China's largest fast-food restaurant chain operator, Yum China, is banking on an increase in its delivery business to accelerate its recovery. The company said this week it had seen a significant uptick in food deliveries over the past few weeks - even after most restrictions implemented during the pandemic had been eased.
According to the company, most consumers have likely adapted to the food delivery and takeaway lifestyle despite most now able to go out and eat. The company, which runs about 10,000 restaurants across China, said delivery orders accounted for about 32% of its overall sales as of June.
Yum China said the increase in delivery sales had mitigated some of the losses it incurred during the height of the pandemic. During the first half of the year, the company reported a 52% drop in profits to about $194 million. The decline would have been worse were it not for an increase in delivery sales, the company said.
"Delivery will...continue growing fast and lead in our recovery from the pandemic," Yum China's chief executive officer Joey Wat said at a news briefing. Given the strength of its delivery business, Yum China will spend more on its services.
Chief financial officer Andy Yeung said the path to full recovery would be an "uneven" one. The company's stores located at train stations and airports had yet to return to prepandemic sales levels and it would likely take some time before they can catch up to other outlets.
Yum China was one of a few companies that capitalized on the rise in the popularity of food deliveries in China. Thanks to delivery apps such as Ele.me and Meituan Dianping, the food delivery market had grown over the past few years. In 2019, online food delivery transactions were an estimated 600 billion yuan ($88.5 billion). This represented a more than 400% growth compared with 2014.
After four years of collaborating with third-party food delivery apps, Yum China decided last year it would establish its own network. Its new delivery unit exclusively serves its KFC and Pizza Hut stores nationwide.
