KFC-owner hails ‘balanced’ premium and value offer as earnings climb

Yum! Brands has reported growth among both higher and lower income customers, as the business behind KFC and Pizza Hut topped analyst expectations for its fourth quarter revenue and earnings.

While businesses and consumers around the world grapple with the challenges of inflation, Yum! CEO David Gibbs told investors today (8 February) that the environment is a “positive” one for the company, despite issues in regions such as China.

In the US the business is seeing higher income customers visiting its restaurants more frequently as the cost of living drives them to trade down, while lower income customers are being retained by the brands’ growing value offerings.

With grocery inflation also remaining at record high levels, the company’s restaurant brands remain “very attractive” options for consumers, Gibbs added. In the UK, Kantar data shows grocery inflation hit a new record of 16.7% in the four weeks to 22 January, the equivalent of an additional £800 on the average annual shopping bill.

“There’s a little bit more interest in value, which our brands are perfectly positioned to deliver on,” the Yum! CEO said. “We’re winning on value.”

The business reported net income of $371m (£308m) in the fourth quarter, up from $330m (£274m) in the previous year. Net sales increased 7% to $2bn (£1.7bn), while global same-store sales increased 6%.

Taco Bell performed best out of the restaurant brands, with same-store sales up 11%. KFC’s sales rose 5%, while Pizza Hut’s increased by 1%.

Our iconic brands are more relevant, easy and distinctive than ever.

David Gibbs, Yum! Brands

Gibbs credited Taco Bell with doing a “terrific job” over the quarter in “balancing” both ends of the consumer spectrum, by featuring premium products, such as a grilled cheese burrito, alongside “sharply priced” items.

In the Pizza Hut division, growth was boosted by advertising to highlight both premium and value offerings, using a “much more modern, contemporary” tone.

The brand also saw success with its value Melts product, launched in October last year. According to Gibbs, the product has helped Pizza Hut over-index on pre-dinner timeframes and individual occasion tickets, attract younger consumers and recover its lower income household base.

Five national marketing campaigns for Pizza Hut on UberEats and DoorDash also drove 30% growth in aggregator transactions over the quarter.  

“Our iconic brands are more relevant, easy and distinctive than ever,” Gibbs said. “I’m confident that our distinct competitive advantages, including our world-class franchisees and the industry’s best talent, will drive accelerated growth in the future.”

Last year, KFC UK won the Marketing Week Award for Long Term Brand Building Excellence with its ‘The Right Way’ strategic platform, launched in 2017. In the space of five years KFC hit more than £1bn in revenue and grew market share by 38%. The fast-food chain improved quality perceptions (up 6.2 points), value (up 7.3 points) and the brand overall (up 8.7 points), attracting 15 million new customers.