Yum China bets post-Covid budgets on Chinese-cuisine value menus and 1,300 new stores

Operates KFC and Pizza Hut across mainland China; a fast-food giant competing in a fragmented restaurant market.

Post-Covid Chinese diners - especially budget-squeezed youth in tier-one cities - can be won with local-dish value menus and 1,300 more stores at up to $900M.

Yum China was the trailblazer among western fast-food giants tapping the Chinese market, but by early 2023 CEO Joey Wat described a fragmented, cutthroat market where pandemic-altered habits made value the deciding factor.

For 2023 the company earmarked up to US$900M to open up to 1,300 stores across mainland China while pushing local specialities into its menus: KFC serving Sichuan stew mao xue wang, Pizza Hut topping pizza with abalone, conpoy and bamboo shoots. Wat: 'value-for-money is becoming a more and more important theme', noting young people in Beijing, Shanghai, Guangzhou and Shenzhen had tighter budgets than peers in lower-tier cities because of housing prices.

The end of Covid restrictions reopened China's market, but pandemic-altered habits left consumers value-conscious and restaurants under pressure to cut costs.

Wat argued the fragmented market is won on 'the price point, or consumption per person', not on brand or cuisine type.

Local dishes like mao xue wang and an abalone-conpoy pizza answer local taste directly instead of importing a global menu.

Deep pockets for 1,300 new stores let the company chase recovery share while rivals retrenched.

In a fragmented market, a global incumbent defends share by localising the product and the price point when its core customers' budgets tighten.

As of 2023-03-06 the company was executing the expansion and rolling out the localized value items; no sales results for the new dishes had been reported. Yum China positioned itself as a former trailblazer now competing against all local and international rivals on price in a fragmented market.