Yum! Brands: Scaling Pizza Hut in China | In Practise

Yum! Brands: Scaling Pizza Hut in China

Former VP Corporate Planning at Yum! Brands

Learning outcomes

  • How Pizza Hut originally entered and positioned the brand in China
  • How the consumer perception of pizza has evolved in China over the last decade
  • The menu evolution between pizza, Chinese, and other western dishes
  • Why KFC is more resilient than Pizza Hut in China
  • Cash payback on Pizza Hut vs KFC
  • Why Chinese consumers historically ordered Chinese over pizza delivery
  • Outlook on delivery unit economics globally
  • The importance of owning your customer relationship

Executive profile

Don Miller

Former VP Corporate Planning at Yum! Brands

Don has 22 years of experience in the restaurant industry and joined KFC when Tricon, now Yum! Brands was spun out of PepsiCo in 1997. Don is the Former VP Corporate Planning at Yum! Brands where he spent 18 years at the company with 11 years in China. In 2003, Don moved to China to lead the finance function where he was responsible for scaling both Pizza Hut and KFC across the country. Don saw the market change as the aggregators entered and also helped lead the restructuring of the network from din-in to delco units. Don returned to the US in 2015 and spent 2 years reporting to the CFO of Yum! Brands at group level. Read more

Don, can you share a short introduction on your background in the restaurant business?

I won't go back as far as my high school days, when I first had a fast-food job at a brand called Roy Rogers in Philadelphia, but my significant experience came in 1998 at Tricon Brands, which was spun off out of PepsiCo in 1997. I joined KFC US in 1998, in the Louisville, KY headquarters for Tricon. Right now, it’s Yum! Brands. I was working on the finance team, doing capital planning, brand planning. I was working with the operations team. Then I had an assignment overseas in China, which lasted about 11 years longer than my initial six-month assignment. It lasted from 2004 to 2015, at which point I came back to the US, worked at headquarters on the CFO staff, heading up financial plan analysis for Yum! Corporate, and then I left the company around the time of the spinoff. China spun off Yum! – it’s China YUMC now on the big board – in 2016, and I figured that was a good time for me to look for something different. That’s a bit of my background, about 18 years at Yum! Brands.

When you first landed in China, how did the Chinese market look?

That was 2003 or 2004. Back then, China was newly introduced into the WTO, and you could see quite a bit of investment going on, yet there were still a lot of underdeveloped cities. Shanghai was where I was based, so that was definitely the “Gold Coast” there, Beijing, Wanzhou, and tier-one cities; those were getting a head start, Shenzhen, and Shanghai. But if you went inland more, it was certainly an up and coming area. There was a lot of infrastructure being built. As far as consumers were concerned, middle-class wealth wasn't quite there. Those that could would access the western brands that were so new to China, KFC being one, obviously, and Pizza Hut, which was more of a casual dining experience.

As far as doing restaurant business back then in China, you had to do it yourself. We owned our own logistics. We sourced suppliers ourselves. We didn't outsource it like, say McDonald's might have done. We did a lot of our stuff internally because we couldn’t go to a third party and say, hey, can you go find us distribution centers and franchisees. We helped build up the restaurant business in China, developing talent and teaching how to run a restaurant from the ground up, one store at a time. It was really an interesting time.

How did the Chinese consumer view pizza as a concept?

That’s a great question. Pizza came into the country as sort of a foreign food, as you would expect, Italian. Speaking probably for not just China but for Asia, milk-based products and cheese were not a big thing, and obviously, cheese is a big part of any good pizza. So there was a bit of a getting used to thing for folks to eat a pizza. One thing that did resonate with consumers was that pizza is a sharing kind of product.

If you ever go to a real Chinese restaurant, not something you might find in the US or a Chinatown in a western city, but in China, you often find Chinese restaurants where everyone’s sharing at a round table with a lazy Susan. From an occasion standpoint, pizza had a good resonance with the Chinese consumers, who love to gather around and eat things. Pizza, from the beginning, was not just about pizza. It was a broad business. This was a critical insight that the leaders of the brand developed before I got there, and that’s what help bring it to become a leading brand in China.

You mean adding more traditional Chinese dishes plus the pizza to Pizza Hut’s offering?

Not actually Chinese; in fact, it was more of a broad menu of western casual dining. It was a western casual dining brand, unlike in the US, where you have Pizza Hut, Domino’s, Papa John’s, pretty much a functional pizza house delivery. It used to be the red roof Pizza Huts. There in China, from the really early days, they had escargot for appetizers, they had cappuccino, salads, desserts. When I arrived, there was a full casual dining table service. It was like casual dining. You got table service that came out professionally handled.

It was different because you got your own order. For many Chinese, it was like, "You mean, I have my own dish?" For a lot of folks, you had group sharing; you didn't get your own dish in typical Chinese restaurants. So it was a fascinating place. I can get into more behind how the broad menu came about, but from the very early days, Pizza Hut went way beyond just pizza. It was a broad, full casual dining experience. The anchor was pizza, but you don't just go there to have a pizza. You go there for a dining experience, be it lunch or dinner.

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Yum! Brands: Scaling Pizza Hut in China

October 27, 2020

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