In the long run, fast food beat out Pepsi

Amy Scott Oct 6, 2015
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In the long run, fast food beat out Pepsi

Amy Scott Oct 6, 2015
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Joining the parade of third-quarter earnings announcements Tuesday are two companies that used to be one. Eighteen years ago, PepsiCo Inc. spun off its restaurant business, which included the chains Pizza Hut, Taco Bell and KFC. 

Pepsi’s stock has more than doubled since the split, according to Bloomberg Business. Shares of the company that became Yum! Brands have grown more than 10-fold.

“The company has become one of the leading players in the restaurant space and one of the true global players,” said restaurant analyst R.J. Hottovy with Morningstar.

About 35 percent of Yum’s profits come from China, he said. 

That growth suffered a setback in the last few years because of food safety issues in that country. Still, Yum is set to rebound, said Peter Saleh with BTIG, in spite of signs of a slowing Chinese economy.

“China has been a big portion of their growth story, and that’s set to continue,” he said.

Meanwhile, Pepsi has been battling 10 straight years of falling soda sales, and it recently fought off another campaign to split up the company, this time into separate beverage and snack businesses.

Investors may wish Pepsi had held onto its restaurant chains, but Morningstar’s R.J. Hottovy said the business probably wouldn’t have done as well under Pepsi.

 

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