Close Ad

The Spoon

Daily news and analysis about the food tech revolution

YUM China

Pizza Hut Sees Huge Runway for Growth in China, Plans to Add up to 1,500 Net New Stores by 2026 (Sponsored Post)

Pizza Hut is planning to rapidly expand its footprint across China in the coming three years as part of an ambitious growth strategy announced by Yum China Holdings Inc. (NYSE: YUMC; HKEX: 9987), at the company’s recent 2023 Investor Day in Xi’an, China.

Following its successful revitalization program, which strengthened the brand’s fundamentals and improved the payback period for new stores, Pizza Hut is poised for rapid growth. The brand is aiming to open 400-500 net new stores per year from 2024-2026, more than double its pace of the past three years, while continuing to maintain a healthy store payback of approximately 3 years.

Pizza Hut’s plans are part of the refreshed “RGM 2.0” strategy launched by Yum China, which also operates KFC, Taco Bell and other restaurant brands in the country. At its Investor Day, Yum China set an overall target to reach 20,000 total stores by 2026 and deliver double-digit CAGR for EPS in 2024-2026 while returning $3 billion to investors during the same period through quarterly dividends and share repurchases.

With a presence in China since 1990, Pizza Hut is a top player in China’s casual dining sector, operating 3,072 stores in over 650 cities. The brand dominates in all of its core categories: pizza, steak and pasta, with over 100 million pizzas and 20 million steaks sold over the last 12 months.

Pizza Hut General Manager Jeff Kuai commented, “As an absolute leader in the sector, our slice of the market is bigger than the next nine brands combined. Despite our leading position, there is still tremendous opportunity for us to gain an even larger share of the market.”

The brand’s strategy for footprint growth includes adding store density in existing cities while continuing to expand into new cities. China has vast untapped markets for Pizza Hut. There are more than 1,200 cities in China that have a KFC but do not yet have Pizza Hut, highlighting the opportunity to leverage Yum China’s infrastructure and resources to expand in many of those locations. Pizza Hut increases its penetration with flexible store models. Its satellite store model, which has a smaller dining area, focuses on off-premise occasions and requires lower capex. The store model has a 2-year payback, which is better than its traditional stores. The brand is also testing a fast-casual store model that aims to provide faster and lighter service while improving labor efficiency.

In addition to expanding its footprint, Pizza Hut has focused on improving its core menu offerings. In particular, the brand has been reinforcing its reputation as a “pizza expert” through product upgrades and new flavors. Its Super Supreme Pizzas and Durian Pizzas have been big hits with consumers. In the first half of 2023, pizza sales rose 56% compared to the same period in 2019.

As Pizza Hut continues to expand, it is aiming to capture more consumer segments through a wider range of food and beverage choices and providing more occasions to visit. The brand is preparing to launch a new line of made-to-order burgers. From September 2023, it also introduced premium Lavazza coffee at its restaurants. Pizza Hut has expanded individual meals, including its personal-size pizza, to cater to solo diners and office workers; as well as breakfast offerings to better serve customers while maximizing store utilization. In addition, the brand is broadening its previous focus on families to better cater to younger generations. Its partnership with Genshin Impact, for example, has attracted many young people and gamers.

Meanwhile, Pizza Hut remains focused on providing excellent value for money. Its popular “Scream Wednesdays”, “All You Can Eat”, and “Buy One Get One Free” value campaigns are huge draws for dine-in and delivery traffic. It is also broadening its price ranges to serve a wider range of customers on everyday needs.

Pizza Hut is also investing in building a best-in-class digital customer experience, an area that is critical to its future success, with approximately 92% of orders placed on digital channels. A key priority is improving its user interface and providing real-time order tracking for customers on its app. The brand is also boosting its member visit frequency through privilege programs and targeted offers based on members’ preferences.

Kuai says: “With continuing efforts to build on our core strengths and expand into new categories, improve value for money, drive delivery growth, and enhance our digital capabilities, we are confident that Pizza Hut will generate even stronger sales momentum and enhance our leading position in the market.”

This post is a sponsored post. See The Spoon’s advertising policy here.

Food Robot Roundup: Delivery Bots Explore New Areas, Yum China’s Robot-Powered Expansion

It’s been a busy few weeks for restaurant robots. In this edition of the food robot roundup, we’ve got updates on the expanding map for a couple of food delivery bots, Jamba & Blendid’s growing relationship, Yum China’s increasing reliance on robots, and more.

Let’s get to it.

Coco delivery bot expands beyond California

Coco has spread its wings. The food delivery robot startup has expanded to Austin, Texas, the first city outside of its home state of California. This expansion is thanks in part to the Series A funding round of $36 million that it raised last August. Coco launches with ten partners in Austin, including Arpeggio Grill, Bamboo Bistro, Clay Pit, DeSano Pizzeria, Tuk Tuk Thai, and Aviator Pizza.

Coco makes a four-wheeled, cooler-sized robot that delivers food and beverages. Coco prepositions its robot at merchant locations in dense city environments and advertises that it completes deliveries in 30 minutes or less. The company has indicated Austin is only its first stop in Texas as it has plans to expand to other cities in the Lonestar state.

Kiwibot, another robot delivery service, announced that they’ve raised $7.5M pre-series A funding and closed an expansion deal with Sodexo, a food services and facilities management company. They currently have 200 robots operating in 10 campuses and are on track to expand to 1200 robots and 50 locations by the end of 2022. 

Kiwibot, which was founded at the University of California, Berkeley, has long-targeted college campuses, ideal locations for food delivery robots with their dense populations of hungry college students, and protected pedestrian walkways. Besides the slew of robots making deliveries on campuses, consumer-facing food kiosks (more on that later) and autonomous retail shopping have also been moving in.

Jamba and Blendid expand to two more campuses

Jamba and Blendid have expanded their reach to two more college campuses, Georgia College and Kennesaw State University. The co-branded Jamba by Blendid smoothie kiosks offer a quick and convenient way to pick up a healthy smoothie and will be located in each school’s student union. 

University campuses are a great way for Jamba by Blendid to tap into a market that is open to using technology and usually doesn’t have easy access to healthy food like smoothies. Blendid has plans to expand its kiosks into other locations such as gyms, hospitals, and airports, which means the company will need to adapt to different customer buying behavior and preferences. At universities, Blendid offers flavors of the week or theme-based drinks to keep students engaged and coming back. 

Hyphen Raises $24 Million Series A

Hyphen, a startup that automates the back-of-house food assembly for restaurants, just announced a $24m Series A funding round led by Tiger Global.

The company’s flagship product is the Makeline, a modular robotic food assembly line. Workers focus on taking the orders and the machine combines ingredients and can generate 350+ meals per hour. KitchenOS, the software powering the Makeline, utilizes data from the robotic assembly line and other inputs to optimize workflows, recipe development, and food scheduling. 

Hyphen’s modular system means that restaurants can add or take away modules and choose ones that precisely fit their needs, such as dispensing, reheating, and mixing. According to company CEO Stephen Klein, the company currently has 11 customers who have pre-ordered the Makeline.

You can catch the Spoon’s interview with Hyphen’s CEO and co-founder Stephen Klein here. 

Yum China expands stores without workers

Image credit: Associated Press

Yum China, a Chinese restaurant group that spun off from U.S. parent Yum Brands in 2016, has expanded its number of stores while keeping its labor force the same, in part by increased use of AI and robotics. The group operates restaurants such as KFC, Pizza Hut, and Taco Bell and has increased the number of stores by 56% from 7,652 in 2016 to 11,788 in 2021. However, the company has kept the same number of employees during the same period at 420,000 full and part-time staff. 

Yum China has managed this by leveraging a variety of restaurant technology. The company has installed touch screen panels to automate the ordering process and has installed robots in its KFC to serve soft-serve ice cream in several Chinese cities. Yum has installed digital lockers store takeout orders in other locations.

Yum China’s increased reliance on automation is just one sign of the rapid adoption of restaurant technology adoption in the Chinese fast food sector. Other examples include this restaurant in Foshan, a city in Guangdong’s southern province, where a robot prepares and serves fast food dishes. Robotic arms prepare the food and then robot waiters and a conveyor-belt system deliver the food.

In case you missed it, I discussed cultural differences in openness to technology adoption in the last roundup, where I discussed the robots serving food to Olympians in Beijing. It’ll be interesting to see if the high profile of robots at the Olympics will lead to more acceptance of food robots in the United States or more hesitation.

Yum China’s New Program Will Teach Digital Skills to Children in Rural Areas

Yum! Brands spinoff Yum China is investing in more digital education for underserved areas. The company today launched its Digital Classroom Initiative that gives children in rural parts of China access to online classes that will teach coding and other digital skills. 

The digital divide between China’s urban and rural populations has narrowed somewhat in recent years. Still, the COVID-19 pandemic once again highlighted its existence, showing the disadvantages the rural population is at when it comes to online learning and, in some cases, access to the internet. 

Yum China says it will use its newly launched Digital Initiative program to provide children in the Hunan province with free computer equipment and instructor-led virtual coding courses. 

The company has been involved in bringing digital education to remote areas since 2019 when it began establishing digital classrooms with help from Leap Learner and the China Foundation for Poverty Alleviation. Yum China has been quietly expanding the program ever since, first in the Ningxia and Hunan provinces and now in the Hunan province. 

While highlighting his company’s own evolution in an increasingly digital restaurant industry, Yum China CEO Joey Wat talked in today’s press release of preparing rural youths with “much-needed skills to thrive in a digital world.” Increasingly, restaurants are part of that shift. The march of technology into restaurant kitchens, dining rooms, and off-premises experiences will create new types of digital jobs in these settings. Some companies are now training underprivileged groups with the kinds of skills they would need for such jobs but may not have the opportunity to gain on their own. Over in Berlin, Germany, Delivery Hero highlighted this recently when it launched its own program, the Tech Academy. 

For its part, Yum China says it will eventually expand its program across more rural areas of the country. 

KFC Parent Company Ramps Up Sustainability Plans for China, Introduces Reusable Baskets

Yum China this week became the first restaurant company in mainland China to receive the International Sustainability and Carbon Certification (ISCC) label for converting its used cooking oil into sustainable biodiesel.

According to a press release, the company launched a pilot of its cooking oil project in 2018 in Chengdu, where all Yum China-owned KFC locations in the city converted their used cooking oil to biodiesel. For the project, Yum worked with biodiesel plants, oil storage sites, and waste collection companies.

For many quick-service restaurants, cooking oils are essential for business; they’re used for frying, grilling, and numerous other cooking tasks around the kitchen. In recent years, restaurants have shifted away from oils packed with trans fats to so-called “healthier” options like sunflower and soybean oil.

But even these healthier oils take their toll on the environment (and your insides, but that’s a story for another day). The EPA notes that cooking oils, whether from vegetable or animal sources, can “cause devastating effects” on the environment: they can suffocate plants and aquatic animals, clog up shorelines, catch fire, and destroy wildlife.

China is one of the world’s largest producers of waste oil, which is a huge environmental risk (to say nothing of the country’s gutter oil problem), but also a huge opportunity if more companies commit to helping turn it into sustainable fuel.

Yum China operates all mainland China locations of Taco Bell, KFC, and Pizza Hut, and owns the Little Sheep, East Dawning, and COFFii & JOY brands. Factoring in all these restaurants, that’s more than 8,600 restaurants across the country. In other words, there’s a lot of cooking oil to be recycled, and a company of Yum’s status could help set a standard for other restaurants across the country.

Recycled oil isn’t the only sustainability initiative Yum China has been up to of late. In the same press release, the company announced it had introduced reusable baskets to over 6,000 KFC locations across China.

The introduction of reusable baskets is in keeping with KFC plans here in the U.S., which include the chain converting to 100 percent renewable plastics by 2025. According to the press release, the move is expected to save more than 2,000 tons of paper per year and cut down the total amount of waste in Yum restaurants by 20 percent on average.

China, meanwhile, is turning itself into a hotbed of activity for foodtech solutions. VC firm Bits x Bites just launched an incubator in Shanghai that partners startups with major CPGs like Danone and Coca-Cola. Waste reductions, be it oils, plastics, or other materials, will no doubt play a role in some of those partnerships moving forward.