Yum Brands China sees 36% profit surge from store growth and innovationYum Brands China sees 36% profit surge from store growth and innovation

Yum Brands China has been steadily improving its sales and profit margins since the second quarter 2024, and for the fourth quarter of the year ended Dec. 31, the company — a separate division from Yum Brands U.S. — reported a 36% profit surge.

Yum Brands China also reported 4% sales growth for the quarter, attributable to store growth, which CEO Joey Watt said, “demonstrates the resilience of our business.”

The company has made a lot of changes recently, including launching and expanding offshoots of two of its most popular brands. Pizza Hut Wow launched last fall as a more affordable alternative to Pizza Hut that offers pizza and pasta at smaller portions and prices. The KCoffee brand, which debuted in 2015 as an in-store KFC coffee brand and has since been spun off as a standalone concept, was so successful that Yum China said coffee has become a key growth driver for the company.

“The KCoffee business has really taken off, and I think [Pizza Hut Wow] appeals to a lot of the solo diners,” Margaret Chi, senior director of Yum China, said. “We got the idea from the culture of Japanese solo dining. The menu is more suitable to smaller parties, and the products appeal to younger customers as well.”

Besides the company’s focus on its successful spinoff concepts, Yum China has also transformed its business from an operational standpoint with Project Fresh Eye (back of house) and Project Red Eye (front of house), which were both designed to make Yum nimbler across service centers and supply chains.

Related:Yum Brands has created an AI-powered platform to house all of its technology solutions

“Red Eye looks at the business from the frontline perspective and the customer perspective and looks for where we can simplify our operations and look for efficiency,” Chi said. “Fresh Eye looks at more administrative tasks in the back office to see where we can use AI technology to streamline certain processes.”

Menu innovation is also a cornerstone of Yum Brands China, and the menu development pipeline operates at a much more rapid pace than its sister company in the U.S. Chi said that there are more than 600 menu items developed annually, like the “Dungeons and Dragons”-themed Goblin Pizza offered last November at Pizza Hut, topped with a deep-fried bullfrog, or on the tamer side of the menu, the spicy beef wrap at KFC China.

Yum Brands China also plans to keep up its store growth pace by expanding both through company-owned and franchised stores, with a focus on franchise expansion in smaller cities and rural towns.

The company opened 534 net new stores for a portfolio total of 16,395 units as of Dec. 31.

Related:Starbucks China hires first chief growth officer following rumors of sale

Contact Joanna at [email protected]