Yum China Holdings, the parent company of KFC, is focusing its outlet development efforts in China on smaller areas, where demand has rebounded far faster from the epidemic than in the country’s larger cities, its CEO said on Thursday.
With over 11,000 locations, the owner of the KFC, Pizza Hut, and Taco Bell brands in China is the country’s largest fast food operator. Earlier on Thursday, it said at an investor day that it was speeding up its retail network development to reach 20,000 outlets in 2,700 cities.
The firm did not specify how many of the proposed additional outlets will be located in what it refers to as “lower-tier cities.”
Yum China’s Chief Executive Joey Wat, on the other hand, told Reuters on Thursday that the firm was targeting such places because its inhabitants had higher discretionary incomes than those in big cities like Beijing and Shanghai and were ready to spend more.
“The living cost in higher-tier cities is generally greater due to rising housing prices in the past few years, meaning that disposable income is less,” Wat said. “Since the pandemic, people in high-tier cities have been more conservative in their spending than lower-tier cities.”
The epidemic has dragged on the company’s revenue, despite the fact that China has mostly limited COVID-19, thanks to Beijing’s “zero-tolerance” policy, which has seen officials shut down high-risk regions even when just a couple of cases have been identified.
Yum China warned last week that adjusted operating profit would fall by 50 percent to 60 percent in the third quarter due to the spread of the Delta variation in China, which forced more than 500 of its restaurants to close temporarily or only do take-out business.
Consumer behaviours in China have also changed as a result of the epidemic, and Yum China is releasing new goods and packaged meals to capitalise on the at-home consumption trend, according to Wat.
For example shoppers can buy two pieces of raw steak from a Pizza Hut online ordering service for 99 yuan.
“Pizza Hut not only sells cooked steak, it sells raw steak,” Wat said. “Many people, whatever their age and gender, learned to cook during their stay-at-home days.”
Yum China and Italian coffee manufacturer Lavazza, which began a cooperation in 2020, also said on Thursday that they intend to open 1,000 Lavazza cafés in China by 2025, up from 22 at the end of August. The two organisations will initially invest $200 million in the joint venture to fund its future expansion.
“This is only the first phase,” Wat said. “More investment will follow.”
(Adapted from TheSingaporeTime.com)