Oct. 26--In its third quarter results reported earlier this month, the world's largest quick service restaurant company Yum Brands Inc. saw its profit dip by over 60%. Its China business, too, was hit owing to a controversy on the quality of its poultry, affecting same-store sales. And even though its India story is yet to take off, David Novak , Yum's sprightly 60-year-old chairman and CEO, was unflustered. Acknowledged for his leadership skills and his best-seller on the subject Taking People With You, Novak was in Goa and Bangalore to inaugurate new restaurants and announce a $100 million investment in the country for more KFC (Kentucky Fried Chicken), Pizza Hut and Taco Bell outlets. In an interview, he shared his views on the Chinese challenge and Indian opportunities. Edited excerpts --
You recently announced a $100 million investment in India. Could you elaborate on the plan?
We basically said by 2020 we will invest, as a system, in company equity and franchise investment, $10 billion in emerging markets that cover India, China, Africa, Russia, Brazil, Vietnam and Indonesia. All this investment will be in new restaurants. Yum Brands is very unique. In an emerging market like India, we have only two restaurants per million people compared with America, where we have 58 restaurants per million people. So we have unprecedented opportunity to open new units.
How have you seen the Indian consumer change?
People enjoy global brands. What we are seeing is more success -- consumers are trying our brands and becoming more frequent customers. So the popularity of Pizza Hut, KFC and now Taco Bell seems to be growing with each and every trip that I make. I travel to India twice a year. Earlier it was one time a year.
Taco Bell hasn't really grown.
It usually takes us about 10 years to develop a brand and scale it. We are ahead of schedule with Taco Bell. We opened Taco Bell in Bangalore a couple of years ago. We have four restaurants already and are getting ready to expand.
Is your expansion based on research? For instance, Indians may not have a taste for Taco Bell products.
Fifty-five per cent of the population here is under 30 or 35 years. It is a very youthful audience when you look at it, and Taco Bell really represents the new fast food. We have got localized products and 70% of the current mix of Taco Bell is vegetarian.
Other than the young consumer, what else is attractive about India right now?
We love any country which has a population that starts with a B. So there are well over billion people here. And about 100 million who can afford our food on a regular basis and that number is quickly heading towards 300 million. You got a very big country with a growing consuming class and growing disposable income. We are going to have very significant business here in India some day.
Which is the biggest challenge of doing business in India: product pricing, supply chain, real estate, dealing with government?
The biggest challenge for us -- everywhere we do business -- is making sure we have the right people in the right place. There are challenges in every country. The real key is to have a local management that understands how to work with the government, how to build supply chains, how to listen to customers and make our brands relevant. We do not see any insurmountable challenge. We are so encouraged by the prospects in India that we made it a separate division of Yum. India one day can resemble the business we built in China.
Isn't the China challenge insurmountable with same-store sales declining by 11% and a trust deficit among consumers?
We have the number one brands in China. KFC was just recently named number one consumer brand in China by BBC. Pampers was number two. This is in a down year. We believe that the China business is exceptional. We have an enormous track record. We have a business in China that people would die for. There is no other consumer company in the world that can even come close to the kind of business we have.
But China is a problem right now.