For the first time in several quarters, Taco Bell wasn’t hogging the Yum Brands earnings spotlight, making some room in Q1 for its sister brand Pizza Hut, which generated an 8% domestic same-store sales increase.
This is a wildly different story from a year ago, when Pizza Hut’s domestic sales plunged by 6% as the chain lapped a strong, pizza-fueled Covid environment from 2021 and struggled with delivery driver shortages that hindered the entire segment.
Pizza Hut has put several pieces into place to solve for its delivery issues. During an interview last week, Yum Brands CFO Chris Turner said the chain has “refined” its internal hiring practices and is now also working with third-party aggregators to both appear on marketplaces and augment deliveries during peak times through white label solutions.
“So, our customers are ordering through the Pizza Hut app, but if they’re running short on labor, they can use drivers from aggregators to fulfill that order. Working with aggregators has given us more delivery capacity and more access to incremental consumers,” Turner said.
Pizza Hut’s robust quarterly sales were also driven in large part by its menu strategy. Its new Melts were introduced in late October, pushing the brand into an entirely new category aimed at customers looking for individualized meals or lunch or something other than an entire pizza.
“[Melts] added a whole new price point to the menu. It’s resonating very well,” Turner said.
That $6.99 price point is on the opposite end of the chain’s other recent innovation – the Big New Yorker. First introduced in the 1990s, the Big New Yorker is a 16-inch pizza available at a starting price of $13.99. The two products generated positive transaction growth from both new and repeat customers during Q1, executives said on the earnings call.
“The menu innovation machine is alive and well with the Melts we introduced in Q4 that continued through Q1,” Turner said. “A number of our strategies are working at Pizza Hut.”
And they may just be helping the chain gain some ground in the competitive segment. Pizza Hut’s first quarter outpaced performances at both Domino’s and Papa Johns and during an interview last week with Yahoo Finance, Yum CEO David Gibbs said, “There is no doubt Pizza Hut is stealing share from others.”
Traffic data likely supports this declaration. According to Placer.ai data emailed to Nation’s Restaurant News, Pizza Hut generated a 9.3% increase in Q1 2023 traffic. These numbers don’t include delivery, but do include visits over an average of 5 minutes. They’re also materially higher than the chain’s traffic gains in Q3 2022 (1.1%) and Q4 2022 (1.3%).
KFC’s gets a lift as well
KFC also got a sliver of that spotlight, reporting a 2% same-store sales increase on the quarter. Like Pizza Hut, KFC got a lift from the expansion of its menu to appeal to more guests, as well as a barbell pricing approach. Specifically, KFC’s new chicken wraps were introduced in the quarter as part of a two-for-$5 promotion and that deal strongly resonated with lower-income consumers.
“The strongest sales KFC saw in Q1 was with the lowest-income consumers. So, the part of the consumer base lifting sales was from low-income consumers because [KFC] did a great job connecting with them through that offering,” Gibbs said during the earnings call.
This is an important demographic for any brand to capture right now as consumers become more discerning in an uncertain economic environment. Placer.ai data shows just how important – reporting KFC experienced year-over-year traffic gains each week since early February, including an increase of at least 8.4% during three of those weeks. KFC executives have noted they will add even more portable, individualized meals to broaden the brand’s appeal across more demographics.
“KFC is a tremendous global brand and in most markets, it offers a tremendous off-the-bone business like tenders, nuggets and sandwiches,” Turner said. “It’s taken the U.S. a little longer to find the right formula, but it feels like we’re finding it.”
Perhaps we can expect this trend to continue in Q2 – KFC launched its new chicken nuggets in April and Placer.ai’s traffic data shows a corresponding traffic increase of more than 8% since then.
Contact Alicia Kelso at [email protected]
