Reporter | Ma Yue
Edit | Xu Yue
1
The pandemic has not stopped Yum China's expansion. Recently, KFC's parent company Yum China released the latest financial report shows that as of the end of 2021, the total number of stores in Yum China reached 11,788, an increase of 12.2% year-on-year. Among them, KFC opened 1232 new restaurants throughout the year, and Pizza Hut opened 335 new restaurants, occupying the main part.
Overall, the changing pandemic and macroeconomic challenges have caused Yum China's performance to fluctuate. In the fourth quarter of 2021, Yum China's restaurant profit margin was 7.5%, compared with 15.1% in the same period last year. Same-store sales in the quarter were down 11% from the same period in 2020, with KFC and Pizza Hut down 12% and 8% respectively.
On this basis, the company's total revenue was US$9.85 billion (about 62.665 billion yuan), an increase of 19% year-on-year; adjusted operating profit was US$766 million (about 4.873 billion yuan), an increase of 5% year-on-year; system sales increased by 10% year-on-year; and same-store sales decreased by 1% year-on-year.
Although the epidemic hit the entire Chinese restaurant market last year, like other restaurant giants that have the idea of "bottoming out against the trend", Yum China has also accelerated the speed of store opening. According to the earnings report, Yum China closed 524 stores in 2021, but opened 1806 new stores at the same time, a record number.
Yum China 2021 full year financial report
Yum China's ambitions don't stop there. In 2022, Yum China plans to open about 1,000 to 1,200 new stores.
Accelerating expansion, Yum China's secret is a "sinking strategy".
"More than half of the new stores are opened in lower-tier cities, and we are also increasing the density of restaurants in high-tier cities. This business contributes the majority of yum China's profits. Yum China CEO Qu Cuirong said.
Yum China's sinking strategy began several years ago, and compared with the relatively saturated development space of first- and second-tier cities, lower-tier cities are a potential market to be developed. At the September 2021 investor conference, Yum China management emphasized that the company currently tracks more than 1,200 cities to be entered, an increase of 500 cities from two years ago.
In 2021, KFC will enter 160 new towns, and more than half of the new stores will open in lower-tier cities. "In these new cities, the KFC brand is very strong, and because it is brand new (entered), the impact of sales diversion is very limited." Qu Cuirong said.
KFC's sinking strategy, on the one hand, lies in the change of store model. For example, KFC opened the first county town store called "KFC Preferred" in Fengqiu County, Xinxiang, Henan Province in August 2020, and plans to add 1,000 new stores in 3 years, focusing on the county and township market. Its menu has changed from ordinary stores, mainly classic products, as well as specialty products launched for small town stores - super spicy rechargeable chicken leg fort, salt crispy chicken and spicy crispy chicken thigh, naughty fresh lemon orange, Nine Treasures Ice Jasmine and so on.
Yang Jiawei, CFO of Yum China, introduced at the performance meeting that the small shop model can be more flexibly expanded, and the reduction of store area has also led to a decline in the investment amount of single stores.
On the other hand, KFC's sinking comes from the continuous localization of new products.
From the menu alone, it is difficult to recognize KFC's "foreign fast food" of the year.
In addition to rice, baked cakes, bean blossoms, fritters and supper skewers, KFC also sells local snacks in different regions, such as hot dry noodles in Wuhan, Peppery soup in Henan, fried sauce noodles in Beijing, and breakfast dumplings in Hangzhou, Wenzhou and Shaoxing in Zhejiang. Earlier, KFC had also introduced snail powder.
KFC hot dry noodles
In addition to the gimmicks and heat on social networks, KFC's move has made many consumers shout "can't understand", "Eat fried sauce noodles in Beijing, why go to KFC?" In the eyes of consumers, this move has made KFC blur its positioning and make the product unclassified. After market inspection, it has also proved that some eye-catching marketing and new products in the catering industry have only become a temporary gimmick, and I am afraid that it is difficult to truly retain and bring sales and word of mouth as explosive products, and it has also been criticized as "ineffective and new".
From the perspective of the entire Chinese catering market, the path of Yum China's sinking market is not a smooth road. KFC's anxiety comes not only from its old rival McDonald's, but also from more Chinese fast food, snack and tea chains – new brands that diversify to meet demand, so that consumers are also diverted.
According to the data of the "Analysis of the Operation Status and Future Development Trend of China's Fast Food Industry in 2021" released by Zhiyan Consulting, there were 1.103 million fast food stores in China in the first quarter of 2021, of which the number of Chinese fast food stores was 951,000 and the number of Western fast food stores was 152,000.
Chinese restaurant chains have become more and more focused in recent years, and capital is also accelerating the layout of this market, such as Wallace, whose number of stores has approached 20,000; Laoxiang Chicken, which has started from Anhui and has more than 1,000 stores and is seeking to be listed; noodle brands such as Hefu Lao noodles, Meet Small Noodles, and Chen Xianggui have obtained several rounds of financing; hot halogen brands such as Sheng Xiang Ting have become representatives of the snack track; not to mention, the tea head brands represented by Heytea and Naixue's tea are accelerating competition in terms of products, stores and supply chains.