SHANGHAI (Reuters) – In a Shanghai bistro, surrounded by brass trimmed lamps and Italian marble, models and Chinese stars sported outfits of black, white and electric purple, the signature colors of veteran American fashion designer Anna Sui.

FILE PHOTO: A Pizza Hut restaurant is seen in a mall in Shanghai, China September 18, 2018. REUTERS/Aly Song

The catwalk-style event is no fashion show, however. Instead it is part of a major push by fast food giant Yum China Holdings Inc (YUMC.N) to give its Pizza Hut brand a high-end makeover amid rising competition and flagging sales.

The glitzy store and haute couture underscore a sharp strategic shift Pizza Hut is taking to revive its fortunes. The pizza chain has experienced tumbling same store sales this year that have dragged down Yum China’s overall growth.

“The brand needs to be somehow rejuvenated,” said Leon Zhang, Shanghai-based partner at branding consultancy Prophet, highlighting a rise in health-focused consumers and a growing array of options for Chinese diners that have hit the chain.

Pizza Hut has taken note. Alongside the tie-up with Sui – more at home at fashion shows in New York or Milan – it will open a test center for innovative products in Nanjing this week and roll out new “Kiosk” and “Express” store formats.

The chain has removed some badly received products – such as pizza topped with expensive abalone shellfish – and shut some concept stores, including one with robot waiters.

Slideshow (3 Images)

Pizza Hut says it has spent at least $60 million in upgrading its products since September last year and is introducing new technologies such as those allowing customers to order food by scanning QR codes on the tables.

Jeff Kuai, the pizza chain’s general manager, said the brand had “streamlined” its menu and bolstered its online presence to catch up with its better-performing sister brand, fried chicken chain KFC.

“We’ve learned a lot from the KFC turnaround and are making progress on all aspects of the Pizza Hut revitalization plan,” Kuai said in comments sent to Reuters. “We are confident in our revitalization plan and committed to returning the brand to growth.”

STANDING OUT

The Pizza Hut turnaround is not Yum’s first salvage job in China. The firm had to restore confidence in all its brands after a food scare in 2012 and again in 2014. In 2015 it opened a high-end Italian restaurant as a test “lab” in Shanghai.

The New York-listed firm, spun off from Yum Brands Inc (YUM.N) in 2016, owns Pizza Hut, KFC and Taco Bell in the country and is the largest fast food operator in China with more than 8,100 outlets. It is valued at $13.4 billion and looking to more than double its number of stores to 20,000 in the long-run.

While it has stabilized sales growth at KFC with upgraded stores, a big push on delivery and automated check-outs, Pizza Hut’s 2,200-plus stores have proved to be more difficult to turn around. The chain has posted just three quarters of positive same store sales growth in China since the start of 2014.

“At the moment they’re really struggling to differentiate themselves enough to stand out from the rest,” said Andrew Atkinson, marketing manager at Shanghai-based research and marketing consultancy China Skinny.

“There isn’t a clear message about why Pizza Hut is special and why Pizza Hut has a position in the space.”

Major rivals include Pizza Express, bought by Chinese equity firm Hony Capital in 2014, chains like Papa John’s (PZZA.O) and Domino’s Pizza (DPZ.N) and a growing array of smaller, local chains doing well with new products and helped by a boom in deliveries online.

These include Shenzhen-originated Le Cesar – known for inventing a pizza using the popular Asian durian fruit – that now has over 120 stores, similarly sized Mua Pizza and Magelita Pizza with 600 outlets.

Pizza Hut’s new-look for its stores and staff – which will be gradually rolled out around the country – could help the brand stand out more, analysts say. The shift comes at a critical time for Yum China, which recently rebuffed a $17.6 billion buyout from a Chinese-led consortium.

The Shanghai Pizza Hut outlet, in an upscale mall, may be the future model. It bears none of the signature red and yellow hues associated with the brand in the United States and pizzas are not the main attraction on the menu.

Instead it has trendy, modern interiors, and popular dishes in China like omelet rice and Australian steak to attract younger consumers. Yum China’s chief executive has described the push as helping make the brand “Instagram-worthy”.

That might help win over consumers like Wang Chupeng, 23, an undergraduate student in Hangzhou. While she likes the atmosphere and student deals Pizza Hut offers, Wang felt the brand was still caught between more premium and budget rivals.

“If I want to eat pizza I’ll usually think of somewhere else. I’d rather pay a bit more to get a better pizza,” she said. “Overall I think Pizza Hut is a bit expensive compared to other places with a similar quality product.”

Reporting by Brenda Goh; Additional reporting by SHANGHAI Newsroom; Editing by Adam Jourdan and Lincoln Feast.

Our Standards:The Thomson Reuters Trust Principles.

Source


Warning: A non-numeric value encountered in /home2/wadyk60ackgy/public_html/wp-content/themes/Newspaper/includes/wp_booster/td_block.php on line 353