Source: Visual China
Reporter丨Xie Zhiying Editor丨Jiang Yuyan
KFC, Pizza Hut parent company YUM China , struggling to win.
revenue in the first half of the year was US$4.756 billion (approximately RMB 34.05 billion), a year-on-year decrease of 4.48%, and net profit attributable to shareholders was US$183 million, a year-on-year decrease of 55.47%.
4-May, more than 2,500 stores in Yum China were temporarily closed, or only provide takeaway services, and same-store sales fell by more than 20% year-on-year.
CEOQu Cuirong described the second quarter as "the most severe challenge that has faced so far ".
Performance is under pressure. How to lead 400,000 employees through difficulties is testing the only Chinese female CEO among the world's top 500 companies.
Qu Cuirong
In cities affected by the epidemic, she has increased the promotion of pre-packaged food , expand community group buying and takeaway business; she cannot stop opening a store. In the first half of , Yum China added 382 new stores, with the total number of restaurants reaching 12,170.
Led by Qu Cuirong, the catering giant with a market value of 156.9 billion has regained its resilience.
20,000 stores
Yum China is the largest chain catering group in China, and it owns a number of well-known brands such as KFC, Pizza Hut, Xiaofeiyang , Huang Jihuang, Taco Bell, Lavazza, etc.
In September 2020, Qu Cuirong led Yum China's secondary listing on the Hong Kong Stock Exchange, and the fundraising was mainly used to expand the restaurant network. On the basis of the existing 10,000 stores, another 10,000 stores were opened. The number of
doubled, Qu Cuirong emphasized the long-term optimism about the Chinese market, and the goal was clear - to create another Yum .
expansion speed is amazing. In 2021, Yum China opened a total of 1,806 stores, with a net increase of 1,282, which is equivalent to opening 1 new store every 5 hours. That year, Qu Cuirong received a high salary of 94.6 million yuan.
Source: Yum China
In terms of business methods, 86% are self-operated, and the franchise stores are mainly in remote areas.
self-operated ensures quality, but also limits growth. Qu Cuirong began to explore the franchise model, reduce the burden of working capital, and accelerate the pace of opening stores.
For example, KFC's "don't start from scratch" franchise, franchisees invest in purchasing stores that are in operation and have begun to make profits, quickly integrate into KFC's operating system, and increase the probability of success.
needs to support 20,000 stores, and efficient supply chain facilities are essential. Yum China has 33 logistics centers covering more than 1,700 towns across the country.
In July this year, the first batch of self-built supply chain centers in Chengdu and Huaian, Anhui were delivered and used. In the same month, the supply chain management center located in Jiading, Shanghai also officially started construction. This is Yum China's largest supply chain center self-built project with a total investment of 600 million yuan.
In the next five years, Qu Cuirong plans to invest US$1 billion to expand the logistics network, reaching 45-50 logistics and integration centers.
Digital reform is still continuing. For example, real-time monitoring of inventory, forecasting demand, managing logistics routes, etc. connects the online and offline consumption experience, and reaches more than 370 million members of through mini programs and APPs.
"In the future, Yum China will continue to increase investment in store network expansion, enhancing digital capabilities, supply chain infrastructure, etc.." Qu Cuirong stared at the bull's eye and targeted it.
Source: Yum China
Despite the unfavorable start of the year, Qu remained optimistic: the target set at the beginning of the year remains unchanged, and there should be a net increase of 1,000-1,200 new stores this year.
This means that the average daily net increase in stores in the second half of the year requires more than 5 stores.
Multi-point efforts
In order to achieve the "small goal" and drive the growth of sales, Yum China strives to build high brand potential.
In the first half of the year, "Crazy Thursday" cultural and sports became popular . KFC played the emotional card and sucked the finger and returned to the original chicken 2.5 yuan 35 years ago; toys around Children's Day can be hard to find, and those with the highest price will be sold for 500 yuan. In addition to marketing, the brand territory continues to expand and extend.
4 In April, Qu Cuirong announced that he would appoint KFC general manager Huang Jinshuan as the group's first chief customer officer, responsible for emerging brands such as Lavazza, COFFii & JOY.
It can be seen that the coffee field is the focus of efforts.
As early as 2014, KFC K-COFFEE entered the domestic market; in 2018, it tried the waters of independent boutique hand-brewed coffee trendy brand COFFii & JOY; in September last year, Yum China reached a cooperation with Italian coffee brand Lavazza, injecting US$200 million into the joint venture to jointly expand Lavazza's network in China.
three major brands have formed a consumption matrix covering different groups, corresponding to mass routes, boutique routes and high-quality routes respectively.
As of the end of last year, the number of Lavazza stores expanded from 4 to 58; COFFii & JOY opened nearly 40, and same-store sales increased by 30% year-on-year; veteran player K-COFFEE sold more than 170 million cups of coffee a year.
Source: Lavazza
Old rival McDonald's has opened 2,500 McCafe, Starbucks said that 3,000 new stores will be opened in the next three years, and the total number of stores will move towards 9,000.
Qu Cuirong is not willing to be outdone. plans to open 1,000 Lavazza coffee shops by 2025. Yum China also has a layout for pre-made dishes on the air vent.
KFC sells snail noodles , frozen chicken soup, Japanese fried rice, Pizza Hut new pasta, steak, curry rice, Xiaofei Yang's hot pot base , Huang Jihuang's sauce sauce, etc., which are popular on e-commerce platforms.
In Qu Cuirong's view, launching pre-made dishes "is an excellent supplement to our business."
This has driven the rise of new retail. In 2021, Yum China's new retail business scale reached 500 million . In the first half of this year, this number exceeded 450 million, and annual sales are expected to double year-on-year.
"We have a distribution network composed of supply chain scale effect, more than 10,000 stores and online channels." Qu Cuirong is full of confidence. "(packaged food) brand 'Shaofaner' was launched in 2018 and will be delivered directly by riders without additional delivery fees."
In order to move faster, Qu Cuirong made large acquisitions.
Last September, Yum China acquired 28% of the equity of Hangzhou Food Service Group for a total cash consideration of about 1.6 billion yuan. The latter operates about 60 Chinese restaurants, including Zhiweiguan and , Hangzhou Restaurant, , and has its own food processing business line.
Challenge geometry
Yum China under the epidemic is difficult to make money.
In the second quarter, Yum China achieved revenue of US$2.13 billion, compared with US$2.45 billion in the same period last year; net profit of US$83 million, down 54% year-on-year; restaurant profit margin was 12.1%, down nearly 4 percentage points from the same period in 2021.
Although it has many brands, Yum China's performance is actually highly dependent on hamburgers and pizza. KFC's single brand revenue accounted for more than 70%, while Pizza Hut accounted for 20% of . The goal of opening a store of
20,000 is naturally placed on both.
From April to June this year, Yum China opened 246 new stores, including 69 KFC and 32 Pizza Hut, and other brands had net new stores of -48.
For the two giants, Qu Cuirong's store expansion ideas are different - KFC increases the store density in existing cities and further sinks to low-tier cities; Pizza Hut accelerates the opening of stores through small-store models such as satellite stores.
focuses on targeting the sinking market.The research report of
Yum shows that the penetration rate of KFC stores under one million people below third-tier cities in China is 3.8, while that of first-tier and second-tier cities is 6.7.
Source: Yum China
Qu Cuirong followed the trend to create a "small town model" store, and controlled costs by streamlining the restaurant environment, dish types, etc., shortening the investment return period of , and improving profitability. In 2020, she started her first attempt in Fengqiu, Xinxiang, Henan.
Foreign fast food "goes to the countryside" and faces challenges.
focuses on affordable Wallace and Diccos have been working in the town for a long time. If you want to break through the inherent habits of low-level consumers, your products need to be differentiated, your supporting activities must keep up, and your digitalization must be more refined.
"Only by opening new stores, the decline in single-store performance is not high." Food industry analyst Zhu Danpeng analyzed, "In the future, Yum China should do more work in product strategy, scenario innovation, menu updates, etc.."
, Qu Cuirong has been looking for the second growth pole, but unfortunately it has not been found yet.
In 2020, Yum China established the Chinese catering business department, incubated the Chinese fast food brand Oriental Jibai , and acquired the hot pot brand Xiaofei Yang and the braised pot brand Huang Jihuang .
To this day, all three brands are on the decline.
In 2021, the operating profit margins of other restaurants, including the three, dropped sharply by 20.8%, with an operating loss of US$29 million; at the beginning of this year, Oriental Jibai officially closed down. Xiaofei Yang and Huang Jihuang continued to close their stores, and 33 stores were closed in the first quarter.
time is not waiting for anyone. Old rival McDonald's has announced that the goal of adding 4,500 new restaurants in 2022 will be achieved ahead of schedule in the first quarter.
For Qu Cuirong, whether it is digging deep into the sinking market to open stores or finding new profit support points, Yum China's fierce battle in the second half is still full of challenges.
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