and markets nonalcoholic beverages worldwide. Market cap at $172.78B, most recent closing price at $38.38. Average quarterly operating expense over the last five quarters at $37.11M, vs. most recent cash and short term investments at $715.75M, implies a Cash / Avg. Operating Expense ratio at 19.29.

5. Starbucks Corporation (SBUX, Earnings, Analysts, Financials): Operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. Market cap at $38.11B, most recent closing price at $50.15. Average quarterly operating expense over the last five quarters at $52.61M, vs. most recent cash and short term investments at $974.96M, implies a Cash / Avg. Operating Expense ratio at 18.53.