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Yum China (YUMC) & Lavazza Plan to Open 1K Lavazza Cafes in China

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Yum China Holdings, Inc. YUMC and Lavazza Group, which is an Italian manufacturer of coffee products, recently announced a plan to broaden the footprint of Lavazza cafés in China. In the beginning of 2020, Yum China and Lavazza Group formed a joint venture (JV) to expand the Lavazza café concept in China.

Through the JV, the companies plan to open 1,000 Lavazza cafés by 2025. In an effort to drive growth, the companies together will invest $200 million. It is worth mentioning that Yum China has a 65% stake in the JV, while Lavazza owns the remaining 35%.

Since the first Lavazza flagship store in Shanghai, which was opened in April 2020, Lavazza has continued to increase its store count to more than 20 stores in China across cities like Shanghai, Hangzhou, Beijing and Guangzhou.

Joey Wat, CEO of Yum China said, “The recent progress of Lavazza cafés in China has been encouraging and reaffirms our belief that our partnership is well positioned to capture the significant coffee opportunity in China with accelerated store network development. We are excited about what the future holds for this iconic Italian brand.”

The companies plan to expand Lavazza presence in higher tier cities with a variety of store formats. As of Aug 31, 2021, Lavazza had 22 stores, the JV is planning to increase the store count to more than double by the end of 2021.

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Zacks Investment Research

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Price Performance

So far this year, shares of Yum China have declined 4.1% against the Zacks Retail - Restaurants industry’s 14% rise. The company is benefiting from its gradual shift toward digital and content marketing to expand its customer base. Also, continuous menu innovation, strategic investment in unit expansion and strong brand recognition are expected to effectively drive sales in 2021 and beyond.

Yum China carries a Zacks Rank #3 (Hold).

Other Solid Restaurant Bets

Some better-ranked stocks in the same Zacks Retail - Restaurants industry include Jack in the Box Inc. JACK, Chipotle Mexican Grill, Inc. CMG and The Wendy's Company WEN, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.

Chipotle earnings for 2021 are expected to rise 137.5%.

Wendy's earnings for 2021 are anticipated to increase 42.1%.

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