Yum China: How Come Inflation is Under Control in China?

Feb 20, 2023 | Corporate Insights, No Bull Economics

Somehow Yum China expects low single-digit commodity price inflation during 1H23. Wow! If only the U.S. could figure out how to do that…

Yum China Key Points

  • Yum China reported that 2022 was a challenging year due to sporadic covid outbreaks, entire city lockdowns, and a labor shortage due to infected employees. All the same, comps were down just -4% y/y during 4Q22 as its off-premise mix reached 66% & its digital order mix increased to 89%.
  • KFC comps were 97% of the prior year’s level, traffic was at 84% while ticket grew +16% due to the rise in the delivery mix (generating a higher ticket average than dine-in).
  • Pizza Hut comps were 92% of the prior year’s level, traffic was at 98% & ticket was at 95% (driven by smaller party size delivery orders due to covid).
  • Robotic service was added to 1/3 of their Pizza Huts.
  • Amazingly, Yum China’s store portfolio expanded by +40% y/y (3,800 net new stores) over the last 3 years despite all the lockdowns.
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