On 6 February, Yum China, operator of KFC and Pizza Hut in China, released its annual financial report for 2024, along with quarterly results for Q4. The report shows record-breaking full-year results that surpassed previous expectations. However, it also shows a dent in profitability after KFC got caught in the price war in the Chinese food and beverage market.
With a total revenue of 11.3 billion USD and 3% year-on-year (YoY) growth, Yum China experienced a record high in income last year. Adjusted net profit also increased 8% to 911 million USD, making the profit margin 10.3%. The company notes that its profit margin and growth rate have been taking off since Q2, so it is increasing its cash dividends by 50% to 0.24 USD per share, and is planning to return 3 billion USD to shareholders between 2025 and 2026.
Most of the growth came from newly opened branches. Yum China opened 1,751 new restaurants in 2024, with 512 of them being franchised branches. Many of these new franchises are part of the strategy to dive(下沉) into lower-tiered cities and towns. The group’s aim is to reach 20,000 locations in 2026, up from 16,395 currently.
In the past year, KFC has introduced various discounts and special offers, such as “Crazy Thursday” sales to compete in the price wars in China. However, this has caused KFC’s operating profit to drop 1% YoY to 1.2 billion USD. The pressure of lowered prices caused KFC to raise its prices for the first time in 2 years last December, averaging a 2% increase. Acting CFO Adrian Ding also pointed out that coffee has been a key driver to KFC’s growth. The KCOFFEE (K Coffee) brand, introduced in 2023, has sold 250 million cups of coffee, growing 30% YoY.
With Pizza Hut continuing to explore lower prices and its WOW mode of branches to attract younger customers, Yum China is adapting to the Chinese market with different strategies for the two brands, but both aiming at lower-tiered cities and towns and the younger generations.
