Article

Pizza Hut's digital sales mix up 5 percent in the last quarter

As the brand continues its turnaround strategy, it will launch a new advertising position in Q4 aimed at millennials.

October 10, 2014 by Alicia Kelso — Editor, QSRWeb.com

Yum! Brands reported its Q3 results earlier this week, including a familiar struggle at KFC China due to another supply chain crisis that dragged sales down for the company's biggest revenue business.

Still, worldwide system sales were up 1 percent, with international and US markets offsetting much of this damage.

For Pizza Hut, the struggles continued domestically, with US sales down 2 percent in the quarter. During the company's earnings call, CEO David Novak said, however, that he is pleased with the progress made with this business.

"Expect us to continue that into the next year. We sharpened our focus on value and have leveraged more competitive offers to drive digital activations," he said. "And consumers are responding."

Novak said sales turned positive toward the end of Q3 and that the digital mix for delivery and carryout is now more than 40 percent. This represents more than a 5 percentage point increase from the second quarter.

To continue this momentum, Pizza Hut will launch a new advertising positioning sometime in Q4, aimed at the millennials.

"We plan to reinforce Pizza Hut's leadership, quality, innovation and superior value as we continue to implement a comprehensive turnaround plan," Novak said.

China expands breakfast

In China, Pizza Hut Casual Dining is expanding its breakfast daypart into more cities.

"With this new sales layer, our longterm goal is to own a mid-scale casual dining breakfast occasion in China on a scale that matches what exists in the United States," Novak said. "This is a huge opportunity and we're well positioned to capture it."

More than 250 new units are expected to open in the China market this year, with AUV's at about $1.6 million and restaurant margins of 19 percent. Although these numbers are slightly down from last year, Novak expects breakfast and late-night dayparts to provide a lift, as well as continued innovation – Pizza Hut Casual Dining revamps 20 percent of its menu twice a year, for example.

Overall, with the US, China and other international markets, Pizza Hut's system sales were even on the quarter. International system sales grew 6 percent in emerging markets and were even in developed markets. The Pizza Hut division opened 152 new restaurants, including 102 international units and 50 US units.

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