Bubble tea meal kits and buckets: how Yum China is evolving

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Yum China (YUMC), the local owner of KFC, Pizza Hut and Taco Bell, is exploiting new ways to reach customers at home as the pandemic continues to dampen its business.

The company, which reported better-than-expected profits on Thursday, said home delivery and take-out now accounted for more than 50% of sales. Revenue rose 11% to nearly $ 2.3 billion, although same-store sales fell 4% in the quarter ended in December, compared to the previous year.

“Home consumption is a growing trend. The pandemic has accelerated this,” CEO Joey Wat told CNN Business.

Yum China is now trying to take advantage of this change by pushing meal kits, which encourage people to make their own “KFC” at home. The product line is an offshoot of KFC called “Kai Feng Cai” which is a Chinese nickname for the brand. But this is no ordinary bucket of fried chicken. Instead, the kit includes dishes like chicken breast, chicken soup, and chicken “luosifen,” a snail-based rice noodle soup dish that has become extremely popular in China.

Wat said the initiative, which launched last October in 2,000 stores, was not just a pandemic game. After demonstrating “encouraging” results, the company plans to expand the offer to more cities.

Beyond Meat brings plant-based burgers to KFC and Pizza Hut in China
Yum China, which has around 10,000 stores and 400,000 employees, has experimented a lot in an attempt to bring its business back to pre-pandemic levels, even as China has recovered faster than most major economies.
Over the past year, it launched smart lockers for customers to pick up their take-out, self-contained vans that serve breakfast to office workers, plant-based meals, and home delivery from Pizza Hut steaks. It even started letting customers buy 1.5-liter buckets of bubble tea to take home, which “sold out within days,” Wat said.
Yum China started selling oversized buckets of bubble tea for home consumption. The new products & quot; exhausted in a few days & quot; according to its CEO.

The company has reason to hold on to any new idea that sticks. On Thursday, he warned of a fragile recovery, which CFO Andy Yeung attributed to “regional outbreaks [of coronavirus], reduced travel and persistent effect on consumer behavior. “

The upcoming Lunar New Year holiday – usually a significant time for sales – is likely to be “moderate,” he told analysts.

A year ago, the situation was even darker. When the pandemic first hit, the company was forced to take a step back and figure out how long it could survive without any sales, Wat said.

“We did it – if we didn’t have any business activity, our business can survive for a year,” she said. This amount of lead is “much better than the average player in the industry,” she noted, but “still not as long as I would like.”

The company took risks. Last year, Yum opened more than 1,100 new stores across the country, a record high of new openings. This year, the company plans to open an additional 1,000 stores.

A driverless van deployed by KFC. Last November, the brand piloted a fleet of “dining cars”. in the streets of Shanghai.

“It’s always a very carefully and well thought out process,” Wat said. “We don’t just open stores for the sole purpose of opening new stores.”

Some branches follow what the company calls a “small town format,” which requires less investment and offers diners a slightly different menu.

Wat argues that the new initiatives are not just too good to have; it’s a necessity.

“In a highly competitive market and a very rapidly changing market like China, we truly believe that innovation is the key not only to survival but also to success,” she said. “We have a really big job to do here, protecting, supporting the jobs of 400,000 people. We have to make sure we have done our best.”

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