| China

Yum China opens more Lavazza cafés – but Covid lockdowns hamper group sales

Yum China has expanded its Lavazza store footprint to 78 outlets, but the quick-service restaurant group’s COFFii & JOY café chain appears to have been adversely impacted by ongoing Covid lockdowns 

Yum China has increased Lavazza’s presence by 34% across China this year to date | Photo credit: Yum China


 

Yum China has opened 20 new Lavazza café stores across China so far this year, reaching 78 outlets. 
 

The quick-service restaurant group, which operates over 11,000 franchised sites of fast-food chains KFC and Pizza Hut across China, partnered with Italian coffee roaster Lavazza in May 2020 to establish the premium coffee shop concept across the country. 


In September 2021 the two companies announced $200m investment to grow the concept to 1,000 stores by 2025
 

Yum China has increased Lavazza’s presence by 34% across China this year to date, as part of wider company plans to open between 1,000 to 1,200 net new outlets across its food and beverage portfolio.

Its third quarter trading update cited 621 net new stores year-to-date across its KFC, Pizza Hut, Taco Bell, Little Sheep, Huang Ji Huang and Lavazza brands. 


While Yum Brands opened 621 and 507 Pizza Hut and KFC stores respectively so far in 2022, it has closed 102 net stores across its ‘other brands’ segment, which includes its coffee chain businesses. 


Almost three years since the country reported its first Covid-19 case, Chinese authorities continue to adopt a Zero Covid policy to stoptransmission of the virus. The measures, which include sudden local lockdowns, have hampered hospitality trade in the second half of the year. 


In October 2022, Chinese President Xi Jinping signalled that there would be no easing of the policy, which saw 28 cities across the country implement some degree of lockdown measures last month, including in Wuhan and Zhengzhou. 


Alongside Lavazza, Yum China also opened its own café brand, COFFii & JOY, in 2018. Yum China disclosed operating 34 COFFii & JOY stores in China as of March 2022, but provided no update for the business for the third quarter. 


Yum China did report operating 928 non-Pizza Hut or KFC outlets as of 30 September 2022, consisting of 600 Huang Ji Huang, 200 Little Sheep, 78 Lavazza and 51 Taco Bell stores – suggesting that its COFFii & Joy business could be facing significant losses.  


Yum China reported year-on-year revenue growth of 5% in its third quarter to reach $2.68bn. 


Chief Financial Officer Andy Yeung said the company expects Covid-19 to continue impacting sales in its fourth quarter, as a result of ‘downward pressure on the economy and cautious consumer spending'. Despite inflation and the fourth quarter traditionally producing lower sales and profit, Yeung said Yum China remains committed to growing its store portfolio in the period. 


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