Here's a follow-up to two of my previous posts. KFC selects Mengniu as its lead supplier of dairy products in China, replacing the decades-old dairy contract with Nestle. As I mentioned before, KFC's parent company, Yum! Brands, Inc. (NYSE:YUM), plans to expand operations in China under the helm of its second-highest paid executive, Sam Su, President of the China Division.
Last year, Yum! Brands' Greater China sales accounted for 70% of the firm's profit growth (Yum! Brands would have been operating at a loss if not for its revenue from China). Now KFC is out to thank China by appointing the country's second largest dairy producer, China Mengniu Dairy Company Limited (HKG:2319), to supply its 2,000 outlets on the mainland. This also comes at a time when the largest coffee maker in the world, Starbucks Corporation (NASDAQ:SBUX), discontinued (again) Nestle's contract in favor of Mengniu for its lower cost products.
So much for being a multinational dairy brand. As if the recent rise of Chinese businesses isn't prominent enough, The Bear Stearns Companies Inc.'s (NYSE:BSC) on-and-off love affair with its potential suitor, China CITIC Bank Corporation Limited (HKG:0998), is back on again (sorry for the post early Monday). Apparently they've decided to invest in each other, with Citic dumping $1 billion, or buying a 6% stake, of Bear Stearns. They plan to hold joint ventures in the Hong Kong market.
Anyway, this will probably give Bear Stearns' clients better transparency into Chinese markets, and a chance to clear their balance sheet. From Bloomberg: "China is one of the fastest-growing economies in the world," Jimmy Cayne, Bear Stearns' CEO, said in a phone interview today. "This is the deal of a lifetime." This contradicts what Bear Stearns President Alan Schwartz said on Oct. 4, that the company will "weather the storm" and isn't looking for funding from an outside investor. What a flip-flopping firm.
What do you think?
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