Fast food players eye formidable 2023 sales

Leading fast-food chains including McDonald's, KFC and Pizza Hut have shown stronger confidence in China's business environment with plans to open more restaurants in the country this year.

Yum China Holdings Inc, the leading restaurant chain with brands including KFC, Pizza Hut and Taco Bell, is expected to boost sales by expanding the number of stores and improving its service quality.

"Our priority this year is to drive sales. We plan to open between 1,100 and 1,300 net new stores in 2023 and continue to invest in technology and infrastructure," said Andy Yeung, CFO of Yum China, adding that the company is expected to spend about $700 million to $900 million on the expansion.

Last year Yum's revenue in China dropped 9 percent year-on-year to $2.09 billion. In the fourth quarter, the company opened 538 new stores in the country, making its new openings reach 1,824, propelled by the development of mainly KFC and Pizza Hut outlets. By the end of the quarter, the number of Yum's Lavazza on-site coffee chains had reached 85, and Taco Bell stores doubled to 91. Last year, the company expanded into over 200 new cities nationwide.

Digital and delivery-related services have been valuable tools to improve customer experience. Delivery contributed about 45 percent of KFC and Pizza Hut's sales in the quarter, an increase of about 10 percentage points from the prior year period. Digital orders, including delivery, mobile orders and kiosk orders, accounted for about 90 percent of KFC and Pizza Hut's sales during the quarter.

Meanwhile, global food-service retailer McDonald's Corp is expected to open a record number of new stores, said the company's top executive.

McDonald's plans to open 900 new quick-service restaurants in China this year, which take up nearly half of its global new openings, said Christopher Kempczinski, president and CEO of McDonald's.

Kempczinski said the company plans a 2023 expenditure of at least $2.2 billion, half of which will be dedicated to new openings.

In September, Phyllis Cheung, CEO of McDonald's China, said the company added nearly 480 new outlets in 2020 and 660 in 2021. There were about 5,000 McDonald's restaurants in China by end-2022, with the number of new openings exceeding 700, which Kempczinski said is "an all-time high".

However, comparative sales in China in the fourth quarter were negative, as they focused on showcasing their strength in beef products with the Big Mac Best Burger launch and continued to gain traffic share in a shrinking quick-service restaurant market, Cheung said.

He added that a focus on driving digital affordability helped increase the frequency of most loyal digital customers in the market. According to the company, close to 90 percent of transactions in China are digital transactions.

In 2017, the US chain sold most of its businesses in the Chinese mainland and Hong Kong to CITIC and private equity group Carlyle for up to $2.1 billion. CITIC took the majority stake of 52 percent in McDonald's China operations.

Zhu Danpeng, a food and drink analyst, said the quick-service restaurant sector, which now focuses more on convenience and digitalization, has been in line with the consumption mindset and behavior among younger generations in China.