Yum! Looks to India

Already established in China, Yum! Brands (NYSE: YUM), operator of Pizza Hut, Taco Bell and KFC, recently outlined its growth plans for India. The company intends to open 1,000 fast-food outlets by 2015. While investors invariably think of China when it comes to overseas growth, they need to look at India, too.

Like China, India offers the promise of an exploding middle-class population. But India differentiates itself through the sheer size of its youth population — the median age in India is 25, and a stunning 30 percent are under 14 years old. These are young consumers preparing to make their first foray into the workforce, and they represent potential lifelong customers. Aligning with India’s youth culture presents an exciting growth proposition for companies.

Yum! is already huge in China, where it makes about a third of its operating profit. While its current footprint in India is relatively small, it has done an excellent job adapting to China, a skill that should help it in other emerging markets.

India needs major boosts in infrastructure, education and health care, all of which should offer excellent investment opportunities. The McKinsey consultancy estimates that private consumption in India should quadruple from 2005 to 2025.

If Pizza Hut, Taco Bell and KFC snare even a small piece of the growing consumption pie, Yum’s bottom line should benefit. 