On December 24th, globally renowned fast food brand KFC China launched a price adjustment, marking the brand's first product price adjustment in nearly two years. The average increase in this price adjustment is 2%, with a specific adjustment range ranging from 0.5 yuan to 2 yuan. In response, KFC stated that this is aimed at better adapting to changes in market costs and ensuring the sustainable, stable, and healthy development of the enterprise.
The relevant person in charge of KFC China stated that the company will regularly evaluate and cautiously adjust its price structure in conjunction with changes in operating costs. Although some product prices have been raised, KFC's popular discount packages, such as the "Crazy Four" promotion, "Crazy Day" activity, "OK meal" and "Children's meal", will remain at their original prices.
In February of this year, KFC adjusted the delivery fee for home express delivery and charged a packaging service fee. According to the official website of KFC, the official pricing for home delivery and delivery fees has been reduced from 9 yuan to 6 yuan. At the same time, KFC will charge packaging service fees at its discretion. KFC stated that this move is aimed at improving the service experience of delivery products by upgrading the insulation of delivery bags and providing dedicated packaging services.
Regarding the price adjustment of this product, the relevant person in charge of KFC stated that in the future, KFC will continue to provide high-quality catering services, closely monitor changes in consumer demand, and strive to bring consumers richer choices and higher quality services.
KFC is affiliated with Yum China. On December 15, 2023, the number of KFC stores in China exceeded 10000. According to Yum China's Q3 2024 financial report, as of the end of September, the number of KFC restaurants reached 11283, a year-on-year increase of 14%. The increase in new stores has led to an increase in KFC's system sales. According to Yum! Brands China's 2024 quarterly financial report, the growth in KFC system sales was mainly due to net new stores.
In the first and second quarters of this year, KFC's revenue maintained growth, but its operating profit declined slightly. But in the third quarter, KFC's operating profit turned into growth. The price increase of KFC products will help the company continue to increase its operating profits.
According to the first and second quarter financial reports of Yum China, KFC's total revenue was 2.23 billion US dollars and 2.014 billion US dollars, with system sales growth rates of 7% and 5%, respectively.
In the third quarter of this year, KFC's operating profit began to rise. According to the third quarter 2024 financial report of Yum China, KFC's total revenue was 2.311 billion US dollars, with a year-on-year increase of 6% in system sales and an operating profit of 364 million US dollars, a year-on-year increase of 6%. The operating profit margin was 15.7%, a year-on-year increase of 0.1 percentage points. The restaurant's profit margin was 18.3%, a year-on-year decrease of 0.3 percentage points, with a slight decline compared to the previous two quarters.
Yum China's Q3 2024 financial report also stated that excluding items that affect comparability at the restaurant level, the restaurant's profit margin increased by 30 basis points, mainly due to improved operational efficiency and favorable raw material prices, partially offset by the increase in cost-effective products aimed at driving customer traffic growth and rising wage costs. It is worth noting that the third quarter is the first time this year that KFC has achieved an increase in restaurant profit margins after excluding items that affect comparability at the restaurant level.
During the third quarter earnings conference call this year, Qu Cuirong, CEO of Yum! Brands China, stated, "We are trying to maintain stable prices for KFC." KFC's average order price in the third quarter was 38 yuan, higher than the previous quarter.
Recently, Yum! Brands Pizzahut under Yum! China also made price adjustments. On December 2, Pizzahut launched a brand new 2025 menu nationwide, of which 30 products across the line all had price reductions of varying degrees, up to 51%.
At the third quarter financial report conference call, Qu Cuirong said that Yum! China had made clear its pricing strategy for Pizzahut since 2017. Pizzahut is positioned to face the mass market. Therefore, Pizzahut has been reducing the price, which is basically the pricing strategy of Pizzahut in the short term and long term.
In the first quarter, the profit margin of Pizzahut Restaurant declined as KFC did, but in the second quarter, the profit margin of Pizzahut Restaurant increased. According to Yum! China's financial report for the first quarter to the third quarter of 2024, the profit margin of Pizzahut restaurants in the first quarter of this year was 12.5%, down 1.7 percentage points year on year. In the second quarter, the profit margin of Pizzahut Restaurant was 13.2%, up 0.8 percentage points compared with the same period last year. In the third quarter, the profit margin of Pizzahut Restaurant was 12.8%, up 0.1 percentage point year on year.
By the end of September, the number of Pizzahut restaurants was 3606, 13 more than the same period in 2023. In the first three quarters of this year, Pizzahut's total revenue was $1.75 billion, the same as the same period last year, and its operating profit was $130 million, up 2% year on year.
In addition to KFC and Pizzahut, Yum! China also owns Taco Bell, Little Sheep and Huang Jihuang brands, and cooperates with coffee brand Lavazza. According to the third quarter financial report of Yum China, the total revenue of Yum China in the first three quarters was 8.708 billion US dollars, a year-on-year increase of 3%, the operating profit was 1.011 billion US dollars, a year-on-year increase of 1%, and the net profit was 796 million US dollars, a year-on-year increase of 9%.