Baisheng China, which has basically recovered from the epidemic situation, has decided that it is time to speed up the “attack”.
Today, yum China Holdings Limited (NYSE: yumc and HKEx: 9987, hereinafter referred to as “Yum China”) announced its third quarter 2020 results. This is also the company’s second listing in Hong Kong after the first financial report. According to the financial report, the system sales of the parent company of KFC and Pizza Hut resumed year-on-year growth, while the same store sales returned to 94% in the same period last year.
Xiaoshidai learned that at the subsequent performance meeting for analysts, the company’s management, including Qu Cuirong, CEO of Yum! China and Yang Jiawei, chief financial officer of Yum! China, further talked about its latest growth and investment strategy, future store opening plan and new store model, as well as ideas for new businesses such as “Kaifeng Cai”.
Let’s take a look at the live news.
Three growth strategies
Xiaoshidai noted that Qu Cuirong proposed at the meeting that in the future, yum China will focus on the following three aspects: the continuous growth of stores, the growth of brand portfolio, and the improvement of digitalization and member operation ability.
The first is store growth. “It took us more than 15 years to open 1000 stores, and in the last four quarters, we have opened more than 1000 stores. We have the ability to build profitable new stores on a large scale. ” She said that the increase in store density will make Yum China closer to customers, bringing more sales and profits, and providing better and faster service to customers.
Qu Cuirong, CEO of Yum! Brands China
Notably, she said, as outbound delivery and takeout become more popular, yum China will tend to open more “smaller, lower cost” new stores, especially in the first and second tier cities. At the same time, the company is testing store styles tailored for lower tier cities to be more flexible and efficient in entering new markets.
“China is a huge market with regional differences. We will adopt a region specific strategy to create flexibility and pursue a saturated growth trend within the region. Multiple channels, different models and regional strategies are essential for expansion, which enables us to build a strong franchise network. ” She said.
In addition, she said, from more logistics centers to it solutions, yum China also needs to invest in infrastructure, “we will need to invest in both online and offline assets strategically.”.
Secondly, brand portfolio growth. This year, the catering giant’s brand matrix has included “new members” Huang Jihuang and Lavazza, according to the snack agent. “Chinese food and coffee also have exciting new growth areas. In terms of franchise and supply chain, we have seen opportunities for cooperation between Huang Jihuang and Xiaofeiyang. Huang Jihuang’s franchisees are already taking advantage of Yum’s strong distribution capabilities to boost store efficiency. We are excited about further collaboration. ” Qu Cuirong said today.
“Similarly, using our experience in coffei & joy, our cooperation with Lavazza was initially successful. Our three Lavazza coffee shops in Shanghai have received good customer feedback. ” She said Yum China’s digital, data and delivery capabilities are creating an ecosystem for consumers and will “drive the growth of the entire brand portfolio.”.
Finally, there is digitization and membership. Qu Cuirong said Yum China will invest in building a customer-centric digital marketing platform, end-to-end digitization, and the application of AI technology tools from farm to dining table.
“Crucially, this will give us more confidence to speed up our cooperation with franchisees and further reach out to more remote areas. A strong digital and membership program will create synergies in our brand portfolio, enhance unit efficiency, and drive store growth. ” She said.
New mode of store
At present, yum China is speeding up the opening of stores. The company announced today that it will update its fiscal 2020 target and expects to open more than 900 new stores this year. This is an increase from the previous target of about 800 to 850, mainly due to the accelerated expansion of KFC stores and the inclusion of new stores by Huang Jihuang.
In the third quarter, yum! China opened 312 new stores, mainly KFC, and transformed 301 stores. As of September 30, 2020, the total number of Yum stores in China has reached 10150.
In a subsequent response to analysts’ questions, Qu added that while speeding up, the company has always stressed the quality of its stores. “That is to say, if we see a good opportunity to open a profitable or at least break even store, we will be positive about opening a store.”
For the type and layout of new stores to be opened in the future, yum China has a clearer new plan.
In response to analysts’ questions, Qu Cuirong said that in the first and second tier cities, the company would choose to open smaller stores due to the growth of takeout and takeout, as well as taking into account rent and other expenses. “For low-level cities, we have been studying suitable models. This year, we have made further breakthroughs, and the cost has even become lower. We’ve found innovative ways to do this, and we’ve simplified the menu of stores in lower tier cities. ” She said.
“For example, in some of our new stores (in low-end cities) this year, we have specially launched lunch packages priced at 15 yuan. In the first and second tier cities, the price of a set meal with four pieces of food is usually 30 yuan to 35 yuan. ” She said that in some areas, especially in low-level cities in Western and Northern China, there are different needs for menus. Therefore, the products sold by Yum! Brands in different regional markets are different, and the prices will also differ.
Pizza Hut is also testing the new store model. “We’ve been talking about Pizza Hut’s satellite store model since last year.” Qu Cuirong said that with the “satellite store” mode, capital expenditure will be greatly reduced, and the operation mode will be greatly different, and the menu style will also be different. “This year, we’re going to have about 20 or so Pizza Hut satellite stores, and I’m happy to say that the early performance is encouraging.”
New retail business
While trying a new store model, the catering giant is also dabbling in new business.
According to the snack agent, earlier this month, KFC announced the launch of Kaifeng Cai series of products. In the first quarter, the products included chicken breast, chicken soup and chicken snail powder, all of which were related to the chicken products KFC was good at. Since October 12, the first season products have been listed in some KFC restaurants in 23 cities.
“It’s natural for us to try packaging retail business in a way.” In response to analysts’ questions, Qu Cuirong said that according to the concept of “people, goods and markets”, the company saw the growth trend of home consumption scenarios during the epidemic period.
“As a result, Pizza Hut quickly launched a steak product for home cooking, which sold well. Then, KFC will also have its own opportunities in home consumption scenarios. Our product innovation team has launched a variety of Kaifeng Cai series products that can be eaten at home. ” She said.
At present, Kaifeng Cai series products are being tested in the first and second tier cities. “We use existing channels such as e-commerce, our own app and stores to sell products. Customers can buy it in our store or deliver it to your door through our delivery team. ” “We are excited about the progress of this new business and the results are very encouraging,” Qu said
Referring to the name, she said, “Kaifeng Cai” is an interesting nickname for KFC in China, which has been popular for many years. “As soon as we say it, we will understand, but it has never been officially used by the official, so this time we will officially claim it.” She said.
Now it seems that the catering giant is likely to have more moves in its retail business. Qu said the retail business of KFC and pizza hut was an area the company was still learning from. “We look forward to providing customers with more of these delicious products.”
Continuous business recovery
Finally, let’s take a look at the third quarter. It is worth noting that this is the company’s first financial report since the completion of its second listing in Hong Kong in September this year. Its performance has been consolidated with Huang Jihuang since April 2020 and Suzhou KFC since August 2020.
In the third quarter, yum’s total revenue in China was $2.35 billion, up 1% from $2.32 billion in the same period last year (or flat, excluding the impact of the exchange rate). Net profit was $439 million, up 96% from $223 million in the same period last year, mainly due to operating profit growth and equity investment income of meituan review (“meituan”).
In addition, system sales increased by 1% compared with the same period last year, of which KFC and Pizza Hut decreased by 1% and 6% respectively (excluding the impact of exchange rate). Compared with the same period last year, the sales of PICC and KFC decreased by 6% and 6%, respectively.
“Despite novel coronavirus pneumonia, the traffic and tourism flow, the school holidays and the shortening of the school holidays continued to be affected, and the third quarter business situation has improved. Food in the house continues to recover, while takeout and takeout continue to be popular. ” The company said in the financial report.
In the third quarter of 2020, KFC and Pizza Hut’s membership plan and member sales contribution sales increased year-on-year. Takeaway revenue accounts for about 28% of KFC and Pizza Hut restaurant revenue, and digital orders (including takeaway orders, mobile phone orders and buffet orders) account for about 78% of KFC and Pizza Hut restaurant revenue.
“Despite the epidemic challenge, we have achieved a lot in 2020.” Qu Cuirong said at the performance meeting that the number of stores of Yum China in this quarter exceeded 10000, which is an important milestone. At the same time, its brand shows innovation and excellent executive power, early grasp the trend of dining out of the store.
For example, it is reported that in terms of enterprise delivery, yum! Brands China has reached cooperation with more than 20000 companies, thus opening up new customers in this segment. “We serve not only breakfast, but also overtime meals.” Qu Cuirong said that due to the huge business base of Yum! Brands in China, the proportion of enterprise dedicated delivery in sales is still very small, but for those stores that have the opportunity to serve the enterprise, the incremental sales brought by this business are considerable.
Looking ahead, yum China remains “cautiously optimistic” and believes that the epidemic will continue to have a significant negative impact on its operations and financial performance in 2020. Although China’s novel coronavirus pneumonia has been improving in the past few months, we have not yet completely stepped out of the epidemic. We still expect the recovery to be nonlinear and uneven. ” Yang Jiawei said.