Ethan Wang

Ethan Wang from CLSA questioned Yum China's long-term delivery strategy in light of evolving consumer preferences for dine-in experiences, particularly in lower-tier cities. He asked whether the company's focus remains solely on delivery or if it is also actively developing dine-in and pickup consumption scenarios.

Answer

CEO Joey Wat acknowledged the continued growth of delivery over the past decade and its expected increase in 2026. However, she affirmed the ongoing importance of dine-in and takeaway, noting that Pizza Hut's takeaway percentage almost doubled compared to 2019, and dine-in still represents 30% for KFC and 40-45% for Pizza Hut. Joey stated that Yum China embraces all customer preferences (delivery, takeaway, dine-in) and strives to serve them well across all channels, balancing cost structures. She also mentioned new growth drivers like car-side pickup, available at over 4,000 KFC stores, to diversify sales.

Ethan Wang of CLSA Limited asked about Yum China's competitive stance amidst the aggressive delivery subsidy battle, questioning if the overall competitive environment had worsened in Q2.

Answer

CEO Joey Wat stated that the market is always competitive and that Yum China learned from the 2017 subsidy war not to 'buy sales.' She explained the company adopted a balanced approach in Q2, participating selectively in promotions for smaller orders like drinks while protecting the price integrity of core products. This strategy allowed for balanced sales growth, margin protection, and strong operating profit growth.

Ethan Wang from CLSA Limited asked about Yum China's competitive stance amid the aggressive delivery subsidy battle, why it isn't participating as heavily, and if the competitive environment worsened in Q2.

Answer

CEO Joey Wat stated that the key lesson from 2017 is 'we don't buy sales.' She described a disciplined and balanced approach, testing the market dynamics and focusing on protecting price integrity and margins. The company realized the hyper-competition was mainly on smaller drink orders and chose a path that balanced incremental sales with long-term brand health and profitability.

The analyst inquired about the reasons for the strong Q1 net profit, the sustainability of these drivers, and the full-year profit outlook.

Answer

Management attributed the Q1 profit improvement to a favorable product mix (more high-margin refreshed drinks) and operating leverage from increased sales volume. For the full year, they plan to maintain competitive pricing to grow market share but cautioned that rising coffee bean costs and increased competition could pressure margins in the second half of the year. They will leverage their scale to mitigate these impacts.