Encountering resistance in upscale dining, Haidilao follows the trend of price reduction in the catering industry

Yum China (0520.HK) seems to have temporarily set aside its pursuit of high-end positioning.

On May 15th, Yum China announced on its official WeChat account that it has reduced prices for various meal sets under the Yum China brand.

The new menu includes individual meal sets and double meal sets priced at 58 yuan and 130 yuan respectively, with an average price reduction of over 10% compared to before.

The day after the announcement, Yum China led the gains in Hong Kong's catering stocks, rising more than 8% at one point during the trading session and closing up 4.19% at 2.24 Hong Kong dollars per share.

It is worth mentioning that Yum China quietly raised prices for its Yum China and COCO brands back in January this year.

Despite the overall recovery in the catering industry in 2023, Yum China still reported a loss of 199 million yuan, marking its third consecutive year of losses.

In comparison, Haidilao (6862.HK) and Jiumaojiu (9922.HK) each made profits of 4.499 billion yuan and 453 million yuan in 2023.

In 2023, Yum China's hopes of tapping into the mid-to-high-end catering market were hindered by the performance of its COCO brand.

The turnover rate for COCO throughout the year only increased by 0.1 to 2 times per day compared to the previous year, resulting in a net loss of 98 million yuan for Yum China.

In addition, other brands including the high-end barbecue brand Chenshao launched in 2022 collectively recorded a net loss of 56 million yuan.

After opening 8 stores in 2023, Chenshao continued to close stores and currently only one store in Shanghai remains in operation.

The underperformance of the COCO brand may be attributed to selling at higher prices. The average per capita consumption in 2023 reached 142.3 yuan, while Haidilao and Suan Hotpot were at 99.1 yuan and 113 yuan respectively during the same period.

In early 2024, while Yum China quietly raised prices, its competitors were aggressively lowering prices to compete for limited consumer spending.

An insider from a Western fast food brand told TradeWind (ID: TradeWind01) that the company's main focus at present is to "survive", and exchanging price for volume has been proven to be an effective strategy.

TradeWind (ID: TradeWind01) also learned from sources close to Yum China's HR department that in the first quarter of this year, Yum China opened 29 new stores, with the turnover rate decreasing to 1.9 days per turnover compared to the same period last year, while COCO opened 5 new stores with a decline in turnover rate.

These operational indicators seem to indicate that in the low-price competition in the catering industry, Yum China is temporarily falling behind.

With Haidilao aggressively expanding through franchising, the urgency of Yum China's price reduction becomes more apparent