Business

As KFC reaches 10,000 stores in China, growth momentum shows no signs of slowing down

By

Mohit Kamboj

KFC China, operated by Yum China, recently opened its 10,000th store in Hangzhou. After several years of rapid expansion – including during the pandemic years – the brand continues to ride a wave of impressive growth momentum that shows no signs of slowing down. With an aggressive expansion strategy, supported by the successful introduction of new product categories, and a focus on everyday affordability and availability, KFC is well-positioned to achieve its stated goal of serving more than half of China’s population by 2026.

KFC first came to China in 1987 and has been growing with China ever since. Today, KFC is present in over 1,900 Chinese cities, and there is still significant expansion potential on the horizon. Highlighting this potential following the opening of KFC China’s 10,000th store, Joey Wat, CEO of Yum China stated, “As the first Western QSR brand in China to reach this incredible milestone, KFC China’s 10,000th store opening is a proud moment for all of us, demonstrating the brand’s deep bond with Chinese consumers across generations for over 36 years. Strategically positioned for sustained growth, KFC China stands to benefit from its large and rapidly expanding store network, substantial economies of scale and access to an even broader customer base.”

Already boasting the largest China store network of any restaurant brand in China, KFC’s expansion strategy is multi-faceted. It is not simply about just increasing the total number of stores, but more specifically it includes expanding to more untapped cities and improving store density in existing markets. Non-stop innovation has been a cornerstone of KFC’s success in China, and a variety of new store models and modules have helped the brand to expand rapidly in recent years. Specifically, there are four different store models including standard stores, future concept stores, mini-stores, and stores strategically located in lower-tier cities. KFC China has also been exploring new and innovative places for its stores such as highway service centers, hospitals, and college campuses, making the brand more accessible to a broader range of consumers. Concurrently, KFC has continued to optimize its investment in new stores, with the new store opening payback period remaining consistent at around 2 years.

In terms of menu innovation, KFC China continually introduces new menu items to reflect the diverse tastes and needs of Chinese consumers. Recent introductions include KFC’s whole chicken and beef burgers, with both now generating annual sales exceeding $100 million. Meanwhile, KFCOFFEE – KFC’s in-house coffee brand – is already one of the largest coffee players in China and is on track to sell 180 million cups of coffee in 2023, an annual increase of more than 30%. Add to that, KFC has a stated goal of reaching more than 300 standalone KCOFFEE stores in China by the end of 2024.

KFC China has been developing more cost-friendly products and extending price ranges on select products to expand its reach. Recognizing the importance of affordability and availability, as Chinese consumers have become savvier and more value conscious, KFC China has expanded its price range, including introducing entry price point offerings alongside its core range of products. For example, KFC has added more products to its RMB 19.9 (USD 2.79) value offering and KFC’s Crazy Thursday’s campaign has helped engage more price conscious consumers. Initiatives like these, among others, aim to deliver excellent value while maintaining the high-quality customers expect from KFC. Additionally, by combining increased convenience and affordability, KFC China has managed to upscale its delivery services, membership programs, and digital order systems, all of which are thriving.

Over many years, KFC China has excelled at forging deep connections with consumers. Going beyond KFC China’s huge loyalty membership base, collaborations with pop culture icons are resonating with younger generations, creating social buzz and attracting new patrons. Today, more than 90% of KFC orders in China are processed digitally and more than 430 million people have become members of the KFC loyalty program.

KFC China has identified Resilience, Growth and Moat as effective strategies for rapidly expanding its business, and the brand’s continued growth momentum in China will continue to be driven by a strategic blend of store expansion, innovative product offerings, everyday affordability, and meaningful customer engagement. As KFC continues to innovate and adapt to the evolving market demands in China, it is poised for continued success in the years ahead.

KFC can rightly feel optimistic about its next chapter of growth in China. Warton Wang, General Manager of KFC China, underlined this optimism at Yum China’s 2023 Investor Day, stating, “We are confident about KFC’s growth potential in China” while adding, “Considering China’s population size and the large number of cities, we see huge growth potential.”