Pizza Hut is planning to embark on an aggressive expansion campaign across China in the next three years. This strategic move is part of Yum China Holdings Inc.’s ambitious growth strategy, which was announced during the company’s recent 2023 Investor Day in Xi’an, China.
After a successful revitalization program that bolstered the brand’s foundations and shortened the payback period for new establishments, Pizza Hut is now primed for swift expansion. With the goal of opening 400-500 net new stores annually between 2024 and 2026, the brand plans to more than double its growth rate from the previous three years while still maintaining a robust store payback period of approximately 3 years.
Pizza Hut’s initiatives are integral to the reinvigorated “RGM 2.0” strategy introduced by Yum China, the parent company overseeing various restaurant brands such as KFC, Taco Bell, and others in the region. During its Investor Day event, Yum China unveiled an overarching objective of reaching a total of 20,000 stores by 2026, all while achieving a double-digit Compound Annual Growth Rate (CAGR) for Earnings Per Share (EPS) between 2024 and 2026. Additionally, they plan to distribute $3 billion to investors during the same period through quarterly dividends and share repurchases.
Having established its presence in China since 1990, Pizza Hut stands as a prominent leader in the country’s casual dining sector. The brand currently manages 3,072 stores spanning across more than 650 cities. Notably, Pizza Hut commands a dominant position in all of its primary categories, including pizza, steak, and pasta, with an impressive record of over 100 million pizzas and 20 million steaks sold within the past 12 months.
Pizza Hut General Manager Jeff Kuai commented, “As an absolute leader in the sector, our slice of the market is bigger than the next nine brands combined. Despite our leading position, there is still tremendous opportunity for us to gain an even larger share of the market.”
The brand’s strategy for expanding its presence involves both enhancing store density in existing cities and venturing into new ones. China presents extensive untapped markets for Pizza Hut, with over 1,200 cities hosting KFC but not yet featuring Pizza Hut, emphasizing the potential to utilize Yum China’s infrastructure and resources for expansion in these areas. Pizza Hut is achieving increased penetration through adaptable store models. One such model is the satellite store, characterized by a smaller dining area, a focus on off-premise occasions, and a lower initial capital expenditure. This model boasts a quicker 2-year payback period compared to traditional stores. Additionally, the brand is experimenting with a fast-casual store model designed to offer faster and more streamlined service while enhancing labor efficiency.
Apart from extending its reach, Pizza Hut has dedicated efforts to enhance its core menu selections. Specifically, the brand has been strengthening its identity as a “pizza specialist” by introducing product enhancements and fresh flavor varieties. Notably, the Super Supreme Pizzas and Durian Pizzas have garnered significant popularity among consumers. In the first half of 2023, pizza sales witnessed a remarkable 56% increase compared to the corresponding period in 2019.
As Pizza Hut’s expansion journey continues, it has set its sights on reaching a broader spectrum of consumers by diversifying its food and beverage offerings and creating more reasons for visits. The brand is gearing up to introduce a fresh line of customizable burgers. Starting in September 2023, it has also introduced premium Lavazza coffee to its restaurant offerings. Pizza Hut has expanded its range of individual-sized meals, including personal-sized pizzas, to cater to solo diners and office-goers. Additionally, breakfast options have been introduced to enhance customer service while optimizing store utilization. Furthermore, the brand is expanding its previous focus on families to better accommodate younger generations. Collaborations like its partnership with Genshin Impact, for instance, have proven appealing to many young individuals and gamers.
At the same time, Pizza Hut continues to emphasize its commitment to delivering exceptional value to its customers. The widely acclaimed “Scream Wednesdays,” “All You Can Eat,” and “Buy One Get One Free” value promotions are significant attractions for both dine-in and delivery customers. Furthermore, the brand is expanding its pricing options to cater to a broader spectrum of customers and their everyday requirements.
Pizza Hut is making substantial investments in crafting an exceptional digital customer experience, recognizing its pivotal role in future success, as roughly 92% of orders are now processed through digital channels. A primary focus is on enhancing the user interface and introducing real-time order tracking features for customers on its mobile app. Additionally, the brand is actively working to increase member visit frequency by implementing privilege programs and tailoring offers based on members’ preferences.
Kuai says, “With continuing efforts to build on our core strengths and expand into new categories, improve value for money, drive delivery growth, and enhance our digital capabilities, we are confident that Pizza Hut will generate even stronger sales momentum and enhance our leading position in the market.”