Yum China to wind down East Dawning fast-food operations
Yum China Holdings, the owner of the KFC and Pizza Hut restaurant chains on the mainland, has decided to shut down its struggling fast-food brand, East Dawning, after it failed to survive the Covid-19 pandemic.
The company said in its annual report that the remaining five outlets of the Chinese-style quick-service restaurant brand would cease to operate within this year.
“The brand was severely affected by the Covid-19 pandemic,” the report said. “As a result, we have decided to wind down operations of the brand.”
The annual report, which as filed to the Hong Kong stock exchange, did not provide financial data for East Dawning, which was established by Yum on the mainland in 2005.
The chain kicked off with about 100 restaurants located mainly at airports and train stations across the nation.
But the number has fallen drastically over the years amid stiff competition. By 2012, it had dwindled to 30, which further dropped to eight by 2020.
“The disease outbreak has dealt a fatal blow to the brand, but it has not been successful over the past decade due to stern challenges from a raft of local restaurant chains,” said Chen Xiao, CEO of Shanghai Yacheng Culture, a consultancy dealing with marketing and branding for foreign and local companies.
“After all, the five outlets and the brand are of little value to Yum’s businesses in China.”
East Dawning was the first Chinese-style fast-food brand created by Yum China to tap the market potential on the mainland. It combines KFC’s business model with Chinese cuisine. The menu includes steamed pastries such as buns and Chinese tea.
The fast-food brand has been eclipsed by the rise of Chinese restaurant chains such as Da Niang Dumpling and Yang’s Dumplings, which are adept at cooking Chinese food to appeal to local tastes.
The mainland’s catering sector has taken a beating from the coronavirus outbreak over the past two years as lockdowns and social-distancing rules have kept customers at bay.
In 2020, restaurants across the country reported total revenue of 3.95 trillion yuan (HK$4.88 trillion), a decline of 15.4 per cent on the year, according to the National Bureau of Statistics.
In the first half of 2021, the catering industry raked in sales of 2.17 trillion yuan, up by 48.6 per cent from a year ago but virtually unchanged from the same period in 2019.
The five outlets and the brand are of little value to Yum’s businesses in China
CHEN XIAO, CHIEF EXECUTIVE, SHANGHAI YACHENG CULTURE
Yum China, whose other brands include Little Sheep, Huang Ji Huang and Coffii & Joy, operates more than 11,700 outlets on the mainland.
It reported net profit of US$525 million in 2021, down by 15 per cent from the previous year. Revenue grew by 19 per cent to US$9.85 billion.
Shares in Yum China retreated by 6.2 per cent to HK$373.60 in Hong Kong yesterday, having lost 9.3 per cent from their initial public offering price of HK$412 in September 2020.