You'll know this first company by the golden arches you see across the U.S.
Yes, it's McDonald's.
Investors often mistakenly assume McDonald's is an old economy relic, left behind in the slow-growth U.S. But they couldn't be more wrong. What many fail to realize is the expansive opportunities left for the company in emerging economies.
But it's not the only American restaurant cashing in on massive growth abroad. The same goes for Yum! Brands, the company behind such fast-food staples as Taco Bell, KFC, and Pizza Hut.
Let's hit on these companies' hidden opportunities in China to start. Food from these giants is still seen as something of an affordable luxury, an item of prestige in many places abroad. And remember, these countries have four or five times the population of the U.S. and are growing much more briskly.
You may think of KFC and its fried chicken as the quintessential American fare, but Yum! already generates 85% more revenue in China than it does in the U.S. In fact, the U.S. comprises less than 26% of all the company's sales, as Yum! expands aggressively around the globe.
The thing is, investors are underestimating the potential in Yum!.
KFC has become a runaway hit in China. Yum! was the first quick-serve chain to enter China, beating even powerhouse McDonald's. The company has just over 5,200 locations there currently, but estimates that it can open some 20,000 outlets over time.
That opportunity has CEO David Novak crowing, "I wouldn't trade our long-term position in China with any consumer company in the world."
But even that may understate what the company can achieve.
In the U.S., Yum! has a restaurant for every 19,500 people. At a prospective 20,000 outlets, China would have a location for every 65,000 citizens, suggesting that the business opportunity may be much, much greater than Yum! is currently willing to project. Maybe three times as great!
And then there's Russia and India, where Yum!'s restaurants are seeing double-digit growth but make up less than 1% of the company's sales. So there's a long runway in these developing nations, too.
And while Yum! may have beaten McDonald's to China, McDonald's has massive growth plans of its own in the Middle Kingdom. It's rolling out its store network faster than in any other country ever (with the exception of the U.S.)
McDonald's currently has more than 1,600 outlets in the nation now, and is shooting for 2,000 locations in 2013. But, again that number looks tiny compared to the U.S. figures, where there's a Mickey D's for every 22,000 consumers. At that rate, the company could put up some 60,000 locations just in China, nearly tripling its total size from today. That's huge!
And like Yum!, McDonald's is only just getting started in India, meaning there's plenty of opportunity left.
But that misses a central point about their businesses: McDonald's and Yum! are not just hamburgers and fried chicken. These companies are massive food distributors that can tailor their offerings to each market, so they can repeat the same formula for success they've used elsewhere in the world, creating food for the middle class.
For example, in India McDonald's has adopted an entirely beef-free menu and debuted the Maharaja Mac, which uses chicken instead. The company has also developed a wealth of non-meat options to meet the needs of the country's many vegetarians.
Despite such phenomenal growth opportunities ahead, solid earnings, and growing dividends, many investors still overlook McDonald's and Yum!
But profits at these companies will continue to explode over the coming decades, and there's still time for you to secure your piece.
But the most exciting part is Nike's plan to expand abroad. To reach its growth target the company will have to tap into burgeoning international markets like Brazil and China.
It has effectively used its marketing and consumer insights to gain the advantage over rivals. Nike is already the frontrunner in the Chinese sportswear market with a 19% share. But it does face tough peers in Adidas at 15% -- and targeting market leadership by 2015 -- and homegrown rivals such as Li Ning and Anta, at 11% and 9%, respectively.
While Nike currently leads, it expects plenty of growth in the future, too. Management estimates the Chinese middle class to more than quadruple in the next ten years. Already China is Nike's second-largest market after the U.S., and it's gaining quickly.
And Nike has another huge tailwind in China.
Chinese citizens prefer the prestige of a global brand like Nike over domestic rivals, much as they like the cachet of eating at McDonald's or KFC. Nike is a luxury brand for upwardly mobile Chinese, and that's helping Nike increase sales at around a 15% clip there over the last three years.
So far the company has really only penetrated Tier 1 cities -- the biggies -- and it has room for further growth in Tier 2 and 3 municipalities, where the domestic brands are stronger. But it's already established a strong foothold and will continue to expand deeper into China.
And China is just the largest of the huge opportunities.
Nike expects other developing markets such as Brazil, India, and Central and Eastern Europe to show double-digit sales increases until at least 2015, adding on another $3 billion to $3.5 billion in revenue.
Nike's also expanding further into retail, allowing the company to capture higher margins and to obtain faster feedback on the most popular and profitable apparel styles.
That's all part of the massive depth of Nike's bench of marketing and consumer expertise and why the business will be able to take advantage of the massive wave of globalization that's still under way.
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