China Fund News reporter Zhang Yanbei
Today, China's largest catering company, Yum! Brands China Holdings Limited, announced its Q2 2024 financial report.
Revenue and profit
Achieve "dual growth" in the second quarter
According to the financial report, Yum! China's total revenue for this quarter reached 2.68 billion US dollars. Excluding the impact of foreign currency, the total revenue increased by 4%. The core operating profit for this quarter increased by 12%. In the complex and ever-changing economic environment, Yum! Brands China has shown significant growth in same store transaction volume and stable profit margins, demonstrating excellent market adaptability.
As of June 30, 2024, Yum! China has 15423 stores in total, including 10931 Pizzahut stores and 3504 Pizza Hut stores. The new stores continue to maintain good return on investment: KFC's return on investment cycle is about 2 years, and Pizzahut's return on investment cycle is also shortened to 2-3 years. This quarter, Yum! Brands China added a net of 401 new stores, of which 25% were franchise stores.
Yum China's food delivery sales revenue has maintained double-digit growth over the past decade, with a year-on-year increase of 11% in this quarter. Takeaway accounts for about 38% of the revenue of KFC and Pizzahut restaurants. The digital order revenue reached 2.2 billion US dollars, accounting for approximately 90% of the company's restaurant revenue, continuously demonstrating the company's effectiveness in digital transformation. In addition, KFC and Pizzahut have more than 495 million members. Membership sales account for over 65%, demonstrating strong customer stickiness and brand influence.
Driven by good performance on the news front, on the morning of August 6th, Hong Kong stock Yum! China surged more than 10% during trading, with a total market value of over HKD 97 billion.
Stable operation, innovation driven
Looking at the performance report of Yum! China in the second quarter, this growth is attributed to its continuous promotion of innovation and enhanced resilience in all aspects of its business.
Firstly, Yum! China has re examined every key process and cost element in its business, and improved operational efficiency and adaptability through innovation. The goal of Yum! Brands is to be the best in the industry and the most cost-effective. The cost savings will be invested in product innovation.
In addition, the company combined automation and artificial intelligence technology to promote the intelligent system iKitchen in all Pizzahut stores. This system is the "backcourt management brain" of the restaurant. It uses artificial intelligence, the Internet of Things, machine learning algorithms and other high-tech to help front-line operations, which can effectively improve the kitchen production efficiency. iKitchen can also accurately estimate the meal time of each order based on the order content and on-site capacity of the restaurant. At the same time, Yum! China is also the first in its industry to adopt Gen AI technology to improve food quality and optimize operational efficiency.
Secondly, in terms of innovative products, breakthroughs in business models, and a keen focus on cost-effectiveness, Yum! China's approach is also commendable. KFC's new burger, the Original Chicken Burger, which combines classic original chicken and mashed potatoes, has been highly sought after by consumers since its launch in May; Pizzahut's innovative Pizza Hut has won the favor of a large number of "one person food" customers.
KCOFFEE is sold in all KFC stores. It is worth mentioning that in the first half of 2024, KCOFFEE sold nearly 120 million cups, a year-on-year increase of 36%, and sales exceeded 1 billion yuan, a year-on-year increase of 26%. This year, Kenyue Coffee has increased from only 100 stores in March to nearly 300 stores in July, about tripling in number. It is expected that by the end of this year, Kenyue Coffee's store count will expand to 500-600, in order to capture more coffee market share.
In terms of breakthrough business model, the WOW store model launched by Pizzahut, which has just reached the milestone of 3500 stores, is a major breakthrough. The characteristics of WOW stores are simple operation, rich variety of food, and value for money, attracting a large number of "one person dining" diners, young people, and customers who value cost-effectiveness more. By the end of July, Pizzahut had transformed more than 100 existing stores into WOW stores. It is estimated that the number of WOW stores will more than double by the end of this year.
Fully grasp the long-term growth opportunities in the Chinese market
In June of this year, the National Development and Reform Commission and five other departments jointly issued the "Measures for Creating New Consumption Scenarios and Cultivating New Growth Points in Consumption", which clearly stated the need to develop the subdivision of catering consumption and support the intelligent upgrading of catering consumption.
The performance report submitted by Yum China in the second quarter once again proves its forward-looking development strategy. In the complex market environment, Yum! China will continue to promote long-term sustainable development through store expansion, product innovation, market expansion, and model innovation.
Yum China is constantly advancing on the path of innovation. The flexible new store model enables effective penetration at different city levels and strategic locations, and the KFC Mini Store model in the town is helping KFC further unlock lower tier cities. The company has also identified opportunities in strategic locations such as university campuses, gas stations, highway service areas, train stations, and other transportation hubs and tourist attractions. For example, KFC's newly opened store at Shanghai Jiao Tong University Xuhui Campus has been well received by college students and has seen a significant increase in foot traffic.
With our leading ability and scale in the industry, we are not only able to effectively respond to challenges, but also transform them into our competitive advantage. We believe that we have the ability to fully seize the long-term growth opportunities in the Chinese market, "said Joey Wat, CEO of Yum! Brands China.
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