Yum! Brands (YUM 0.46%) just announced that Greg Creed, the CEO of Taco Bell, will take over as CEO of Yum! Brands on Jan. 1, 2015. I really like this move, as Creed has been with Yum! Brands for more than 20 years. Before he was the CEO of Taco Bell, he was the chief operations officer for all of Yum! Brands, so he knows the company well.
Source: Yum! Brands
The other thing that I like about him becoming CEO is that he has been instrumental in reenergizing the Taco Bell brand. As CEO, he oversaw the launch of Doritos Locos Tacos, the Cantina Bell menu, and most recently the new breakfast menu at Taco Bell. He has also proven to be a brilliant marketer and has taken a few poignant shots at arch rival McDonald's (MCD 0.13%). With Creed becoming the CEO of Yum! Brands, should we expect the war with McDonald's to heat up?
The new office of the chairman
Chairman and CEO David Novak will become executive chairman when Creed takes over. Novak has been instrumental in building Yum! Brands into what it is today. During his time as CEO, a tenure which began in 1999, Yum! Brands' market cap has increased from $6 billion to $34 billion today.
Furthermore, once Novak becomes executive chairman, he will form the office of the chairman, which will consist of himself, Creed, and Yum! Brands Vice Chairman Sam Su, who also runs Yum! Brands' China division. I really like this move because it keeps Novak actively involved with the company and allows him to help strategize going forward. He will also serve as a mentor to Creed, which will allow for a seamless transition as Creed takes over the day-to-day operations. In the press release, he said:
This new Office of the Chairman will partner as a triumvirate on overall corporate strategy and leadership development to propel continued growth.
Look for Creed to shake up KFC and Pizza Hut
Creed is widely credited with reinvigorating Taco Bell and making it a much more formidable player in the fast-food industry. Pizza Hut and KFC could both use a bit of Creed's magic. In the first quarter, Pizza Hut's U.S. same-store sales declined 5%, and KFC's U.S. same-store sales declined 3%. Under Creed, Taco Bell fared much better. Its U.S. same-store sales fell only 1%, primarily due to the severe winter weather during the first quarter.
Source: Wikipedia
While both KFC and Pizza Hut are introducing new menu items, most notably the Double Down for KFC and WingStreet for Pizza Hut, where I think Creed will have the biggest impact is with marketing. He has done a tremendous job creating buzz for Taco Bell's Doritos Locos Tacos and its new breakfast menu via social media and traditional TV advertising. Taco Bell took direct aim at McDonald's when it ran ads featuring customers named Ronald McDonald raving about Taco Bell's new Waffle Tacos and A.M. Crunchwraps. The ads generated significant buzz for the company as it rolled out breakfast nationwide.
China and emerging markets will remain a focus
While turning around Pizza Hut and KFC in the U.S. is a priority, Yum! Brands' future growth remains in the international markets. In the first quarter, the China segment's same-store sales grew 9% and the operating profit increased 80%. In addition, a total of 249 new restaurants were opened in the first quarter. This year, Yum! Brands plans to open about 700 new restaurants in China. Outside of China, the company plans to open 1,250 new international units.
How do shares compare?
|
Market Cap |
Forward P/E |
Price/Sales |
Dividend Yield |
1 Year Return | |
|---|---|---|---|---|---|
|
Yum! Brands |
$33.68B |
17.95 |
2.53 |
1.9% |
11.19% |
|
McDonald's |
$100.12B |
16.18 |
3.56 |
3.2% |
-1.12% |
Source: Yahoo! Finance
Foolish final thoughts
This Fool is a big fan of Greg Creed and thinks he will be an excellent CEO for Yum! Brands. Shareholders should be very happy with his selection and that Novak will stay on as executive chairman. The only ones who will likely be upset are the folks over at McDonald's.
Look for Creed to take some more shots at McDonald's, as he will have control of not only Taco Bell but Pizza Hut and KFC as well. McDonald's is going to have its hands full not only trying to reinvigorate its sales but also fending off Yum! Brands in the fast-food wars. Grab your Waffle Taco, Double Down, or wings from WingStreet because it's going to be interesting to watch.
