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Yum’s Pizza Hut Set for Big Growth in Latin America, Iberia

By Christiana Sciaudone

Investing.com — Latin America will soon be home to a lot more Pizza Huts.

The pie purveyor, which has already conquered much of Asia, is projecting solid growth south of the border and in Iberia, where stores are set to more than double as the taste for America’s favorite slice of Italy infiltrates local cuisines.

That said, succeeding in the region is not without its problems — economic downturns, currency fluctuations, inflation pressures and, of course, the occasional dictator can burn even the best-laid plans. So Pizza Hut is hedging risks as it always does, by never going it alone.

“We always partner with somebody from the country, we don’t go it alone,” said Enrique Ramirez, the global chief financial officer and general manager for Latin America & Iberia, in a video interview earlier this month. “We have to adapt and be flexible to be successful.”

Yum! Brands (NYSE:YUM) hit a record this month after announcing a dividend of 50 cents per share and a $2 billion share buyback plan, as well as strong first quarter results. After conquering much of Asia, Pizza Hut is now turning its attention to other regions with the most potential. Pizza Hut currently bring in the smallest share of revenue versus its sister brands KFC and Taco Bell, which together comprise Yum! Brands. But Pizza Hut saw the highest same-store sales growth for the first quarter of 2021, and while the U.S. was heavily responsible for that, Latin American & Iberia will lead the division’s growth in units in the coming years.

Of total Pizza Hut sales, the U.S. represents 45%, while Asia and China together lead with a total of 30%. That’s followed by Latin America & Iberia, with 10% of total sales for the most recent quarter. Of about 11,000 total global locations, the region has 2,500. That is set to more than double to 5,500 in the coming years, emphasizing the increasing importance of those markets.

Earlier this month, Pizza Hut opened its 1,000th Fast Casual DelCo (FCD) location in Guadalajara, the same city where its first-ever Mexico location opened 52 years ago. The new store model is a higher-margin concept that first rolled out in 2017 and a move away from the traditional in-store dining restaurant Pizza Hut was first known for. The stores are smaller with lower costs and faster profitability.

“We see that the growth is mostly in delivery and carryout, that’s why we’re pushing that model,” Ramirez said. The plan to open or renovate more such locations is in different stages of development in different parts of the world, and where the dine-in model works well and is profitable — like in El Salvador and Peru — it will remain.

Currencies in Latin America are well-known for dramatic fluctuations, as well as potentially expansive inflation and a lack of trustworthy public institutions. To avoid some of those pitfalls, Pizza Hut seeks to develop local suppliers, as well as to add local flavors.

Latin America & Iberia are expected to increase by about 6% a year in number of units, versus about 4% for overall unit growth. Latin America has 1,500 locations, with another 1,000 set to be added in Brazil and Mexico. Colombia also has room to run, and the company is eyeing markets it’s not currently serving, including Argentina. The Iberian market, meanwhile, is also set to grow, adding another 500 stores from 1,000 today. In Spain, Pizza Hut also partners with Telepizza, a local brand, meaning they can build up both brands for market share.

U.S. brands have had mixed success in Latin America, and in fact Pizza Hut was present in Argentina, for example, last century before closing shop. But it looks like now they’ve found a recipe that works.

Yum’s Pizza Hut Set for Big Growth in Latin America, Iberia