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Although Pizza Hut's Casual Dining concept in China is an "industry success story," the U.S. business is struggling to find footing amidst tighter competition and a ubiquitous digital landscape.
During parent company Yum! Brands' earnings call this week, CEO David Novak called the first quarter "disappointing," with sales down 5 percent. The U.S. system makes up about half of Pizza Hut's total profits.
The slide in sales is despite new product news with the launch of the hand-tossed pizza in January.
"The news wasn't strong enough to overcome value-focused competitor activity," Novak said during the call.
To remedy the slide, the brand will focus more on competitive value, nationally advertising its WingStreet concept, and new products such as its garlic parmesan pizza line. The company said it is pleased with results from both the WingStreet and garlic parmesan platforms, but refused to give sales specifics.
Novak said the company also needs to do "a better job engaging the digital consumer, where our competitors are, frankly, doing a better job driving activation."
Yum! Brands is adding more resources for Pizza Hut's digital presence, and will have a "high sense of urgency" in this arena.
Pizza Hut continues to thrive outside of the U.S. Novak called its Pizza Hut Casual Dining business in China "arguably one of the greatest success stories in the industry" within the past three years. The concept faces very little multi-national competition in the market, and posted 8-percent same-store sales growth in Q1.
Driving much of that success is the brand's initiative to refresh 20 percent of its menu every six months. The company is also expanding its breakfast daypart into more cities.
The Pizza Hut home service business in China is also turning in strong performances. There are now more than 200 units in 25 cities, with more growth on the horizon.
"We're beginning to rapidly scale this brand rapidly across the country. Sales are almost totally incremental versus our casual dining concept. This is a separate brand with great potential," Novak said.
Yum! will accelerate global development this year, Novak said, including and especially in emerging markets, which are expected to grow at a rate three times that of developed markets.
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