Asia leads Burger King sales growth

Burger King sales are growing faster in Asia than in any other part of the world, reports parent Restaurant Brands.

Sales in Asia rose 5.3 per cent, according to the company’s second quarter earnings data released overnight. Latin America sales rose 4.9 per cent. The performance in those two markets was enough to offset a 0.8 per cent decline in same-restaurant sales across the US and Canada, resulting in flat global systemwide sales growth.

The success in Asia comes at a time when rivals Yum Brands (parent of KFC and Pizza Hut) and McDonald’s are struggling to maintain growth in Asia, where both companies are trying to sell long-term franchise rights.

It also partly explains why Restaurant Brands this week announced a priority of expanding its Tim Hortons coffee cafe brand into Asia, with the Philippines the first stop.

The Asia and Latin American figures were high points in a result best described as “adequate”.

However, Neil Saunders, CEO of Conlumino, observes that although the headline result of a 0.2 per cent decline in overall revenue looks somewhat gloomy, this is mostly the consequence of a strong US dollar and weak Canadian dollar, which especially affected revenues from Canadian-based Tim Hortons.

“The underlying numbers are slightly better, with both divisions in positive territory on a comparable sales basis and system-wide sales up by 0.6 per cent even after the impact of exchange rate fluctuations.”

Saunders says the loss of sales momentum from previous quarters is in line with recent numbers from rivals like McDonald’s and Yum.

“This trend is being driven, primarily, by a slowdown in spending on eating out by American consumers.  The softness in the US market is disappointing given the initially positive reaction to menu changes and the introduction [by Burger King] of hot dogs. It underlines the fact that menu change and innovation is not now something that can be done periodically: fast food players need to see this as a constant process that has to be supported by ongoing promotions and marketing activity.”

Saunders believes McDonald’s continues to hold a slight edge over Burger King, and is doing more to shake up its traditional business model to maintain consumer interest and drive growth.

“All that noted, the one saving grace for Burger King is good cost control which allowed [pre-tax earnings] to grow by 3.7 per cent this quarter.

“Overall, Restaurant Brands continues to make progress; but with spend tightening and competition intensifying it now needs to up the pace of innovation if it is to grow further,” concluded Saunders.