Towards the goal of comprehensive recovery, KFC and Yum China, the parent company of pizza hut, are ready to play a “combination boxing”.
At the first quarter performance meeting of 2021 held by Yum China today, its Chief Financial Officer Yang Jiawei pointed out that although the impact of the epidemic is diminishing, it is expected that it will take some time for same store sales to recover to the level of 2019, and the company will start to accelerate the recovery from overweight marketing and new products.
Xiaoshidai noted that at the meeting, Qu Cuirong, CEO of Yum China, and others also talked about takeout opportunities, the latest progress in the recovery of pizza hut, inflation and cost expectations. Now, let’s take a look.
Let’s take a look at the latest performance.
According to the performance of Yum China in the first quarter of 2021, the total revenue during the period was US $2.56 billion, an increase of 46% year on year; The operating profit was US $342 million, up 250% year on year. Same store sales increased by 10% over the same period last year. Novel coronavirus pneumonia was affected by the new year’s growth, according to the company.
Yang Jiawei said at today’s meeting that if compared with the first quarter of 2019, the same store sales of Yum China has recovered to about 94%, and the total revenue has increased by about 7%, thanks to the opening of new stores and the merger of Suzhou KFC and Huang Jihuang.
Turning to the performance in the first quarter, he said that the rebound of epidemic situation in some regions has greatly reduced the number of travelers, which has also affected the company’s sales recovery“ KFC is more affected because the brand has more stores in transport hubs. ” He said.
According to its introduction, in terms of year-on-year growth, KFC’s same store sales increased by 5% in the first quarter, driven by the recovery of Tang food sales. Pizza Hut’s same store sales rose 38% in the first quarter, thanks to a pick-up in customer flow.
“ Although (KFC) Tang Shi has recovered, takeout is still very popular, accounting for 28% of sales, up 10% from the pre epidemic level in the first quarter of 2019. ” Mr Qu said the company began testing the ability of KFC and pizza hut to share riders last year, testing the platform for the first time at the peak of the lunar new year, and was satisfied with the progress.
In Qu Cuirong’s view, the takeout business can not only bring sales increment, but also provide higher flexibility for the location of new stores“ If a store relies too much on Tangshi, it can’t compromise too much on its location. It must choose a very good location, otherwise there will be no business. ” For Yum China, she said, the increase in takeout means more opportunities to open in places with lower rents.
“ It’s not a small thing for us. ” Qu Cuirong said. After Yum China opened 10000 stores last year, she once said she wanted to achieve the goal of the next 10000 stores faster.
At today’s meeting, Qu Cuirong also pointed out that as the proportion of takeaway business increases, the company will continue to make efforts to control the cost of operating takeaway, such as upgrading the rider platform and helping to optimize the riding route. In addition, as the store density of Yum China increases, this will shorten the delivery distance of riders and help reduce costs.
Qu Cuirong, CEO of Yum China (photo)
The next step for pizza hut
After years of reviving pizza hut, yum China is now seeing more positive signals.
“ We are encouraged by the strong recovery of pizza hut in the first quarter. Same store sales increased 38% and operating profit reached $60 million. These results reflect our efforts to revise the fundamentals. ” Qu Cuirong said.
Xiaoshidai introduced that the four pillar strategies of Yum China to promote the recovery of pizza hut include: revising fundamentals, strengthening digitalization, optimizing takeout and introducing new store styles. At today’s meeting, Qu Cuirong also introduced the latest progress of the four strategies.
First of all, the “Fundamentals” menu has greatly improved in the past few years. In March this year, 40% of Pizza Hut’s new menu was upgraded and updated“ We have also been tapping the growth potential of breakfast and afternoon tea by offering new products to optimize the menu, such as French toast for breakfast and three layers of afternoon tea. ” She said.
Second, the number of pizza hut members and the proportion of digital orders have increased significantly, and more new technologies have been introduced. Qu Cuirong said that pizza hut has been improving the membership plan of super app. At present, the number of members has exceeded 90 million, accounting for 55% of the total sales, with a year-on-year increase of 9 percentage points. In addition, the proportion of digital orders in Pizza Hut’s sales has increased from 65% a year ago to more than 80%.
She said that pizza hut also applied artificial intelligence in the kitchen to achieve “intelligent meal preparation scheduling” and “real-time production control”. The preliminary results show that the operation efficiency and consumer satisfaction have been improved.
Third, pizza hut is expanding its take out, take out and self cooked products“ Takeout accounts for 35% of sales, 10% higher than the pre epidemic level in the first quarter of 2019. While the outbound business was originally small in scale, pizza hut is striving to expand this business and provide more convenience for consumers through menu innovation and self cooking food business. ” Qu Cuirong said. Previously, Pizza Hut launched a steak product for home cooking.
Fourth, Pizza Hut strengthens the store mix by accelerating the renovation of stores and building new store types. Qu Cuirong said that since 2018, pizza hut has renovated more than 1100 stores, nearly half of the total number of stores, achieving the goal of an average age of less than three years.
In addition, pizza hut has opened more small stores“ The new small store model (including the satellite store model, that is, a large store with several small stores) has brought more opportunities for the expansion of pizza hut, enabling us to seize the growing demand for non hall food. ” According to its introduction, more than half of the 44 new stores opened by Pizza Hut in the first quarter were small stores.
With the success of Pizza Hut’s recovery, what is Yum China’s next plan? In this regard, Qu Cuirong said that the next step is to focus on consolidating and improving the changes made in the past few years, so as to make pizza hut more resilient.
“ In at least two ways, we have to continue. The first is to promote sales growth, which is the direction of development in recent years. Next, we have to balance sales and profits. It’s wise to look at sales on the surface and pay attention to profits. We hope to have both. ” She said.
Secondly, in order to be more resilient, Pizza Hut will continue to expand its non hall food business“ At present, more than 40% of the non hall food businesses, such as take out and take out, account for this, which is very important because we will not rely too much on Hall food. ” Mr. Qu said he hopes to build four business pillars for Pizza Hut: in-house food, take out, take out and self cooked products.
This year’s target remains unchanged
Looking ahead, Qu Cuirong said at the meeting that he was optimistic about China’s long-term growth opportunities“ We will continue to accelerate the store expansion of core brands, develop new brands, and strengthen the end-to-end digital and intelligent supply chain to build a bigger and more flexible Yum China. ” She said.
However, it also stressed that it should be cautious about the short-term situation. In this regard, Yang Jiawei said: first, due to the continuous implementation of epidemic prevention measures, the number of restaurant customers is still far lower than the level before the epidemic. Second, consumers are cautious about spending, and the sales of the company’s stores in the transportation hub are still far below the level of 2019.
“ In this context, the company expects that same store sales will take some time to fully return to the pre epidemic level. The company will focus on driving sales growth through attractive value positioning, more marketing activities, product innovation, and online interaction with consumers of Tang food and non Tang food. ” He said the top priority for Yum China is to increase passenger flow.
In addition to the impact of the epidemic on the recovery, yum China also proposed that it would face cost pressure, including the expected rebound of poultry prices and inflation pressure, and the promotion of take away packaging upgrade. In addition, yum China expects labor costs to rise in the following quarters, as wage growth is expected to pick up in the second half of the year and the company plans to recruit more employees.
According to Yang Jiawei, affected by the epidemic, yum China has lacked part-time employees in the past few quarters. The company is trying to increase the staff reserve of the restaurant, which will increase the training time and salary expenditure, but is crucial to improve the service quality and long-term development ability.
Today, yum China reiterated that its goal for 2021 will remain unchanged, that is, it is expected to open about 1000 new stores in total, with an expected capital expenditure of about US $600 million. According to the conference materials consulted by snack agents, the $600 million is planned to speed up the expansion and renovation of stores, develop new brands, and increase investment in digital, automation and logistics infrastructure.
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