Yum China Loses Ground; Can Mobile Payments Lend a Hand

July 10, 2017         By: Steven Anderson

It was a bit of a mixed bag when Yum China—the Chinese arm of Yum Brands, which handles KFC, Pizza Hut and Taco Bell brands—posted its second quarter earnings recently. While sales were down, some estimates were up, and there was a clear indication that mobile payments were doing especially well.

The estimates said Yum China would land earnings per share of $0.24, with revenue of $1.632 billion. Though earnings per share were up 29 percent from the previous report, hitting $0.27, that was on revenue of just $1.594 billion. Same-store sales rose just 0.3 percent in that time frame. Reports suggest one of the big priorities is to up the store count from around 7,600 to over 20,000.

The clear winner was mobile payments; though same-store sales had anemic growth at best, mobile payments were responsible for 40 percent of the sales in the quarter. Plus, delivery purchases represented 13 percent of total sales, though how much overlap there was between mobile payments and delivery purchases wasn’t immediately clear.

Further reports noted the introduction of a loyalty program in the region had also provided help in restarting the company’s futures. Though even the company noted that there would be issues; Pizza Hut’s sales in the region were expected to be “uneven” and Taco Bell might take “several years to pay off” as it starts growth. The first Taco Bell China had ever seen only opened late last year.

It’s important to note that we’re talking about food that’s almost certainly unfamiliar to the Chinese market, but it looks like Yum China is looking very strongly at mobile to turn things around. Mobile payments, delivery options, loyalty programs…these are often all seen together. In many cases they’re all incorporated into the same mobile app for added convenience, and if that’s tried in a mobile-heavy market like China, then there’s no telling what the top end could look like.

While the unfamiliar nature of the food might mean a while until it really takes off—it might not ever take off—the addition of mobile systems like payments, delivery and loyalty programs could really help here. Throw in order ahead options and even a burrito might look appetizing to the Chinese market.