Over the past three decades, Pizza Hut has firmly established itself as the largest casual dining restaurant brand in China. In June 2023, Pizza Hut surpassed the 3,000-store milestone in China, a feat that very few casual dining chains have achieved. From its inaugural location in Beijing in 1990, the brand has expanded its presence to over 650 cities in China.
Pizza Hut’s revitalization program, launched in 2017, has been instrumental to the brand’s continued success in China. A refreshed brand identity, new store concepts, and a constantly-improved menu have won over customers. Improved digital capabilities have also enabled the brand to expand its membership base to over 145 million members across the country. On the operations side, digital tools such as robotic servers have improved efficiency and boosted customer satisfaction.
Pizza Hut’s phenomenal growth story in China is contributing to strong results for parent company Yum China (YUMC), which recently announced record-breaking earnings in the second quarter of 2023. The company’s total revenue of $2.65bn set a new Q2 record, while system sales and same-store sales saw increases of 32% and 15% respectively year-over-year. Meanwhile, the company’s $257mn operating profit for the quarter also reached new all-time high – more than tripling that of the prior year. Pizza Hut alone achieved 13% same-store sales growth year-on-year for the quarter, despite a challenging macro environment. This was led by an impressive 27% growth in transactions.
The brand continues to fortify its “Pizza Expert” image by experimenting with new flavor profiles and ingredients to appeal to customers’ evolving tastes. For example, its Bolognese Pizza with Beef introduced in Q2, which captures the familiar taste of Spaghetti Bolognese, has become a customer favorite, especially with children.
It is also making strides beyond pizza, and today offers an extensive range of pizzas, steaks, pasta, rice dishes and other entrees, along with appetizers, beverages, and desserts. With roughly 10% of sales coming from steak, Pizza Hut has already established itself a leading steakhouse in China. It has also been fueling growth through diverse channels, encompassing dine-in, delivery, takeaway as well as prepackaged ready-to-eat meals.
Pizza Hut has been accelerating its new store openings over the past few years, with 313 net new stores opened in 2022 compared to just 41 in 2019. 169 net new stores were opened in the first half of 2023, highlighting the continued emphasis on growth. It is worth noting that Pizza Hut’s smaller format satellite stores have helped the brand expand its coverage. The lower capex and costs have also enabled better margins and a shorter payback period compared to regular stores.
Looking forward, Yum China sees abundant white space to further grow the Pizza Hut brand in China. Yum China CEO Joey Wat commented on the future outlook: “We believe the brand holds tremendous growth potential in China, and we are committed to actively pursuing expansion opportunities to further grow the brand.”
