Company veteran Pant to chart new growth strategy for fast-food giant in China
Yum Brands Inc, owner of KFC and Pizza Hut chains, has revamped its top management team in China after incumbent chairman and chief executive Sam Su retired from his post.
Su, who was instrumental in the fast-food chain's expansion and setting up of more than 4,000 KFC restaurants in the country, will be replaced by company veteran Micky Pant, currently CEO of the KFC unit.
Su will, however, serve as executive adviser till February next year and remain on Yum's board to assist with the transition. The new management is set to take the helm at a time when the fast-food chain has been witnessing sluggish sales and reeling from a tainted meat scandal.
The company also said that Joey Wat, 44, the president of KFC China, and Peter Kao, 58, senior vice-president and brand general manager of Pizza Hut China, have been promoted to the position of chief executive officer of KFC and Pizza Hut, respectively, and report to Pant.
Greg Creed, chief executive officer of Yum Brands, acknowledged Su's key role in building up the company's presence in China over the years. "Su is a restaurant industry pioneer who established KFC and Pizza Hut as global powerhouses in the world's fastest-growing economy," Creed said.
Ben Cavender, principal at China Market Research Group, said Su, who was with Yum in China since inception, was the right person to run the brand at a time when it had just four stores and little competition. "But it is a different ball game to run 4,000 stores," he said.
"Yum has been slow to adjust to changing consumer demands. The company is banking on the new management team to implement these changes quickly and regain trust and confidence of consumers," Cavender said.
In July last year, Shanghai Husi Food Co Ltd, a supplier to McDonald's, KFC and Pizza Hut, was found to be using expired meat in its products. The scandal has left a lingering impression on Chinese consumers and weakened fast-food chains performance.
Yum posted a 4 percent fall in China sales during the second-quarter. Restaurant margins decreased by 2.2 percentage points to 14.6 percent, while operating profit declined by 25 percent.
The fast-food giant's performance was in stark contrast to the strong performance of the food and beverage industry in China during the first seven months, according to the China Cuisine Association. The industry recorded a year-on-year growth of 11.6 percent and revenue of 1.76 trillion yuan ($275 billion) between January and July.
The weak performance of Yum in China, particularly KFC, reflects a change in the retail environment in China and changing consumer preferences, according to Jason Yu, general manager of Kantar Worldpanel China.
"The increasingly affluent middle-class consumers in China, especially in the first-and second-tier cities, have more choices in terms of dining and eating out and hence focus more on food safety," said Yu.
Despite efforts to diversify its menu and launch new marketing initiatives to attract younger consumers, KFC still needs to do a lot to rebuild its brand image and create a clear differentiation to stand out from competition, said Yu. The company also needs to grow more aggressively through franchises in lower tier cities and come up with new ways of reaching more consumers digitally, he said.
Yum is planning to open at least 700 new restaurants this year. The restaurant chain has 6,853 outlets in China. Among them, 4,889 are KFCs, 1,388 Pizza Hut restaurants and 276 home service units of Pizza Hut.
