KFC running hot, page-77

There should be no argument as fast foods are definitely in the Discretionary Consumer sub index of the ASX.  Does this mean that CKF is a discretionary?  Well, yes and no.  Its discretionary in that if the fast food/restaurant  industry disappeared completely, people would still eat.  But that's a self serving argument in that if all supermarkets disappeared then everybody would survive on eating out (or growing their own and ignoring the economic implications for now).

Is it discretionary on economy?  Not really.  The place of fast food in the economy is well known.  Many have long recognised the counter-cyclicity of fast food (eg, http://fortune.com/2011/08/23/why-mcdonalds-wins-in-any-economy/).  The profitability of fast food outlets has more to do with introducing fads at the right level and at the right time - ie, convincing people that its cheaper, just as healthy, and a treat for doing it tough/being successful/celebrating an event than the alternatives.

The CKF board will, of course, like to stick to the "discretionary" moniker as that provides a ready excuse should profits dip: "its an externality we cant control".  That should be taken as "we haven't moved fast enough to keep engaging a changing customer base".   The telling part in the above quote is the "consumer sentiment for our products " part.   That is manageable.